Inflation a concern, capex to help: ITC – Times of India

ITC chairman & MD Sanjiv Puri is optimistic about India Inc‘s quick recovery from the Omicron wave, although his group’s hotel chains have seen a significant drop in business. He told TOI that inflation is a concern, although the macros for investment are looking good and identified improvement of farmers’ incomes and climate crisis as other challenges. While he spoke of expanding the Savlon portfolio to nasal sprays, Puri said ITC will explore a bid for government-run Hotel Ashok as and when it is put up for sale. Excerpts:
What is the impact of the third wave in terms of your business and on the overall recovery process?
With each wave, we are better equipped to manage and deal with it. The impact of the first wave was very severe and the second wave was not as much and the third wave, also because of the fact that impact is moderate from the health perspective and hospitalisation, is less. So, the restrictions are much less than they were earlier, So, the impact is lower.
Does the current wave make the economic recovery process choppier?
The expectation is that this wave will pass fast. I hope that this will not have such a serious impact. The real challenge that we are to deal with is how do we create more livelihoods? How do we improve income levels of farmers? Because it’s roughly half the workforce and incomes of farmers coming up also spur a consumption-investment-employment kind of virtuous cycle. The third area that needs to be tackled is climate crisis. It is not that it has suddenly become real, India is one of the worst impacted. And, particularly, the agriculture economy gets hit the most.
As far as macros for investment are concerned, they were never as good. Whether it is liquidity, corporate balance sheet, corporate earnings, corporate income tax – all these are very favourable. We are also seeing some kind of a commodity super-cycle. The focus on the capital investments is a good strategy to kick-start the economy – jobs get created, consumption improves, and then capacity utilisation improves when investments should happen because all the other macros are in favour. Thrust on capital expenditure is good, thrust on agriculture and rural economy is important.
What kind of drop in business are you seeing in your hotels since Omicron?
Last week, it was probably between 50-60% of the last quarter. It is a large drop.
What are the big challenges you see from business point of view in 2022?
Sustainability and digital economy are some of the key drivers going forward. These are some areas because there will be disruptions and challenges emerging on account of these areas. And one more is inflation. This is certainly a concern because while we are fairly judicious in passing on prices, we try and deal with as much as possible through internal efficiencies and assortment. But the impact will be so huge that everybody is having to deal with either pack size or repricing and that (inflation) does impact consumption. A part of it is transitory, but part of it may not be. It is a worry for the consumer business.
You have extended the Savlon portfolio, what is the plan going forward and what is the overall share of FMCG in the portfolio?
It is around 27% of ITC’s revenue. After acquiring Savlon, we have added a number of products such as masks, sanitizers, sanitisers with hand wash. We are testing a nasal spray to prevent Covid-19 infection.