Jaipuria Institute of Management,

Vineet Khand, Gomti Nagar

Lucknow – 226010

Academic Year 2021-22

Batch 2021 - 2023
Trimester 1st Trimester
Programme PGDM General
(PGDM / PGDM-FS / PGDM-RM)
Name of Course Accounting for Business
Section Group A
Name of Faculty Prof Reena Agarwal

Nature of Submission Analyzation of Annual Report of Company

(Assignment / Project Report)
Topic of Assignment / Project Annual Report of ITC Ltd FY2020-2021

Deadline for Submission 30-09-2021

Group/ Learning Team Number LT A08
Maximum Marks Allotted

Contribution of Group/LT members in the Assignment/Project

Sl. Name & Enrollment Contribution Signature

No. Number of Student

1 Abhinav Anand Singh Asset of the Balance Sheet

2 Ameesha Srivastava Liabilities of the Balance Sheet

3 Akash Tewari Profit & Loss Statement

4 Diksha Singh

5 Avinash Gautam

Date of receiving at PMC: Signature of PMC Staff:

Penalty [Marks to be deducted (if any)]:

ANNUAL REPORT OF ITC

LIMITED 2020-2021
Analysis and interpretation of the annual report of ITC ltd. focusing on the
Fiscal Year 2020-2021

LT A08
ABHINAV ANAND SINGH
AKASH TEWARI
DIKSHA SINGH
AMEESHA SRIVASTAVA
AVINASH GAUTAM
 Acknowledgement

We, the members of LT A -08, would like to express our deepest appreciation to all those
who provided us the possibility to complete this project report. Furthermore, we would also
like to acknowledge with much appreciation the crucial role of our professor Dr Reena
Agarwal guided us in all possible ways.
We are also grateful to the director of Jaipuria Institute of Management Lucknow, Dr. Kavita
Pathak for providing us the opportunity to embark on this project.
We extend our sincere gratitude to all those who have either directly or indirectly contributed
towards the completion of the project report.
 Table Of Contents
Title Page Number

Introduction to Future Retail 4

Financial Position 9

Cash Flow Position 20

Auditor’s Report 22

Key Points of MDA 24

Significant Accounting Policies 31

Conclusion & Key Learnings 32

Bibliography 34
Introduction

ITC was knowns as Imperial Tobacco Company of India Limited. It was established in the
year 1910 on 24th Aug. It’s headquartered is in Kolkata, West Bengal. It was converted into
Public Limited Company on 27th oct 1954. The company has a total of 13 businesses in 5
segments. It has a diversified presence across industries such as Cigarettes, FMCG, hotels,
agribusiness, etc.
The first Indian chairperson of the company was Ajit Narain Haskar .
Shareholder & listings:

 Bombay Stock Exchange

 National Stock Exchange of India
 Calcutta Stock Exchange
 Luxembourg Stock Exchange (GDR’s)

shareholder’s(as on 31st mar,21) Shareholding

Financial Institutions 42.42%

FII’s & FPI’s 14.63%
Foreign Companies 29.47%
NRI’s OCI’s 0.69%
Body Corporates 1.03%
Public 11.65%
Share underlying GDR’s 0.12%
Total 100%

Employees:
As per the annual report of 2021, ITC has 28000+ employees. Yogesh Chandra, the
chairman of the company also won Padma Bhushan award and 7th best performing
CEO in the world by Harvard Business Review.

Strategies of ITC
ITC follows 5 strategies given below:
 Price Strategy: ITC follows different price strategy for different product i.e
premium pricing for luxurious product whereas reasonable pricing for middle
class segment, which will help them in sales generation and will lead to better
revenue figures.
 Place Strategy: The products are available in every retail shop around India.
They have a well-established logistic and manufacturing distribution network.
They have 4 manufacturing & more than 61 dealers in India. They export food
products internationally too.
 Promotional Strategy: They have a unique promotion strategy keeping in
mind its target audience and its brand preposition. Promotion is done
through various social media platforms like radio, television, newspaper, etc.
They have launched several popular ad campaigns through popular tv
channels with the help of celebrities like Shah Rukh Khan, Kareen Kapoor for
better visibility.
 Marketing Strategy: ITC use Demographic and psychographic segmentation
factor for marketing. They operate their own distribution channel. Goods are
made through available to wholesale distributors and then carried forward
which are transmitted to its customers in most remote area. Their targeted
customers are 5-60 age group. They meet the need of different companies.
Some of their marketing campaigns are: proudly India campaign, sab sath
badhein campaign, etc.
 Digital Marketing Strategy: ITC has also started doing digital marketing with
the help of social media platform i.e Facebook, Twitter, Instagram.

Accounting Policies of ITC

The Financial Statements are prepared in accordance to Indian Accounting
Standards, notified under Sec 133 of the Companies Act, 2013. They measure
cost as per the Generally Accepted Accounting Principle (GAAP).
Articles of Association:
During the year, the Articles of Association of your Organization was altered,
with your endorsement, to make them reliable and lined up with the arrangements
of the Organizations Act, 2013 and the Rules and Regulations outlined thereunder,
and the Secretarial Standards on Executive Meetings and General Meetings.

Products of ITC
Some of the famous products of ITC are:
 Ashirwad Aata
 Classmate Notebooks
 Cigarette
 Sunfast Biscuit
 Hotel
 Noodles
 Coffee

FINANCIAL POSITION
OF ITC Ltd
Consolidate Balance Sheet as at March 31st, 2021

Detailed Analysis On Non-Current Assets and Current Assets (in crores)

Non- Current Assets -
Property, Plant and Equipment
It includes:
 Freehold Land
 Building
 Leasehold Improvements
 Office Equipment
 Furniture and fixtures
 Vehicles

As from Balance Sheet its clearly shown PPE has been decrease by 442.66 crores. In 2020 it
was 18932.57 crores and 2021 it was 18489.91crores.
Company has sold leasehold, plants and equipment, office equipment vehicles and furniture
The Company uses Straight-Line Method for depreciation it also uses under Part C of
Schedule II of the Companies Act 2013
Capital Work in Progress
It can be clearly depicted from the report that in 2020 it was 2776.31crores but in 2021 it was
3329.97 crores it increased by 553.66 crores.
Company is expanding and it is spending more it developing new structures and other
important equipment which are in work in progress mode. Which will help in the expansion
of company in near future.
Investment property
In 2020 investment was 385.36 crores and in 2021it was 376.56 crores there is a decrease of
8.8 crores. The company is selling its investment in order to gain funds.
Goodwill
In 2020 goodwill was nil and in 2021 it was 577.20 crores so company has created huge
goodwill in one year.
Other intangible asserts
In 2020 other intangible assert was 519.45 crores and in 2021 it was 2004.32 crores so there
is a increase of 1484.87 crores the company is investing heavily in buying software and
application to expand more and to cater much larger population.
Intangible Assets Under Development
In other intangible Assets it’s been observed that there is a fall of 0.39 crores in computer
software due to high disposal. As it was 3.89 crores in 2020 and 3.50 crores in 2021.
Right To Use of Assets
It’s been observed that in 2020 it was 680.17 crores and in 2021it was 726.84 crores so there
is a increase of 46.67 crores company is purchasing its stores on lease.
Financial asserts
 Investment
In 2020 investment was 13455.59 crores and in 2021 it was 12950.38 crores so there
is a decrease of 505.21 crores so the company has reduce its investment in order to
raise fund and to use these fund in expansion of the company.
 Loans
In 2020 loans was crores and in 2021 it was 2.37 crores so there is a deduction of 0.94
crores so the company has paid its loan amount to some extend which shows growth
of the company.
 Others
In 2020 other financial asserts were 607.17 crores and in 2021 it was 72.45 crores so
there is a huge reduction of 534.64 crores so the is a huge loss on company bonds,
stocks, mutual funds.

Other non-currents assets

Other non-current assets decrease by 133.09 crores as it was 1364.71crores in 2020 and it
was 1231.62 crores in 2021 so it means suppliers paid in advance, prepaid expenses, statutory
authorities etc.

CURRENT ASSETS -
Financial Assets -

Inventories
In the FY 2020, the Inventories were 8038.07 crores as compared to FY 2021, Inventories are
9470.87 crores, which shows increase in inventories with 1432.80 crores.
Financial asserts
 Investments
In the FY 2020, the investments were 17175.02 crores as compared to FY2021, investment
are 14046.71 crores, which shows a decline of 3128.31 crores.
 Trade Receivables
In the FY2020, the Trade Receivable or Debtors were 2092 crores, as compared to FY 2021,
Trade Receivable are 2090.35 crores, which means there is an decrease in FY 2021 with 1.65
crores, denotes that they sold more goods on credit.
 Cash and Cash Equivalents
In the FY 2020, the cash, and cash equivalents 561.84 crores, as compared to FY2021, it was
231.25 crores, which denotes that for the company the assets in the form of cash have been
reduced by 330.59 crores in the current year. With profit being lesser than previous year, the
company had to use its cash reserves for operating activities with borrowings as well.
 Other bank balances
In the FY 2020, the bank balance other than above were 6281.43 crores as compared to FY
2021, it is 3770.25 crores, which denotes that the assets have been reduce by 2511.18 crores,
(borrowings for Operating activities).
 Loans
In the FY 2020, the loans were 4.87 crores as compared to FY 2021, it was 2.77 crores,
which shows a decline of 2.10 crores and it shows company growth as it has paid its debt.
Others
In the FY 2020, the other Financial assets were 1505.94 crores as compared to the FY 2021,
it was 1197.15 crores which denotes decline of 308.79 crores.

Other Current Assets

In the FY 2020, the other current assets were 847.74 crores as compared to the FY 2021, it
was 1006.07 crores, which shows a growth of 158.33 crores so the company assert is
increasing which shows growth of the company.
Detailed Analysis on Non-Current Liabilities and Current Liabilities in crores
CONSOLIDATED PROFIT AND LOSS TILL 31ST MARCH, 2021 –
Detail Analysis on Income -:

Revenue from Operations

As we all could see there has been a significant change of Rs 1717.2 from FY2020 to FY2021.
If we look the sales of product has been increased by Rs 3026.13 and sales of services has
been decreased by Rs 1198.61cr. It includes the net of sales returns and damaged stocks
where the government grant has been received a sum of Rs 42.57 crore while in FY2020 it
was Rs 119.66cr. While the Other Operating Revenues has been decreased by Rs 110.32 cr.
In sales of products and services there has been decrease in the sale of cigarettes by Rs
(868.62) crore. In brand packaged and food product the sales has been decreased by Rs
(1863.41) crore. While in other category section like (Education; stationery product etc)
increased by Rs 31.48 crore. In Hotel sector there has been major fall in the services of ITC
hotels by Rs (1199.82) crore. In agriculture business (Unmanufactured tobacco; wheat,
soya, spices etc) it has been increased by Rs 1961.67 crore. In paperboards packaging sector
(Paperboards and printed material) has been increased by 39.4 crores.

OTHER INCOME
In the FY2021 the interest income has been decreased by Rs 214.05 crore in comparison to
FY2020. The dividend income has been increased by Rs 172.83 crore. In other non-
operating income it increased by Rs 51.25 crore. While in Other gains and losses it got
increased by Rs 237.30 crore.
Interest Income
The bank deposit has decreased by Rs (150.12) crore from FY2020 to FY2021. Whereas
financial assets got decreased by Rs (2.57) crore. The financial assets at amortised cost got
decreased by Rs (144.11) crore. While in statutory authorities it got increased by Rs82.75
crore. The Interest Income has been decreased in comparison to last FY2020 by Rs(214.05)
crore.
Dividend Income
There is an increase in Other Investment by Rs 180.53 crore. While the dividend income of
the company got increased by Rs 172.83 crore.

While in the Other gains and losses there has been the Net Profit on the sales of investment
by Rs 142.72 crore. In total there has been Net Profit for the company as it got increased by
Rs 227.3 crore.

TOTAL INCOME

The company’s total income has been increased by Rs 1954.33 crore from the FY2020 to
FY2021.

EXPENSES

The cost of material consumed got increased by Rs 483.31 crore. The purchase Stock in
Trade also got increased by Rs 2606.71 crore. While there in the change in the inventories it
got increased by Rs 2606.71 crore. The excise duty has also increased by Rs 350.52 crore
from FY2020 to FY2021.

Employee benefits expense

The salary and wages account got increased by Rs 247.32 crore. While in the share-based
payment to employees decreased by Rs 38.89 crore. The staff welfare expenses decreased
by Rs 42.42 crore. Overall, the employee benefit expense got increased by Rs162.74 crore
from FY2020 to FY2021. The Other expenses got decreased by Rs (655.02) crore.

The total expenses of the company got increased by Rs 4089.32 crore from FY2020 to
FY2021.

In Profit before exceptional and tax got decreased by Rs (2134.7) crore. The Profit before
tax got reduced by Rs (2002.6) crore.

Tax Expense

The current tax decreased by Rs (406.61) crore. While in the deferred tax the previous year
balance was already in negative so in FY2021 it increased by Rs 314.05 crore. Overall, the
Tax Expense of the company increased by Rs 101.73 crore.

The profit for the year which got deducted by Tax expense is Rs 13031.64 crore result to
be decreased by Rs (21043.41) crore in comparison to FY2020.

Other Comprehensive Income

In this we add both the items that will not be reclassified and also the reclassified to profit
or loss brings total of other comprehensive income which got increased by Rs 1135.56 crore
in comparison to FY2020.

The total comprehensive income is being calculated by the sum of profit for the year and
other comprehensive income wherein there has been the total comprehensive income has
been decreased by Rs (476.35) crore

Profit/Loss -:
Profit before Tax (PBT) – Profit before Tax of the ITC company last year in FY2020 stood Rs
19298.92 crore while in the FY2021 it got drastically reduced to Rs 17164.15 crore.
Net Profit of the Company (PAT) – Profit after the Tax of the ITC company last year FY2020
stood at Rs 15136.05 crore while in the FY2021 it reduced to Rs 13031.64 crore.
The main factor for this major decrease in the profit of the company are increment in –
(a) Increase in the Material Consumption
(b) Increase of stock in trade
 (c) Increase in Excise duty

FINAL OBSERVATION -:

(a) The company’s major part of losses has been due to the increase in custom duty
charges.
(b) There is no doubt that company profit got impacted just because of Covid-19 in the
FY2020.
(c) The salary and wages have been increased at large number which played major role in
the increase in their expense.
Consolidated Statement of Changes in Equity as at 31st March 2021 –
 Cash Flow Position
Of ITC Ltd

Cash Flow Statement as at 31st March, 2021 –

 Auditor’s Report –
By SRBC & Co. LLP

Audit Report of the Standalone Ind AS Financial Statements Opinion:

This audit was done on the standalone financial statements of ITC Limited which comprises
the balance sheet as at March 31 2021, the statement of P&L including other comprehensive
income, cash flow statements and statement of changes in equity for the year.
The notes also include the summary of significant accounting policies and other explanatory
information.
Basis for Opinion:
The audit of the standalone Ind AS financial statements was conducted in accordance with
the Standards on Auditing (SAs), as specified under section 143(10) of the Act.
Key Audit Matters:
Revenue recognition:
Auditor’s Response:
 The auditor assessed the company’s revenue recognition accounting policies in line
with Ind AS 115 (“Revenue from contracts with customers”) and tested thereof.
 Tested the effectiveness of such controls over revenue cut-off at year-end.
 The revenue with historical trends is compared and where appropriate, conducted
further enquiries and testing.
 The disclosures in financial statements in respect of revenue; as specified in Ind AS
115 are also assessed.
Litigations – Contingencies:
Auditor’s Response:
 The Company’s accounting policies in respect of claims, provisions and contingent
liabilities are obtained to assess compliance with accounting standards.
 The design and implementation of the Company’s controls over the assessment of
litigations and completeness of disclosures are assessed and supporting
documentation are tested and meetings conducted with in-house legal counsel.
 Relevant historical and recent judgements passed by the appropriate authorities are
also assessed in order to challenge the basis used for the accounting treatment and
resulting disclosures.
Acquisition of Sunrise Foods Private Limited
Auditor’s Response:
 Checked whether the accounting treatment is done under Ind As103
 Tested the valuation for arithmetical accuracy.
  The competence, capabilities and relevant experience of the experts engaged by the
management are assessed in order to determine fair valuation of assets and liabilities
acquired.
 The disclosures in financial statements are assessed in respect to acquisition in
accordance with the accounting standards.

The opinion of the auditor on the audit conducted on the ITC Limited company is that the
company has , in all material respects, adequate internal financial controls with reference to
standalone financial statements and such internal financial controls with reference to
standalone financial statements which was operating as at March 31, 2021, based on the
financial reporting criteria established by the Company stated in the Guidance Note issued by
the ICAI.
 Key points of MDA report
of
ITC Limited

The discouraged monetary conditions and disintegration of business and customer opinion
incited a progression of mediations by governments across the world. The Government of
India reacted quickly to contain the spread of the infection, ensure lives and stuff up the
medical services framework. This was followed up with a few stages to help occupations and
financial movement through boost bundles.

 There is uplifted vulnerability around the circumstance and state of the recuperation
direction. A fast scale up in the speed of immunization and preparing of the medical
services foundation to moderate the effect of conceivable future episodes would be
basic going ahead.
 ITC's mediations are adjusted to the public needs of upgrading seriousness of Indian
horticulture and industry, creating enormous scope business openings and supporting
feasible livelihoods, driving import replacement, making public brands to boost
esteem catch in India, expanding Indian agri-sends out and advancing feasible
strategic approaches.
 In the course of the most recent five years, the Value-Added by ITC, for example the
worth made by the monetary exercises of your Company and its workers, amassed
around 239000 crore rupees of which over 167000 crore rupees accumulated to the
Exchequer.
 Ventures made by ITC keep on being directed by the public goals of ‘Make in India'
and 'Multiplying Farmers' Income' and the general subject of ‘Atmanirbhar Bharat'
that looks to make the nation more grounded, strong and more cutthroat.

Profits, Dividends and Retained Earnings:

 Ventures made by ITC keep on being directed by the public goals of ‘Make in India'
and 'Multiplying Farmers' Income' and the general subject of ‘Atmanirbhar Bharat'
that looks to make the nation more grounded, strong and more cutthroat.
  ITC supported its 'AA' rating by MSCI-ESG - the most noteworthy among worldwide
tobacco organizations. It has likewise been remembered for the Dow Jones
Supportability Emerging Markets Index - an impression of being a supportability
pioneer in the business.

Taxes on cigarettes are one of the highest in India as depicted in the chart below:

 It is estimated that on account of illegal cigarettes alone, revenue loss to the

Government is approx. 15000 crore rupees per annum.
 The oppressive tax collection and administrative system on cigarettes in India keeps
on influencing the job of Indian tobacco ranchers, who have experienced a combined
drop in income of over 6000 crores rupees since 2014.
  Utilizing the strong development foundation of the Life Sciences and Technology
focus, ITC dispatched more than 120 new and creative items with convincing
incentives in record time, showing spryness and execution greatness. ITC's energetic
arrangement of more than 25 world class Indian brands now addresses a yearly
purchaser spend of over 22000 crore rupees.

Compliance with the conditions of Corporate Governance:

The endorsement from your Company's Auditors, Messrs. S R B C and CO LLP, affirming
consistence with the states of Corporate Governance as specified under the Listing
Regulations, is annexed.

Going Concern status:

There is no huge or material request passed during the year by any controller, court or council
affecting the going concern status of your Company or its future activities.

Compliance with Secretarial Standards:

The Company is in consistence with the material Secretarial Standards gave by the Institute
of Organization Secretaries of India and supported by the Focal Government under Section
118(10) of the Act.

Employees:
The total number of representatives as on 31st March, 2021, remained at 26,017. There were
153 representatives, who were utilized consistently and were in receipt of compensation
amassing 102 lakh rupees or more or were utilized for part of the year and were in receipt of
compensation amassing 8.5 lakh rupees each month or really during the monetary year
finished 31st March, 2021. The data needed under Section 197(12) of the Companies Act,
2013 and the Companies (Arrangement and Remuneration of Managerial Faculty) Rules,
2014 is given in the Annexure shaping piece of this Report.

Articles of Association:
During the year, the Articles of Association of your Organization was altered, with your
endorsement, to make them reliable and lined up with the arrangements of the Organizations
Act, 2013 and the Rules and Regulations outlined thereunder, and the Secretarial Standards
on Executive Meetings and General Meetings.

Conclusion:

 The Company's Triple Bottom Line reasoning has over the course of the years
prodded the formation of imaginative plans of action that synergise the structure of
monetary, ecological and social capital. With Manageability as the bedrock of your
Company's corporate procedure, the superordinate objective of serving bigger public
needs and making an incentive for all partners has developed into another worldview -
'Capable Competitiveness' - a withstanding technique that spotlights on outrageous
intensity however in a way that recharges the climate and supports maintainable
livelihoods.
 The essential Vision of making various drivers of development through the quest for
market openings that best match institutional qualities, has come about in the
advancement of solid Businesses of things to come just as an arrangement of winning
a-list brands furthermore, future-prepared items. Today, your Company is the main
FMCG advertiser in India, a pre-famous inn network and an around the world
acclaimed symbol in green hotel , the unmistakable market pioneer in the Indian
Paperboards and Packaging industry, a spearheading pioneer in rancher and country
strengthening through its Agri Business and a worldwide model in manageable
strategic policies. Over the most recent twenty years, your organization’s non-
cigarettes organizations have developed more than 25-crease and as of now establish
more than 60% of net Fragment Revenue. At the core of this change lies the force of
cooperative energy, with consistent access for your Company's new Businesses/drives
to the profound what's more, fluctuated abilities inhabitant across various parts of the
venture, and its elite ability pool.
 SINGNIFICANT ACCOUNTING POLICIES
OF FUTURE RETAIL

Policies of company
Many companies have their different policies regarding decision making, performance
management, relationship with employees and their co-workers, nature of organization, way
of working.

Accounting policies of Future Group

 Financial statements of Future group are prepared according with Indian Accounting
Standards (Ind As) under historical cost with basis of accrual. In Financial statements
Ind As requires judgment, assumptions, and estimates.
 These things are affected the financial statements when revenue amounts are reported
and expenses which are done by the company during the period.
 These estimates are change sometime for period to period. According to estimates,
accounting actual report is different from these statements.
 Their accounting policies are based upon assets, liabilities, revenue, income tax
related statement, burrowing costs, share’s capital, properties, their branches,
equipment’s, advanced based customers, their benefits and losses, regulatory cash
flows.
 Financial statement is determined based on Ind As 102 ‘Share based payment’,
‘Leases’ transaction based on Ind As 17,’Inventories’ transaction based on Ind As 2
and Impairment of Assets based on Ind As 36.
 In Ind As 115 “Revenue Recognition” using cumulative catchup transition method.
 In property, plant, and equipment the company estimates useful lives using the
Straight-line method.
 ROU assets of leases on the basis of Straight-line method.
 Conclusion

The company has not been able to increase its sales and profits for the FY 2020. The
operations of the company have not been able to convert their efforts into profitability,
therefore, decreasing the profit ratio since the previous year.

The company is majorly conducting its activities by the means of borrowings and leasing. It
has borrowed money from various institutions and still had to issue shares for the year to
meet its operating expenses. This has impacted the revenue of the company yet again it has
barely surpassed its expenses.

The company conducting the retail activities on lease basis can bear positive results in the
future, as it is more cost effective than purchase of land and building. Yet the interest
payment has affected the revenues.
 Key Learnings from the Project

 The project helped us in improving time management and coordinating with our LT
members.
 We learnt about Root Cause Analysis (RCA).
 While working on this project we got to the proper interpretation of the financial
statement of ITC.
 Better understanding of cash inflow in business and cash outflow , also got to know
that cash outflow is not necessarily a negative thing.
 We gained expertise in research work.
 With the help of the project we enhanced our analytical skills and abilities.
 We learnt more about the financial position of ITC .
 Bibliography

 https://www.futureretail.in/

 Future Retail Annual Report

 https://www.financialexpress.com/market/stock-market/future-retail-ltd-stock-
price/

 https://www.ibef.org/industry/retail-india/showcase/future-retail-ltd

 https://www.bseindia.com/stock-share-price/future-retail-ltd/fretail/540064/