Despite not making profits, ITC's investment in the non-cigarette FMCG categories is currently aimed at building a "market position".

The non-cigarette FMCG business that it categorises as 'FMCG Others' includes apparel retailing, packaged foods, safety matches and agarbattis and education and stationery products.

The segment had reported a profit (earnings before finance cost and tax) of Rs 34 crore for FY15. But was in red during Q1 of this fiscal (Rs 8 crore loss).

According to the company Chairman, YC Deveshwar, the aim of the segment is not just creating profits, but also to "establish the brands" and create a "market position".

Deveshwar, during the 104th AGM of ITC, was responding to shareholders' queries on how soon the non-cigarette FMCG business segment would start generating profits.

He pointed out that despite being in red (making losses) and losing cash, e-com players were being funded. The reason: "they are in the position of building a market''.

"Similarly, ITC too was investing in the (non-cigarette) FMCG business because it was creating a position in the market," he said during the AGM.

The company could have had "one product" and made profit on it, but it chose not to do so.

"The new businesses are spending money not just for own standing, but also paying for the new launches," he added.

As the segment (FMCG Others) turns profitable, ITC will foray into "all products that can be termed FMCG".

Back Up plan to cigarettes

Referring to the restrictive regulatory and tax regimes on cigarettes and the incidence of increased smuggled offerings, Deveshwar said the foray into other FMCG was a plan that the company had formulated some 10 years ago.

"The regulatory environment is not totally rational. I wonder if some NGOs are acting as agents of overseas cigarette companies," he said.

The company, according to the Chairman, was in regular communication with both Centre and the States, and "more rationality" in taxation was expected next year.

"I would urge the government not to kill the golden goose that lays the egg," he added.

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