CLASSMATE NOTEBOOKS

HISTORY
Launched in 2003, with an array of student notebooks, Classmate currently is INDIA'S NO.1
NOTEBOOK BRAND* and offering a comprehensive stationery portfolio with writing
instruments (ball, gel & roller pens and mechanical pencils), mathematical instruments
(geometry boxes), scholastic products (erasers, sharpeners and rulers) and art stationery
products (wax crayons, plastic crayons, sketch pens and oil pastels).
Classmate stands for identifying and celebrating the uniqueness of every child. The brand
encourages each user to nurture the skills and interests that make them special, with
confidence, to make their dreams, reality.
The Classmate philosophy is simple: Everyone is born unique. Classmate stands for the
celebration of this uniqueness within every individual to ensure that the seed of originality
does not get lost. Classmate encourages its users to nurture their true talent, follow their true
calling and become whatever they truly want to be.
Classmate aids in this by offering high quality products that are affordable. After all, in the
right hands, a pen can be much more than a pen, and a notebook can be a window to the
world. As a partner and friend to children during their most important years, Classmate
attempts to create an environment for them to learn and grow in, as they write their own
futures.

VISION AND MISSION

The ITC Vision & Mission

Sustain ITC’s position as one of India’s most valuable corporations through world class
performance, creating growing value for the Indian economy and the company’s
stakeholders.

THE ITC MISSION

To enhance the wealth generating capability of the enterprise in a globalising environment,

delivering superior and sustainable stakeholder value.

The ITC Way

ITC is a board-managed professional company, committed to creating enduring value for the
shareholder and for the nation. It has a rich organisational culture rooted in its core values of
respect for people and belief in empowerment. Its philosophy of all-round value creation is
backed by strong corporate governance policies and systems.

ITC’s CORPORATE STRATEGIES are :

Create multiple drivers of growth by developing a portfolio of world class businesses that
best matches organisational capability with opportunities in domestic and export markets.

Continue to focus on the chosen portfolio of FMCG, Hotels, Paper, Paperboards &
Packaging, Agri Business and Information Technology.

Benchmark the health of each business comprehensively across the criteria of Market
Standing, Profitability and Internal Vitality.

Create distributed leadership within the organisation by nurturing talented and focused top
management teams for each of the businesses.

Continuously strengthen and refine Corporate Governance processes and systems to catalyse
the entrepreneurial energies of management by striking the golden balance between executive
freedom and the need for effective control and accountability.

CORE VALUES

ITC’s Core Values are aimed at developing a customer-focused, high-performance

organisation which creates value for all its stakeholders:

Trusteeship

As professional managers, we are conscious that ITC has been given to us in “trust” by all
our stakeholders. We will actualise stakeholder value and interest on a long term sustainable
basis.

OBJECTIVES
Classmate, the stationery products brand from the ITC group recently launched an activity
called Classmate Man of the Match (CMOM). The objective was to create brand and product
range awareness, translating to trials, thereby increasing portfolio sales. The CMOM
programme attempts at making a large set of Classmate consumers become more aware and
try some of the newer product categories like pens, writing pencils, geometry box sets, etc.,
that the brand launched some time back.
This has been carried out by the brand activation agency Candid Marketing.

For the brand, the agency has integrated the use of both online and on-ground media to
generate awareness about the campaign.

The CMOM activity works simply. It allows the target group to earn 'runs' or points on
purchase of Classmate stationery products. Participants with the maximum number of runs
will get a chance to meet Classmate's brand ambassador Yuvraj Singh, and be gratified with
Pune Warriors India merchandise (the IPL team that Classmate partners).

The 45-day Classmate campaign merges multiple consumer engagement platforms to

leverage the brand promotion. The campaign uses digital marketing and activations
(including the use of social media), with traditional on-ground platforms like roadshows, and
tie-ups with Café Coffee Day (CCD) outlets, thus allowing the brand to be present in the
consumer's physical and virtual environments.

The campaign has also been designed to ensure varying levels of prizes and gratification for
participants according to the number of runs scored by them.

For example, on getting 100 runs, participants will be given unique serial codes which can be
used to redeem a free coffee at any CCD outlet. As part of the campaign, branded tent cards
have also been placed at 56 CCD outlets across the country to drive communication.

In the digital space, it's mainly Facebook and Google which have been leveraged to promote
the activity by running and promoting the contest online.

Additionally, email marketing and mobile phone-based SMS marketing platforms have also
been leveraged. Twenty eight lakh text messages were sent across cities, to people within the
age-group 15-25 years and the database was oriented from sources like schools, coaching
classes and colleges.

Classmate also created a campaign microsite that encourages participants to register for the
contest on making their first purchase, and thereafter subsequent purchases made by
individuals have to be uploaded on the site to earn runs.
Discussing the campaign, Karan Kumar, marketing manager, ITC's Education and Stationery
products business, says, "As the endeavour was to become an integral part of the consumer's
ecosystem, it only made sense for the programme to permeate the twin worlds of click and
mortar."

Amrita Kumar, managing partner, Candid Marketing, says, "We decided to use the online
medium to facilitate work at a faster pace and used the on-ground platform to create
awareness about the campaign. By combining ground activations with a digital contest we are
ensuring that the campaign gains maximum popularity."

The company claims that Classmate is already the leading brand in the Rs 3,000 crore
notebooks market in India.

SYMBOL

SLOGAN
ORGNIZATIONAL STRUCTURE
As evident from the above representation of the generic supply chain structure for ITC
businesses, the supply chains of most of ITC's businesses are vertically integrated. Farmers
are the key suppliers to majority of our businesses which are dependent on agri-commodities
and therefore constitute an integral part of ITC's supply chain. Please refer to Social
Investments - Mission Sunehra Kal section in this Report for details of our relationship with
this important part of our supply chain.
The Education and Stationery Products (ESPB), Matches & Agarbatti and Foods Businesses
have significant Third Party Manufacturing (TPM) contributions. In line with our
commitment to extend the Triple Bottom Line approach along our supply chain, we have
started by including the Notebooks manufacturers of ESPB which contributed to around 90%
of the total business of ESPB, within the Reporting Boundary. The materials aspects of these
exclusive TPMs are included in this Report. Going forward, they will be helped in
establishing systems to improve their environmental and social performance. Also during the
year, ATC Limited, an associate company of ITC group has been brought within the reporting
boundary, where as per plan, they were supported in implementing systems and processes to
monitor the material environmental and social aspects in its manufacturing operations. It is
proposed to bring the 2 TPMs of the Company's Cigarettes Business within the reporting
boundary in 2014-15.

HEAD QUARTERS

ESPB HEAD OFFICE

ITC Limited,
Education & Stationery Products Business
ITC Centre, 6th Floor, 760, Anna Salai
Chennai 600 002, India
Telephone: +91 44 4219 2700

FINANCIAL ASPECTS

Indian conglomerate ITC's education and stationery products business, which sells notebooks
and other stationery items under the Classmate brand, has clocked revenues of Rs 1,000 crore
in terms of consumer spends.
"When the company got into the stationery business way back in 2003, there was a lot of
scepticism, but today we are market leaders in the branded notebooks category," says Chand
Das, chief executive, education and stationery products business at ITC.
The company's rise to the Rs 1,000-crore mark took a little over 10 years, which according to
Das is the fastest in the history of the stationery business in India.
Companies such as Navneet, for instance, despite being around since 1956, have a turnover
of less than Rs 1,000 crore.
Das, who was moved from the company's packaging business to run this business way in
2002, has played a major role in getting consumers to think brands while buying a
commoditised category like notebooks.
The organized market for notebooks is around Rs 4,000 crore, where ITC's Classmate is the
market leader with a 20 per cent share. The other national brand, Navneet, is a distant second
with 7 per cent share. The rest of the market is controlled by a host of regional brands.
Das is now set for the next round of market expansion. He is currently testing brand Saathi,
which would be a notebook brand targeted at what he calls "less prosperous markets".
Brand Saathi would be priced 15 per cent lower than Classmate, whose average price is
around Rs 25. "The idea is to ladder the portfolio," says Das.
He also plans to launch a premium offering called Classmate Pulse. This, he says, will be
strong on design elements and would have features such as dividers and pockets. But how
many Indian consumers are actually brand conscious when it comes to buying a notebook?
Das says that in the last decade, he has succeeded in capturing the mindshare of the students
by actively investing in various school contact programmes. "Our target audience, both
consumers and the trade, understand brands," he says.
Almost 85 per cent of the company's revenue comes from notebook sales, while the rest is
from other stationery products such as pens and art stationery. This ratio will change to 70:30
in favour of notebooks in the next five years, says Das.

MARKETING ASPECTS
Holistic Marketing concept is based on development,design and implementation of marketing
programmes, processes and activities that recognize the breadth and inter-dependencies.

Social Responsible Marketing:

Corporate Social Responsibility of classmate. For sale of every four notebooks, Re 1 is
donated to the foundation that manages the education of poor and needy.

Integrated Marketing:
Classmate employs all components of Integrated Marketing Mix to reinforce the brand image
and increase sales.

Relationship Marketing:
Customers are being provided with all the variants that satisfy their requirements. For dealers
and retailers, classmate offers discount on other stationery products like geometry boxes,
pens and pencils to ensure a good relationship. The discount percentage depends the facts and
quantitative report presented by dealers.

Internal Marketing:
Classmate's marketing manager is entrusted with responsibilities of developing and managing
all the aspects of email programs to successfully drive traffic, building membership loyalty,
increasing member to member and community engagement, generating incremental member
guaranteed content and creating upgrades.

Brand
A brand is a name, term, symbol, design or combination of all these, intended to identify the
goods or services of one or group of sellers and to differentiate them from competition.

It is the seller's promise to deliver the same bundle of benefits/services consistently to buyers.

Classmate as a brand promises to deliver notebooks of high quality and Eco-friendly paper.
It is the pioneer of organization of the notebook industry.

Classmate with its product features and customer value have ensured that the customers
always prefer classmate over its competitors. Also the number one status of the classmate
notebook has been the status symbol for the customers.

Classmate has always catered to the requirements of the target group by introducing variants.
This helped classmate to strengthen the loyalty factor and this helped in establishing the
emotional connect with the brand.

Classmate puts in a lot of focus on brand management.It consistently delivers the product that
matches the expectations and also provides additional features. It enhances the emotional
connection within the people by its ad campaigns which focus on uniqueness and also
specialties in a kid.

The market mix component are well put in to use to maintain the brand image.
 HUMAN RESOURCE ASPECTS
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PRODUCTS

Classmate products include notebooks, pens, pencils, mechanical pencils, diaries,

mathematical drawing instruments, scholastics, erasers, sharpeners and scales and art
stationery products.
Notebooks
Classmate notebooks consist of many variants including notebooks, long books, practical
books, drawing books and reminder pads, with a theme on the cover and related information
inside.
ITC Classmate notebooks use ozone-treated, elemental chlorine free paper, leading to higher
paper quality and shelf life.
Pens
Classmate offers fountain pens, gel pens, roller pens and ball pens.
Pencils
Classmate's range of pencils includes wooden and mechanical pencils. Variants of wooden
pencils include HB Bonded Lead, HB Jet Black, Carbon Black, 2B Trilobe and Rubber
Tipped.
These pencils come with different features, clicking mechanisms, and grips.
Art stationery products
The Colour Crew range of art materials includes wax crayons, plastic crayons, oil pastels and
sketch pens.
Mathematical instruments
Classmate has several types of drawing instruments available.

ACHIEVEMENTS
ITC Classmate recently came up with a campaign ‘Be better than yourself’ to educate
students on how to tackle exam pressure, with a core message that the goal is not to be better
than anyone else but to improve one’s own past performance. The TVC shows how students
are being trapped in the constant pressure of performing better than others.

According to Shailendra Tyagi, Chief Executive Officer (Education and Stationary Products
Business), ITC, the campaign is designed to encourage children to chase their future selves.
“‘Be better than yourself’ campaign focuses on today’s school-going generation and aims to
challenge the long-standing and widely held social assumptions on the nature of competition
in academics. The campaign is designed to encourage children to chase their future selves. It
inspires them to keep only their personal values and ambitions ahead of the competition; and
to be judged only on their own metrics, not anyone else’s,” said Tyagi.

“The brand understands that a child’s potential is influenced and shaped by parents, teachers
and the academic environment. Hence, the campaign reaches out to all stakeholders with a
key message,” added Tyagi.

The brand enjoys a strong penetration in the stationery market. It claims to have a share of
22-24% in the notebook market.

“In terms of consumer spends, we are already a Rs 1,000 crore brand and enjoy No.1
position in this segment. We command a market share of 20-something and a 5-15% price
premium over the regional competitors,” said Tyagi.

Read on to know what Tyagi shared with exchange4media on the brand’s vision, overall
marketing strategy and more.

Stationery Market
At present, the stationery business in India is worth over Rs 15,500 crore, with notebook as
the largest segment estimated to be worth over Rs 7,500 crore. Other key sectors in the
stationery market are writing instruments, art and scholastic products, which total up to
another Rs 8,000 crore. In the past few years, the industry has seen a growth of 4.5- 5%.

Ad Spends
The company spends more than 5% of its turnover on marketing and brand building
activities. We spend across mediums, depending on the need of the campaign. Our
expenditure on digital marketing has substantially increased over the past few years, and we
plan to continue practicing the same.

BTL or ATL Marketing

As a brand, we believe that both ATL and BTL are equally important and they complement
each other. Depending on the product, target audience and the geographies, we evaluate the
media mix and move with our marketing plans.

Social media, too, has definitely changed the fundamentals of marketing and information
sharing throughout the globe. It gives liberty to a brand to reach out to the masses in real time
via multiple channels. As for the recent campaign, we will use TV, cinema, outdoor as well
digital platforms to communicate the message through a 360-degree approach.

2017-18 Revenue
We do not forecast revenue figures. We are already a brand worth more than Rs 1000 crore.
We expect the brand to grow aggressively with a higher double-digit figures in the coming
years.

Future Plans
Classmate has developed a portfolio of world-class products through sustained investments in
brand building. Going forward, we will leverage our competencies, expertise, innovations
and brand communication strategies to stay ahead in the market.

PRESS RELEASE
Classmate Notebooks From ITC
The Financial Express - 24 Aug 2003

ITC Greeting Cards Business has launched Classmate, a brand of notebooks, under its brand
Expressions Paperkraft.
The Classmate range, which stands for quality and dependability, is available in more than
180 variants and comes in hard as well as soft covers. Besides, it is available in different rule
formats- single, double, square and unrule format. The entire range has cover designs and
graphic visuals that range from birds, flowers, animals, sports, space, transport and
monuments.
The last two pages of the notebook are totally devoted to trivia on various subjects adding fun
to learning.
The Classmate range is priced between Rs 10 and Rs 40. The company would be distributing
the Classmate stationery products through stationery outlets as well as greeting cards outlets
that stock stationery products.
Classmate, India's largest Notebook brand, has launched a new campaign 'Be Better
than Yourself', which focuses on today's school-going generation and aims to
challenge the long-standing and widely held social assumptions on the nature of
"competition" in academics.
In this competitive world, I Classmate shows a heart-warming way to tackle exam pressure
with a reminder that the goal is not to be better than anyone else but to improve one's own
past performances. In its new campaign marking the exam season, Classmate encourages
students to chase their own milestones instead of being trapped in the constant pressure of
performing better than others.

Speaking about the campaign, Mr. Shailendra Tyagi, Divisional Chief Executive, Education
and Stationary Products Business, ITC Ltd said, "Classmate has always focused on relevant
issues concerning parents and their children. With this campaign, we are trying to boost the
confidence of the upcoming generation and reminding them that the rise to the top is a
competition with oneself, and a journey with others. Children today are measured by the
marks they score or their performance with respect to their peers, while the true measure of
success should be continuous self-improvement. We believe that in this regard, it is much
more than a marketing campaign - it is a social drive."

"Brand Classmate has a mandate to take its new philosophy to as many Indian homes and
classrooms as possible, and thereby the brand finds purpose in providing a pressure-free,
happier environment for our children to grow, and live in," Mr. Tyagi added.
 INDUSTRY PROFILE

ORIGIN AND EVOLUTION

ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of
India Limited. As the Company's ownership progressively Indianised, the name of the
Company was changed from Imperial Tobacco Company of India Limited to India
Tobacco Company Limited in 1970 and then to I.T.C. Limited in 1974. In recognition of
the Company's multi-business portfolio encompassing a wide range of businesses - Fast
Moving Consumer Goods comprising Foods, Personal Care, Cigarettes and Cigars, Branded
Apparel, Education and Stationery Products, Incense Sticks and Safety Matches, Hotels,
Paperboards & Specialty Papers, Packaging, Agri-Business and Information
Technology - the full stops in the Company's name were removed effective September 18,
2001. The Company now stands rechristened 'ITC Limited,' where 'ITC' is today no longer
an acronym or an initialised form.
A Modest Beginning

The Company's beginnings were humble. A leased office on Radha Bazar Lane, Kolkata, was
the centre of the Company's existence. The Company celebrated its 16th birthday on August
24, 1926, by purchasing the plot of land situated at 37, Chowringhee, (now renamed J.L.
Nehru Road) Kolkata, for the sum of Rs 310,000. This decision of the Company was historic
in more ways than one. It was to mark the beginning of a long and eventful journey into
India's future. The Company's headquarter building, 'Virginia House', which came up on that
plot of land two years later, would go on to become one of Kolkata's most venerated
landmarks.
1925: Packaging and Printing: Backward Integration
Though the first six decades of the Company's existence were primarily devoted to the
growth and consolidation of the Cigarettes and Leaf Tobacco businesses, ITC's Packaging
& Printing Business was set up in 1925 as a strategic backward integration for ITC's
Cigarettes business. It is today India's most sophisticated packaging house.
1975: Entry into the Hospitality Sector - A 'Welcom' Move
The Seventies witnessed the beginnings of a corporate transformation that would usher in
momentous changes in the life of the Company. In 1975, the Company launched its Hotels
business with the acquisition of a hotel in Chennai which was rechristened 'ITC-
Welcomgroup Hotel Chola' (now renamed My Fortune, Chennai). The objective of ITC's
entry into the hotels business was rooted in the concept of creating value for the nation. ITC
chose the Hotels business for its potential to earn high levels of foreign exchange, create
tourism infrastructure and generate large scale direct and indirect employment. Since then
ITC's Hotels business has grown to occupy a position of leadership, with over 100 owned and
managed properties spread across India under four brands namely, ITC Hotels - Luxury
Collection, WelcomHotels, Fortune Hotels and WelcomHeritage.
ITC Hotels recently took its first step toward international expansion with an upcoming
super premium luxury hotel in Colombo, Sri Lanka. In addition, ITC Hotels also recently
tied up with RP Group Hotels & Resorts to manage 5 hotels in Dubai and India under ITC
Hotels' 5-star 'WelcomHotel' brand and the mid-market to upscale 'Fortune' brand.

WORLD CONTEXT

A man's signature is perhaps one of the most impressive portrayals of his identity. We have all
toiled hard, as a child, to get that signature worthy of the person we aspire to be. Keeping this
proposition in mind, ITC has launched a campaign for its Classmate range of pens.

Writing instruments for ITC is a relatively new segment. Its Classmate range
of notebooks was the first to be launched in 2003. Pens and other writing instruments were
included around three years earlier. The current campaign is its first mainstream ad to get
heard in a Rs 2,600-2,800 crore market of writing instruments that include pens and pencils.

The TV commercial opens with a young, school-going girl scribbling in her notebook. What
she is writing is hidden from view, as she stops anyone from looking into her diary. She
finally finds inspiration in a fair when she sees ribbons flying in the air. The pages of the
diary are then revealed to have her signature, which she had been trying to perfect over time.
The background score emphasises on the uniqueness of her dastakhat or signature.

"Classmate as a brand recognises that an individual is born unique. Therefore, we must

recognise, nurture and celebrate this uniqueness. We came up with a similar campaign last
year and have decided to extend it this year but with specific focus on the pens this time,"
says Karan Kumar, marketing manager, education and stationery business.

ITC will bank on cross-promotions with its notebooks, as range enjoys a 18-20 per cent
market share of the Rs 3,000-3,500-crore market. But in writing instruments, it has has only
two per cent owing to its late entry. At the moment, its focus is on brand creation and
communication. This reflects on its budget allocation too. Of the Rs 35-50 crore advertising
budget, a lion's chunk is being spent on consumer connect.

According to Kumar, the age when children first start using pens is significant for them. The
permission to use pens in schools, as against the pencils they had used so far, is a sort of a
rite-of-passage for the child, a sign of empowerment. Which is why they try to imitate the
first grown-up habit they can imagine - carve out a unique signature for themselves.

"The inspiration came from real-life experiences. I have seen my 10-year-old daughter trying
to carve out a signature for herself and practising it day-in and day-out. We wanted to keep it
as real and honest as possible, so we went to Darjeeling and chose a young girl from the
schools there. With the location, the beautiful child and the lyrics by Gulzar, we were able to
capture the essence of finding oneself through the signature," said Sam Ahmed, chief creative
officer and vice-chairman, Rediffusion.
The commercial was launched in Hindi and Tamil on July 2. While the lyrics for the Hindi
version have been penned by Padma Bhushan Gulzar, the Tamil TV commercial has lyrics by
six-times National Award-winner Vairamuthu. The Hindi edit lasts for 60 seconds, and the
two Tamil ones for 40 seconds and 30 seconds.

ITC plans to extend the campaign to different media. It will be using the social medium
extensively to increase the outreach, according to Kumar. There will also be school contact
engagement programmes and on-ground contact. It also plans to release these creatives on the
back-covers of its notebook range, by way of cross-promotion.

An expanding portfolio has helped the brand grow over the years, claims Kumar. The
company launched its art material range, Classmate Color Crew, in 2012. It is planning more
launches, including new models of writing instruments, variants of geometry boxes, sub-
categories in the art stationery range and a premium range of notebooks.

INDIAN CONTEXT
The TV commercial starts with a mother who finds a letter from her daughter in one of her
Classmate notebooks. The daughter expresses her guilt over getting low grades in her maths
exam and apologizes to her mother with a promise that she will try her best next time to get
better grades than her friends. In the letter, the daughter also asks her mother to bake a
chocolate cake for her next time if she manages to beat her class-mates in the exam. To her
surprise, when the daughter gets back home, she finds the cake on the table, and her mother
praises her for improving over her previous marks. "This is for beating yourself, not others,"
she says.

Admittedly, it is a concept born from a societal truth. Children, through school and college,
are almost always compared with others - their classmates and peers. And in an achievement-
oriented society like ours, they are conditioned to perceive their peers as competition.

"Be Better Than Yourself" kicks off a crusade against such a prevailing view, and how it
shapes the kids as they grow up. The campaign is designed to encourage a child to chase her
or his future self. To set only their personal values and ambitions ahead of the competition;
and to be judged only on their own metrics, not anyone else's.

The brand understands that the achievement of a child's potential is influenced and shaped by
parents, teachers and the academic environment, and hence it reaches out to all stakeholders -
particularly parents and children - with the key message. The brand will use TV, Cinema,
Outdoor and digital platforms to communicate its message through a 360-degree campaign.
RECENT TRENDS

Chand Das can't stop beaming. The chief executive of ITC Greetings' Gifting and Stationery
Business has just stepped out of a presentation ceremony that honoured winners of the
Classmate Young Author 2005 awards.

But that's not the main reason for the smiles. ITC's stationery business, which sells notebooks
under the Classmate brand name, brought in earnings of Rs 40 crore (Rs 400 million) in
2005-06.

Granted, that's chicken-feed for a conglomerate like the Rs 7,600-crore (Rs 76 billion) ITC,
which has interests spread across hotels, tobacco and the agri-business.

But if you consider the stationery business was just Rs 10 crore (Rs 100 million) in 2004-05,
then revenues have jumped 400 per cent. And ITC aims to continue the scorching pace of
growth. "The stationery business will be worth Rs 500 crore (Rs 5 billion) in five years," Das
declares.

After two full years of being in business, the Classmate brand is already the No. 2 player,
inching close to market leader Navneet.

Industry estimates place Navneet's share in the notebooks business to be worth Rs 80-90
crore (Rs 800-900 million), although the company itself refuses to confirm these numbers.
That doesn't bother ITC too much. "Next year, we will be the leader," claims Das.

In a world where the word "notebook" conjures up images of a sleek, portable computer
(earlier called the laptop), why is ITC betting big on paper? As a first explanation, Das
parrots the official explanation.

"Since 2000, ITC has been looking at growing its non-cigarette FMCG business, which
blends with the core capability of the group."
More importantly, there is a huge growing market for paper-based consumer products. In
2000, the greeting card industry (the segment ITC first entered) was worth around Rs 250
crore (Rs 2.5 billion) and was growing at a healthy 15 per cent a year.

For existing players like the Delhi-based Archies Greetings and Gifts, the return on capital
employed was an incredible 39.4 per cent.

"The most value-added paper product on the face of the Earth is a greeting card," says Das,
explaining the rationale behind ITC's decision to enter that business. By 2003, ITC's greeting
card brand Expressions was No. 2, with a 20 per cent share of the market.

But this was not a story with a happy ending. The greeting cards' category was being
increasingly threatened by various new formats. While e-greetings threw the first jab, the
body blow came in the form of affordable SMS and MMS rates and increasing telephone
usage. Suddenly, greeting cards were as out of fashion as stone-washed jeans.

ITC didn't give up, though. It tried value-addition: cards with attached rakhis and friendship
bands, for instance, in a bid to boost occasion-related sales. But the company soon realised
that "greetings could no longer be the only plank for the business to rest. The challenge was
to grow the business division," says Das.

In 2003, ITC saw another opportunity. Notebooks was a Rs 5,000-crore (Rs 50 billion)
category growing at 9-10 per cent every year. Importantly, there were huge visible gaps in the
market. The organised segment accounted for less than 10 per cent of the notebooks market.
There were only a couple of players with a pan-India presence: the Mumbai-based Navneet
and Nightingale, owned by the Sivakasi, Tamil Nadu-based Srinivas Fine Arts.

While market leader Navneet's sales come primarily from west India (Navneet executives
confirm that Maharashtra is a huge market for the brand), Nightingale had restricted itself to
the premium end by focusing on superior styling and had built a successful business out of
diaries.

Accordingly, ITC launched its notebooks, deliberately pricing itself 10-15 per cent higher
than the competition, between Rs 10 and Rs 40. This ensured that it created an affordable-yet-
aspirational image and also send a hidden message of being a superior product (60 gsm paper,
bleached without using chlorine). Then, ITC focused on the design elements of notebooks:
each Classmate notebook has a theme on the cover and related information inside.

For instance, if the cover has a photograph of a ship, the inside front cover has information
about ships. Then, the last two pages of the notebook have trivia and the back cover
highlights the corporate social responsibility initiatives of the company (Re 1 from each
notebook sold is set aside for the cause of underprivileged children).

Of course, breaking into the market wasn't easy. Distribution of a mass product like
notebooks can be an expensive proposition - which partly explains the lack of national
players. Then, notebooks were reserved for the small-scale sector.

So ITC outsourced the final production to 20 satellite manufacturing plants across the
country. These plants are supplied with paper from ITC's plant at Bhadrachalam, in Andhra
Pradesh. To keep a check on transportation costs, Das says the company tries to manufacture
and sell within the same area.

Then, ITC also had the advantage of sharing infrastructure with its food and cigarette
business - the group has 19 branch offices across India. "These offices became a nodal point
for sales and distribution of notebooks. Our ability to hit the market was the fastest," says
Das.

The company then tapped into its customer through below-the-line advertising. In 2003, the
year of Classmate's launch, it introduced the Young Author competition for students across
schools in India, who were in the 9th to 12th grade. In the third edition of the Classmate
Young Author competition, for which the awards were given away in March 2006, there were
close to 40,000 participants from the top 15 cities. Note that ITC is tapping only the top 4,000
schools in the country.

Children from these schools are likely to be early-adopters of the Classmate range. Das says
that since last year, the competition has been extended to create a Young Artists contest aimed
at younger children in the same schools. After all, "The young artist of today may become the
young author of tomorrow," says Das.

Apart from competitions, ITC is also looking at customisation. In most top-rung schools
across the country students have to buy notebooks only from the school book store - the
notebooks often have the school's name and emblem embossed on it. To get a share of that
market, Classmate has inked deals with 100 schools across the country to provide them with
customised notebooks.

It's not just schools. ITC might soon lock horns with Nightingale in the upper end of the
market. The company is in the midst of re-launching its Papercraft range of executive
notebooks. ITC executives claim that the range used to be earlier sold only through greeting
cards outlets.

"The Papercraft portfolio needs augmentation," is Das'only comment. However, ITC itself
might have to contend with competition. Over the past two years, notebooks has become an
attractive business destination for several companies.

These include TNPL, the Tamil Nadu-based maker of maps and diaries, writing instruments
makers Cello and Kores and paper manufacturer Bilt. For Cello and Kores, notebooks have a
synergy with their existing businesses - which means the companies can tap into the existing
distribution networks and customers. On the other hand, Bilt and TNPL find a connect in pulp
and printing, respectively.

Still, the notebooks foray isn't going to be easy for these new players, either. If Bilt has access
to paper, it still needs to augment distribution. Cello and Kores have already got products into
the stationery stores, but they still have to sort out the logistics of distributing bulky
notebooks - pens, for instance, can be transported even on bicycles.

Meanwhile, the existing players don't seem concerned about the prospect of increasing
competition. Not even first mover Navneet - which is facing a barrage of competition - is
worried.
Says Shailendra Gala, vice president, stationery, Navneet Publications, "The industry is
poised to grow in a more healthy and organised manner, with new entrants making their foray
into the notebook business."

In fact, Navneet is soon extending its brand into pencils, because there is a synergy with the
existing notebook business. Clearly Das'enthusiasm is infectious.
BALANCE SHEET

Balance Sheet of ITC ------------------- in Rs. Cr. -------------------

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

Sources Of Funds
Total Share Capital 795.32 790.18 781.84 773.81 381.82
Equity Share Capital 795.32 790.18 781.84 773.81 381.82
Reserves 25,414.29 21,444.92 17,957.00 15,126.12 13,628.17
Networth 26,209.61 22,235.10 18,738.84 15,899.93 14,009.99
Secured Loans 0.14 0.00 1.77 1.94 0.00
Unsecured Loans 51.00 66.40 77.32 86.58 107.71
Total Debt 51.14 66.40 79.09 88.52 107.71
Total Liabilities 26,260.75 22,301.50 18,817.93 15,988.45 14,117.70
Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

Application Of Funds
Gross Block 18,239.65 16,679.17 13,918.85 12,590.48 11,967.86
Less: Revaluation Reserves 52.41 52.75 53.05 53.34 54.39
Less: Accum. Depreciation 6,226.91 5,469.83 4,819.66 4,245.37 3,825.46
Net Block 11,960.33 11,156.59 9,046.14 8,291.77 8,088.01
Capital Work in Progress 2,295.73 1,487.79 2,276.75 1,333.40 1,008.99
Investments 8,823.43 7,060.29 6,316.59 5,554.62 5,726.87
Inventories 7,359.54 6,600.20 5,637.83 5,269.17 4,549.07
Sundry Debtors 2,165.36 1,163.34 986.02 885.10 858.80
Cash and Bank Balance 3,289.37 3,615.00 2,818.93 2,243.24 120.16
Total Current Assets 12,814.27 11,378.54 9,442.78 8,397.51 5,528.03
Loans and Advances 3,283.22 2,881.47 1,831.09 1,803.18 1,929.16
Fixed Deposits 0.00 0.00 0.00 0.00 1,006.12
Total CA, Loans & Advances 16,097.49 14,260.01 11,273.87 10,200.69 8,463.31
Current Liabilities 6,921.52 6,404.43 5,684.35 5,285.75 4,619.54
Provisions 5,994.71 5,258.75 4,411.07 4,106.28 4,549.94
Total CL & Provisions 12,916.23 11,663.18 10,095.42 9,392.03 9,169.48
Net Current Assets 3,181.26 2,596.83 1,178.45 808.66 -706.17
Total Assets 26,260.75 22,301.50 18,817.93 15,988.45 14,117.70

Contingent Liabilities 1,916.00 2,149.23 2,533.61 2,231.79 258.73

Book Value (Rs) 32.95 28.14 23.97 20.55 36.69

Balance Sheet of ITC ------------------- in Rs. Cr. -------------------

Mar '19 Mar '18 Mar '17 Mar '16 Mar '15

12 mths 12 mths 12 mths 12 mths 12 mths

Sources Of Funds
Total Share Capital 1,225.86 1,220.43 1,214.74 804.72 801.55
Equity Share Capital 1,225.86 1,220.43 1,214.74 804.72 801.55
Reserves 56,723.93 50,179.64 44,126.22 32,071.87 29,881.73
Networth 57,949.79 51,400.07 45,340.96 32,876.59 30,683.28
Secured Loans 7.89 0.00 0.01 3.60 0.02
Unsecured Loans 0.00 11.13 17.99 25.83 38.69
Total Debt 7.89 11.13 18.00 29.43 38.71
Total Liabilities 57,957.68 51,411.20 45,358.96 32,906.02 30,721.99
Mar '19 Mar '18 Mar '17 Mar '16 Mar '15

12 mths 12 mths 12 mths 12 mths 12 mths

Application Of Funds
Gross Block 21,887.76 18,595.00 16,843.67 22,256.11 21,392.12
Less: Revaluation
0.00 0.00 0.00 52.41 52.41
Reserves
Less: Accum.
0.00 3,029.01 1,963.43 8,051.58 7,213.63
Depreciation
Net Block 21,887.76 15,565.99 14,880.24 14,152.12 14,126.08
Capital Work in Progress 0.00 5,025.58 3,537.02 0.00 2,114.14
Investments 26,578.00 23,397.22 18,585.29 12,854.24 8,405.46
Inventories 7,587.24 7,237.15 7,863.99 8,519.82 7,836.76
Sundry Debtors 3,646.22 2,357.01 2,207.50 1,686.35 1,722.40
Cash and Bank Balance 3,768.73 2,594.88 2,747.27 6,563.95 7,588.61
Total Current Assets 15,002.19 12,189.04 12,818.76 16,770.12 17,147.77
Loans and Advances 6,329.97 6,203.48 4,394.64 3,188.71 2,349.80
Total CA, Loans &
21,332.16 18,392.52 17,213.40 19,958.83 19,497.57
Advances
Current Liabilities 11,682.36 10,808.96 8,683.79 8,129.22 7,214.45
Provisions 157.88 161.15 173.20 8,430.78 6,206.81
Total CL & Provisions 11,840.24 10,970.11 8,856.99 16,560.00 13,421.26
Net Current Assets 9,491.92 7,422.41 8,356.41 3,398.83 6,076.31
Total Assets 57,957.68 51,411.20 45,358.96 30,405.19 30,721.99

Contingent Liabilities 0.00 2,257.52 2,148.64 2,648.78 1,864.99

Book Value (Rs) 47.27 42.12 37.33 40.85 38.28