Corporate Governance Analysis :

The Governance Structure :

Corporate Governance in ITC consists of three interlinked levels, namely -

1. Strategic supervision by the Board of Directors.

2. Strategic management by the Corporate Management Committee headed by the Chief
Executive Officer of the Company (CEO).
3. Executive management by the Divisional / SBU / Vertical / Shared Services Chief Executive /
Chief Operating Officer - Business Vertical assisted by the Divisional / SBU / Vertical / Shared
Services Management Committee.

Promoters :

Shareholding of Promoters : 31 Mar 2018 : No. of shares owned

31-Mar-18

General Insurance Corpn. Of India 21,08,75,828

Government Of Singapore 16,71,16,378

I C I C I Prudential Life Insurance Co. Ltd. 12,67,99,778

Life Insurance Corpn. Of India 1,97,50,75,980

Myddleton Investment Co. Ltd. 48,63,11,940

National Insurance Co. Ltd. 12,34,73,330

New India Assurance Co. Ltd. 19,53,10,738

Oriental Insurance Co. Ltd. 15,21,65,492

Rothmans International Enterprises Ltd. 15,49,54,890

Specified Undertaking Of The Unit Trust Of India 1,02,52,89,805

Tobacco Manufacturers (India) Ltd. 2,97,83,47,320

Chief officers :

Chairman – Yogesh Chander Deveshwar (50 Years Exp)

Yogesh Chander Deveshwar (71), is the Chairman of ITC. He was appointed as a Director on the
Board of the Company on April 11, 1984 and became the Chief Executive and Chairman of the Board
on January 1, 1996. On splitting the role of the Executive Chairman between Chairman and Chief
Executive Officer with effect from February 5, 2017, Deveshwar, at the request of the Nomination &
Compensation Committee and the Board, recognising the need for orderly transition in a company
of ITC's size and complexity, agreed to continue as Chairman in non-executive capacity and also play
the role of Mentor to the executive management.

Deveshwar joined ITC in 1968 and is an alumnus of the Indian Institute of Technology, Delhi, and
Harvard Business School. Between 1991 and 1994, he led Air India as Chairman and Managing
Director.

Deveshwar has served as a Director on the Central Board of the Reserve Bank of India and as a
Member of the National Foundation for Corporate Governance. He is a Member of the Board of
Trade, Ministry of Commerce and Industry, and a Member of the National Food Processing
Development Council, Ministry of Food Processing Industries, Government of India. Deveshwar is a
Member of the Governing Body of the National Council of Applied Economic Research and also the
former Chairman of the Society and Board of Governors of the Indian Institute of Management,
Calcutta. He is also a Member of the Governing Council of the Central Manufacturing Technology
Institute, Ministry of Heavy Industries & Public Enterprises, Government of India. He serves on the
National Executive Committees of some of India's premier trade and industry bodies, and has served
as a Member of the UK-India CEOs Forum and US-India CEOs Forum instituted by the respective
Governments. Deveshwar is a past President of CII.

Compensation Breakdown :

Salary – 120000000

Sitting Fees – 1050000

Bonus/Commission – 104567000

Perquisites – 72936000

Total – 298553000

Shares owned : 1015000

Managing Director – Sanjiv Puri (35 Years Exp)

Sanjiv Puri (56), is the Managing Director of ITC effective May 16, 2018. He was appointed as a
Director on the Board of ITC with effect from December 6, 2015 and Chief Executive Officer from
February 5, 2017 taking independent charge of the executive leadership of the Company. He is also
the Chairman of the Corporate Management Committee.
Prior to this, he was the Chief Operating Officer (COO) of ITC since July 22, 2016. Before taking over
as the COO, he was responsible for overseeing the FMCG, Paperboards, Paper & Packaging and Agri
Businesses of ITC. Puri is an alumnus of the Indian Institute of Technology, Kanpur, and Wharton
School of Business. He joined ITC in 1986.

Prior to his appointment as a Director on the Board of ITC, Puri was President, FMCG Businesses -
Cigarettes, Foods, Personal Care, Education & Stationery Products, Matches and Agarbattis, since
December 2014. He has handled a wide range of responsibilities including business leadership
positions as well as in manufacturing, operations and information & digital technology. Puri became
Divisional Chief Executive of the Tobacco Division in 2009, with additional responsibility for the
Company's Trade Marketing & Distribution Vertical. He has led ITC Infotech India Limited (I3L), a
wholly owned subsidiary of ITC, as its Managing Director from May 2006 to August 2009. Puri served
between 2001 and 2006 as the Managing Director of Surya Nepal Private Limited (SNPL), a joint
venture subsidiary company of ITC in Nepal. He has also been a Director on the Board of The
Tobacco Institute of India and past Member of the Board of Governors of the Media Research Users
Council. He has served as the Chairman of FICCI's FMCG Committee, the Agri & Food Processing Task
Force of the CII Eastern Region and as a Council Member of the CII Eastern Region. He was also on
the Executive Council of The Indian Society of Advertisers.

Presently, Puri is the Chairman of SNPL and the Sr. Vice Chairman of I3L and its wholly owned
subsidiaries in the UK and USA. He serves on the National Executive Committees of CII and FICCI. He
is also a Director on the Board of US-India Strategic Partnership Forum and a Member of the Steering
Committee of FICCI.

Compensation Breakdown :

Salary – 37464000

Perquisites – 7133000

Total – 44597000

Shares owned : 100000

CFO – Rajiv Tandon (44 Years Exp)

Rajiv Tandon (65), was appointed as a Director on the Board of ITC effective January 22, 2016. He is
responsible for Finance, Accounting and Internal Audit Functions and Investment Subsidiaries of the
Company. Prior to this, he was the Chief Financial Officer of the Company, a position that he
continues to hold. A Fellow Member of the Institute of Chartered Accountants of India with over
three decades of experience, Tandon has held various positions in ITC including Executive Vice
President - Finance & MIS of the Tobacco Division, Executive Vice President - Corporate Finance,
Finance Advisor and member of the Management Committee of Agri Business and Tobacco
Divisions.

Tandon was named the 'Best CFO in India' by Business Today in 2013. He has held several important
positions in various industry bodies including Member, Managing Committee, The Bengal Chamber
of Commerce & Industry; Chairman of the Expert Committee on Banking and Finance, Indian
Chamber of Commerce; Member, Taxation and Company Law Committee, CII, and is currently a
Member of the CII National Committee for CFOs, as well as a Member of the Capital Markets
Committee of FICCI.

Compensation Breakdown :

Salary – 28950000

Perquisites – 5385000

Total – 34335000

Shares Owned : 289750

Board of Directors :

Yogesh Chander Deveshwar (Non-independent, Non-Executive, Non-Promoter)

Yogesh Chander Deveshwar (71), is the Chairman of ITC. He was appointed as a Director on the
Board of the Company on April 11, 1984 and became the Chief Executive and Chairman of the Board
on January 1, 1996. On splitting the role of the Executive Chairman between Chairman and Chief
Executive Officer with effect from February 5, 2017, Deveshwar, at the request of the Nomination &
Compensation Committee and the Board, recognising the need for orderly transition in a company
of ITC's size and complexity, agreed to continue as Chairman in non-executive capacity and also play
the role of Mentor to the executive management.

Sanjiv Puri (Non-independent, Executive, Non-Promoter)

Sanjiv Puri (56), is the Managing Director of ITC effective May 16, 2018. He was appointed as a
Director on the Board of ITC with effect from December 6, 2015 and Chief Executive Officer from
February 5, 2017 taking independent charge of the executive leadership of the Company. He is also
the Chairman of the Corporate Management Committee.

Nakul Anand (Non-independent, Executive, Non-Promoter)

Nakul Anand (62), was appointed as a Director on the Board of ITC effective January 3, 2011. In
addition to overseeing the Hospitality, Travel & Tourism Businesses of ITC, he took over in December
2014, the responsibility for overseeing the Lifestyle Retailing Business.

B Sumant (Independent, Executive, Non-Promoter)

Mr. B. Sumant (54) has been appointed as an Additional Wholetime Director on the Board of ITC
effective 16th November, 2018.

Sumant is presently a member of the CII Eastern Regional Council. He is also a Director on the Boards
of Tobacco Institute of India and Surya Nepal Private Limited, a joint venture subsidiary company of
ITC in Nepal.

Rajiv Tandon (CFO) (Non-independent, Executive, Non-Promoter)

Rajiv Tandon (65), was appointed as a Director on the Board of ITC effective January 22, 2016. He is
responsible for Finance, Accounting and Internal Audit Functions and Investment Subsidiaries of the
Company.
He is currently a Member of the CII National Committee for CFOs, as well as a Member of the Capital
Markets Committee of FICCI.

Shilabhadra Banerjee (Independent, Non-Executive, Non-Promoter)

Shilabhadra Banerjee (70), joined the ITC Board as a Non-Executive Director effective July 24, 2014
and was appointed as an Independent Director on July 30, 2014.

Banerjee does not hold directorship of any other company.

Hemant Bhargava (Independent, Non-Executive, Non-Promoter)

Hemant Bhargava (59), has been appointed as an Additional Non-Executive Director on the Board of
ITC effective July 28, 2018, representing the Life Insurance Corporation of India (LIC).

He is presently on the Boards of Larsen & Toubro Limited, Voltas Limited, The Tata Power Company
Limited, Infrastructure Leasing & Financial Services Limited, LIC Mutual Fund Trustee Private Limited,
LIC Pension Fund Limited, LIC (Lanka) Limited and LIC Bangladesh Limited, amongst others.

Arun Duggal (Independent, Non-Executive, Non-Promoter)

Arun Duggal (72), joined the ITC Board as a Non-Executive Independent Director effective September
15, 2014.

Duggal is the Chairman & Non-Executive Director of ICRA Limited, Mangalore Chemicals & Fertilizers
Limited and International Asset Reconstruction Company Private Limited. He is also a Director on the
Board of Dr. Lal PathLabs Limited, amongst others.

Sunil Behari Mathur (Independent, Non-Executive, Non-Promoter)

Sunil Behari Mathur (74), has been on the ITC Board since July 29, 2005, first as a representative of
LIC and then in his individual capacity as a Non-Executive Independent Director.

Mathur is a Director on the Boards of Hindustan Oil Exploration Company Limited, UltraTech Cement
Limited, Infrastructure Leasing & Financial Services Limited and DCM Shriram Industries Limited,
amongst others.

John Pulinthanam (Non-independent, Non-Executive, Non-Promoter)

John Pulinthanam (58), has been appointed as an Additional Non-Executive Director on the Board of
ITC effective May 16, 2018, representing the General Insurers' (Public Sector) Association of India.

Nirupama Rao (Independent, Non-Executive, Non-Promoter)

Nirupama Rao (68), was appointed as a Non-Executive Independent Director on the Board of ITC
effective April 8, 2016.

She is also on the Board of KEC International Limited.

Sahibzada Syed Habib-ur-Rehman (Independent, Non-Executive, Non-Promoter)

Sahibzada Syed Habib-ur-Rehman (74), was appointed as a Non-Executive Independent Director on

the Board of ITC effective July 27, 2012.

Rehman does not hold directorship of any other company.

Meera Shankar (Independent, Non-Executive, Non-Promoter)

Meera Shankar (68), was appointed as a Non-Executive Independent Director on the Board of ITC
effective September 6, 2012.

She is also on the Boards of Pidilite Industries Limited and Adani Transmission Limited, amongst
others.

David Robert Simpson (Independent, Non-Executive, Non-Promoter)

David Robert Simpson (61), was appointed as a Non-Executive Director on the Board of ITC effective
January 27, 2017, as a representative of Tobacco Manufacturers (India) Limited, a subsidiary of
British American Tobacco p.l.c.

He is also on the Board of Ecofin Global Utilities and Infrastructure Trust plc, UK, amongst others

Conclusion :

The management structure of ITC Ltd. consists of Strategic supervision, Strategic management and
Executive management headed by different committee of directors.
The company is governed by the professionals with more than 40 years of experience. Some of them
have spent whole of their tenure with the company itself.

The promoters of the firm are some renowned companies and not a single director of the firm is
related to any promoters of the firm.

All the directors in the firm own stake in the company and some of them own hefty amount of
shares.

Out of 14 directors, 9 are dependent and 5 and non-independent directors. There are 4 executive
and 10 Non-executive directors.

Stockholder Analysis :

Institutional Ownership

ITC’s 46.2% institutional ownership seems enough to cause large share price movements in the case
of significant share sell-off or acquisitions by institutions, particularly when there is a low level of
public shares available on the market to trade. However, as not all institutions are alike, such high
volatility events, especially in the short-term, have been more frequently linked to active market
participants like hedge funds. For shareholders in ITC, sharp price movements may not be a major
concern as active hedge funds hold a relatively small stake in the company. Although this doesn’t
necessarily lead to high short-term volatility, we should dig deeper into ITC’s ownership structure to
find how the remaining owner types can affect its investment profile.

Insider Ownership

An important group of shareholders are company insiders. Insider ownership has to do more with
how the company is managed and less to do with the direct impact of the magnitude of shares
trading on the market. A stake of less than 1% in ITC is relatively small, though at least there is still
some alignment of interest with shareholders. A higher level of insider ownership has been found to
reflect the choosing of projects with higher return on investments compared to lower returning
projects for the sake of expansion. I will also like to check what insiders have been doing recently
with their holdings. Insider buying may be a sign of upbeat future expectations, however, selling
doesn’t necessarily mean the opposite as insiders may be motivated by their personal financial
needs.

General Public Ownership

A big stake of 22.2% in ITC is held by the general public. This level of ownership gives retail investors
the power to sway key policy decisions such as board composition, executive compensation, and
potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-
making of the company.

Private Company Ownership

Another important group of owners for potential investors in ITC are private companies that hold a
stake of 4.0% in ITC. These are companies that are mainly invested due to their strategic interests or
are incentivized by reaping capital gains on investments their shareholdings. However, an ownership
of this size may be relatively insignificant, meaning that these shareholders may not have the
potential to influence ITC’s business strategy. Thus, investors not need worry too much about the
consequences of these holdings.

Stockholders Division in ITC

0

10.71
37.64

34.25

17.4

Promoters Individuals Institutions FII Govt. Others

The Company's shares are listed with 3 Stock Exchanges:

Kolkata (10000018)

Mumbai (500875)

National Stock Exchange (ITC)

 Top 10 Shareholders : 31 Mar 2015 - 31 Mar 2017 : No. of shares owned

31-Mar-17

General Insurance Corporation Of India 21,31,00,828

Government Of Singapore 15,48,70,795

Icici Prudential Life Insurance Co. Ltd.

Life Insurance Corporation Of India 1,97,50,75,980

Myddleton Investment Co. Ltd. 48,63,11,940

National Insurance Co. Ltd. 11,32,33,330

New India Assurance Co. Ltd. 20,54,76,725

Oriental Insurance Co. Ltd. 16,93,91,366

Rothmans International Enterprises Ltd. 15,49,54,890

Specified Undertaking Of The Unit Trust Of India 1,10,25,91,521

Tobacco Manufacturers (India) Ltd. 2,97,83,47,320

The impact of a company’s ownership structure affects both its short- and long-term performance.
Differences in ownership structure of companies can have a profound effect on how management’s
incentives are aligned with shareholder returns, and whether they adhere to corporate governance
best practices. Although this is an important factor for long-term investors, many investors can also
be impacted by institutional presence and their high-volume trading.

Bodies Corporate 4,138,102,157 33.86

Tobacco Manufacturers (India) Limited 2,978,347,320 24.37

Life Insurance Corporation of India 1,975,075,980 16.16

Specified Undertaking Of the Unit Trust Of India 974,531,427 7.97

Conclusions :

ITC has stockholders in the form of Institutions, general public, insiders, other private companies but
not in the form of promoters and government.

ITC has a percentage of more than 35 in the form of institutional investors. This is an important
factor for long-term investors, many investors can also be impacted by institutional presence and
their high-volume trading.

ITC shares are listed on NSE, BSE and CSE but on foreign exchange.

The most shareholding of 24.37% in ITC is of Tobacco Manufacturers (India) Limited.

Most of the directors of the company are also shareholders of the firm as well.