Y.C. Deveshwar

Founding Fuel frames ITC's 2023 demerger of its hotels division as a strategic move by chairman Sanjiv Puri to 'kill three birds with one stone': unlock value, restructure capital allocation, and respond to aggressive new entrants in hospitality — notably Reliance Industries, which was actively forging partnerships with Oberoi Hotels and making acquisitions like Mandarin Oriental in New York.

The author notes the announcement surprised the market: ITC's board retained a 40% stake in the new ITC Hotels entity rather than a clean spin-off. The ITC share price fell from Rs 471.35 on the announcement date of July 24 to Rs 442.60 by September 25. Analysts questioned whether ITC was wary of fully cutting the umbilical cord with hotels, and whether a perceived takeover threat drove the decision to keep a controlling stake.

Founding Fuel notes the historical irony: in the early 2000s, ITC under Deveshwar accumulated shares in East India Hotels (the Oberoi Group), reaching 13.69% — just below the 15% open-offer trigger of that era. Deveshwar publicly maintained the stake was a financial investment, not a takeover attempt.

The column recalls that ITC also built a roughly 13% stake in the distressed Hotel Leelaventure between 2008 and 2013, and attempted to increase that stake in 2019 when Leela tried to sell its assets to Brookfield. ITC sought a Sebi stay on the sale, but the Securities Appellate Tribunal rejected its appeal in September 2019 — leaving the matter pending before the NCLT.

Reliance's recent moves are framed by Founding Fuel as altering the three-horse hospitality race among Taj, ITC and Oberoi. Reliance spent about $100 million acquiring a controlling stake in Mandarin Oriental in New York, then announced a tie-up with Oberoi Hotels to co-manage three properties across India and the U.K., including Stoke Park in Buckinghamshire.

Hotels, the column notes, always enjoyed a special place in Deveshwar's heart from 1996 onward. Backed by the huge cash flow from ITC's dominant cigarette business, he expanded the hotel portfolio to nearly 100 properties (120 today).

Analysts, Founding Fuel observes, were never happy with the hotels division's performance. While it accounted for 20% of total capital employed, return on capital employed stayed in single digits and contribution to the topline was insignificant compared with the healthier performance of tobacco, paperboards, agri and FMCG. Critically, erstwhile parent BAT — still holding 29.1% —.

The demerger plan was first mooted in ITC's FY2019-2020 annual report, but Deveshwar succumbed to cancer on May 11, 2019 — before he could execute it. The pandemic then wrecked the hospitality industry. Sanjiv Puri put the demerger back on track as the post-pandemic hotel recovery took hold, with Q1 2023 results showing exceptional performance led by domestic travel.

Open Magazine's obituary frames Deveshwar as a nationalist and stalwart of sustainable business. Across two decades of leadership (1996-2017), ITC's revenue grew ten-fold from Rs 5,200 crore to Rs 51,500 crore, while shareholder returns compounded at 23.3% per year. The market capitalization at the end of FY2015-16 stood at $45 billion — almost 50 times the market value in 1996 —.

Deveshwar's relationship with British American Tobacco (BAT) — the 29% shareholder in ITC — is described as the defining corporate battle of his career. In March 1995 BAT publicly claimed a lack of confidence in ITC chairman Krishan Lal Chugh, alleging financial irregularities in the power-generation business and pressing for a majority stake. In reality, Open reports, BAT wanted cash-rich ITC's funds for itself.

Deveshwar is quoted dubbing ITC 'India's Trademarks Corporation' — a phrase that recast the BAT-controlled cigarette maker as a national champion rather than a foreign subsidiary. The phrase mattered because it gave ITC a nationalist halo during the hostile takeover fight and aligned the company's identity with the post-liberalization ambition of Indian firms defining themselves against multinational parents.

Deveshwar then went on what Open calls a diversification spree with a 'let's put India first' clarion call, transforming the Kolkata-based cigarette maker into a conglomerate spanning FMCG, paper and packaging, hotels, agriculture and information technology. When he took over in 1996, nearly 75% of ITC's revenues came from tobacco; by the time of writing tobacco was down to slightly over 40% of revenues.

Open credits Deveshwar with making ITC a global exemplar in sustainability — what current chairman Sanjiv Puri calls 'the only company in the world to become carbon positive, water positive and solid waste positive for over a decade'.

The pioneering farmer empowerment drive ITC e-Choupal — which links the company directly with rural farmers using the internet for agricultural and aquacultural procurement — is described as the world's largest rural digital infrastructure and a case study at Harvard Business School.

Anand Nayak, former ITC HR head, tells Open that Deveshwar's greatest strength was articulating a mission framing ITC as a commercial enterprise with the overarching objective of 'putting India first' and creating value for the country. His concept of distributed leadership held that leadership was not concentrated with the top team but required at multiple organizational levels —.

Pradeep Dhobale, a former ITC director, recalls Deveshwar handing him the loss-making ITC Bhadrachalam paper business in 1999 with the words 'I am giving the lives of 2,000 families in your hands. Please take care of them' — with no mention of production, revenue or profit targets.

Deveshwar was among the first global tobacco chiefs to sense the impending decline of the cigarette business, Open notes. As ITC's helmsman he looked beyond shareholder value to overall gain for environment, society and nation. The paper business expansion was originally framed as securing raw material for pulp; Deveshwar saw the potential for rural employment and environmental benefit, and instructed the team to scale plantation targets 10x —.

Wharton frames ITC's transformation under Deveshwar as a journey from a single-product tobacco company founded in 1910 as the Imperial Tobacco Company of India to a multi-business corporate enterprise with turnover around US$6 billion by 2010. Non-tobacco businesses — foods, personal care, hotels, paper, agriculture and IT — accounted for about 40% of revenues by 2010.

Deveshwar joined ITC in 1968, became chairman in 1996, and from 1991 to 1994 served as chairman and managing director of Air India — a brief detour through India's national carrier between two ITC tenures. Returning to ITC in 1996, he faced the choice of staying in the comfort zone of a tobacco business ITC had run for nine decades or creating multiple new growth drivers to match the emerging Indian economy.

In 1985, ITC's platinum jubilee year, turnover was about Rs 800 crore with profit near Rs 8 crore. By 2010, Deveshwar tells Wharton, turnover had crossed US$6 billion with profit above US$900 million. The math implies a near-eight-fold dollar-turnover expansion in 25 years and a profit pool that grew by over 500x —.

Deveshwar's diversification thesis, in his own words to Wharton, was unconventional at the time. He recalls being told conventional wisdom did not favor diversification as a prudent growth strategy. He countered with two beliefs: in an emerging economy with untapped opportunities, diversity managed well via innovative business strategies could yield significant growth; and that diversity could lend unique sources of competitive advantage unava...

The clearest example Deveshwar cites of synergies across ITC's diverse portfolio is Aashirvaad atta. ITC's e-Choupal network enables cost-effective wheat sourcing with traceability through identity-preserved procurement. Tobacco-blending expertise informs customized blending for local tastes. Hotel master chefs contribute consumer-palate insights to the foods business. The packaging arm supplies the bag.

On FMCG, Deveshwar tells Wharton the sector was expected to triple to over US$80 billion by 2018. ITC's foray blends internal competencies — sourcing, branding, trade marketing, distribution, manufacturing — with emerging opportunities.

Deveshwar points out India is grossly under-roomed: only 5 million international arrivals a year against 80 million in France, 58 million in the U.S., 55 million in China. He estimates India needs 50,000 hotel rooms in two to three years and positions ITC Hotels to capture that growth. He also emphasizes environmental design —.

Paper and packaging, Deveshwar notes, are an under-penetrated Indian market — per-capita consumption around 5 kg per year, against nearly 300 kg in the U.S., 200 kg in the U.K. and 45 kg in China. With education and economic growth expected to drive manifold demand, ITC invested significantly in capacity in this business. The growth of branded consumer goods would, in turn, drive packaging demand —.

ITC's agri-business division, Deveshwar tells Wharton, is positioned as a supply chain partner for the foods and tobacco businesses, with the e-Choupal rural network progressively leveraged to widen FMCG distribution. The e-Choupal itself is a celebrated example of rural digital infrastructure — direct internet-mediated farmer linkages for procurement of agricultural and aquacultural products —.

On governance of a diversified portfolio, Deveshwar explains ITC's 'distributed leadership' model: a three-tier structure with the board handling strategic supervision, a corporate management committee handling strategic management, and divisional management committees handling executive management of each business. This clarity lets top management function with what he calls a venture-capitalist mindset —.

Deveshwar argues sustainability is a strategic asset. Beyond e-Choupal, he cites sourcing pulp from renewable plantations rather than cheaper imports to create tribal and marginal-farmer livelihoods; integrated watershed development covering over 56,000 hectares; animal husbandry services reaching over 450,000 milch animals; supplementary education for over 200,000 rural children; and roughly 30,000 women entrepreneurs created through about 1,...