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ITC Bhadrachalam to merge with ITC

BS Bureau

ITC Ltd, the Rs 88.16 billion cigarette and hotels company, has decided to merge its subsidiary, the Rs 6.23 billion ITC Bhadrachalam Paperboards Ltd, with itself.

The ITC move follows the dramatic turnaround in fortunes at the paperboard maker, which has been transformed from an ailing venture to one of the most efficient producers in the world in the financial year ended March 31, 2001.

Confirming the development, ITC sources said the board would meet on September 21 to consider the merger proposal.

The source, however, declined to comment further on the proposed merger on the plea that there was nothing to share with the media before the ITC board took a final decision on the issue.

Analysts said the merger will help both the companies.

ITC's topline will grow straight by Rs 6.11 billion (ITC Bhadrachalam's turnover in 2000-01) while the paperboards maker will be benefited by ITC's immense marketing and distribution strength."

Shareholders of ITC Bhadrachalam, a subsidiary in which ITC holds 61.6 per cent including 20.34 per cent of Russell Credit, are likely to receive ITC shares against their holding in the paperboards maker once the merger proposal is cleared.

ITC directly holds 41.26 per cent of the paid-up equity of ITC Bhadrachalam and controls 18.99 per cent stake in the paper company through its wholly-owned subsidiary Russell Credit.

ITC also holds 2.6 million preference shares of Rs 100 each in the paper firm.

Following the merger, ITC Bhadrachalam's investment subsidiaries namely BFIL Finance and BFIL Securities and MRR Trading & Investment Company will come under direct ownership of ITC.

ITC Bhadrachalam holds 99.99 per cent stake in BFIL Finance, which controls 99.99 per cent stake in BFIL Securities as well as MRR Trading & Investment Company.

The paper maker returned to the black last year with a net profit of Rs 349 million as against the previous year's net loss of Rs 321 million.

Despite the paper industry facing a global slowdown in demand, coupled with continuing over supply, ITC Bhadrachalam's total sales grew to 204,000 tonnes (Rs 6.11 billion) in 2000-01 from 179,000 tonnes (Rs 4.44 billion).

This was primarily due to growth in exports to 39,228 tonnes (Rs 944 million) from 19,896 tonnes (Rs 428 million). The growth in sales was 38 per cent in terms of value and 14 per cent in terms of volume.

"ITC Bhadrachalam views the Asian region as an arena of opportunity and, with its experience and product knowledge, will focus on increasing its share in such segments which place the most exacting demands on product performance," said the company's annual report for 2000-01.

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