Y.C. Deveshwar on Capital Allocation

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.

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).

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 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.

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 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 —.

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 —.