ITC Ltd is ready to enter the personal care products market, which is currently the fief of fast-moving consumer goods majors Hindustan Lever and Procter & Gamble.
The company has proposed a change in its memorandum of association for its foray and has started sending postal ballots to shareholders, seeking their approval.
The results of the ballot --- which is mandatory --- will be declared on December 22. "This is an enabling resolution to allow ITC to expand its presence in the FMCG segment," company sources said.
ITC's decision to enter personal care products was significant, said analysts. "There is a certain degree of exhaustion in the sector, which has created a window of opportunity for a new player with the right business plan," said an analyst.
Established players in the FMCG segment have been indulging in a bloody war over pricing, with undercutting and discounts being the order of the day.
The size of the personal care product market is about Rs 15,000 crore (Rs 150 billion), with soaps and shampoos alone accounting for Rs 7,000 crore (Rs 70 billion).
In the last three years the segment is estimated to be growing at 8-9 per cent, which is considered to be among the highest in the Rs 45,000 crore (Rs 450 billion) FMCG market.
ITC already sells a wide range of products in the FMCG segment but none in personal care. The company's FMCG range now has more than 45 food products, covering staples, ready-to-cook pastes, confectionery, snacks and biscuits and ready-to-eat meals. ITC emerged as the most profitable FMCG company in the second quarter in the current financial year.
Analysts said ITC had the capability to source high-quality agri-products and raw materials, access to in-house paperboard and packaging solutions, and a cost-competitive FMCG distribution infrastructure. All this will come in handy for its personal care product launch.
In terms of distribution strength, ITC could bank on its e-choupal network, which currently has more than 4,700 sites catering to 2.8 million farmers in Madhya Pradesh, Uttar Pradesh, Maharashtra, Rajasthan, Karnataka and Andhra Pradesh.
ITC recently commissioned a rural mall, named Choupal Sagar, at Sehore, MP, and more such malls are in the pipeline.
However, it is unlikely that the company will re-enter the edible oils segment, which it exited some time back.
The company clocked a net profit of Rs 485 crore (Rs 4.85 billion) in the quarter ended September 30, 2004. Hindustan Lever's net profit was Rs 324 crore (Rs 3.24 billion) during the same period.
