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July 26, 2001
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Money > Business Headlines > Report July 26, 2001 |
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ITC will continue picking VST stakeBS Bureau Cigarette and hotel major ITC Ltd does not want a controlling stake in VST, but, according to company chairman Y C Deveshwar, "the idea is to prevent the present industry equation from being disturbed." Which means, ITC would be open to buying VST shares from sellers, including the promoters of Bright Star Investment, to scale up its holdings in the Hyderabad-based cigarette maker, and thereby keep off new entrants. When asked whether Russell Credit, which recently made the open offer for VST shares, would buy Bright Star's stake in the Hyderabad-based cigarette firm, Deveshwar said, "That is a possibility but any decision in this regard will be taken by our investment subsidiary." When asked whether Russell Credit was talking to Bright Star already, Deveshwar said, "Not to my knowledge, but they are free to talk to anybody." Commenting on the possibility of a co-ordinated move by BAT and ITC in VST, Deveshwar said, "Since we have a relationship with BAT, we expect the company to take us into confidence before they place any proposal with FIPB in keeping with the letter and spirit of the relationship and so far they have not approached us." British American Tobacco plc, promoter of VST and the single largest shareholder in ITC had declared its intention to pick up more shares in VST, directly, subject to approval from the Foreign Investment Promotion Board. BAT recently said it was exploring the options before taking a decision. Responding to Deveshwar's statement, BAT sources said the company would consult ITC in keeping with best practices and corporate governance norms. While it was premature to talk about the nature of the application to be filed before FIPB, BAT would always consult associates before embarking on any move in the Indian market. Industry sources indicated BAT's proposal is unlikely to get FIPB approval as the central government had assured Parliament in 1998 that it would not allow foreign direct investment in the tobacco and cigarettes sector. This commitment to Parliament was in force and so the BAT proposal would not get approval. In fact, sources said the government kept a strict watch on FII holdings in tobacco companies as well to honour the promise made to MPs. As part of the effort to maintain the industry equation, ITC's investment subsidiary, Russell Credit had recently made a counter-offer for shares of VST at Rs 125 in response to an open offer at Rs 150 made by Bright Star Investments, a company promoted by the Damani brothers, who are Bombay-based stockbrokers. BAT Plc, which owns a third of VST's equity and manages the company, had backed the counter-offer by ITC's subsidiary. However, Bright Star's higher offer price had overshadowed the ITC offer and this had cast its shadow on the relationship between BAT and ITC. The former had stated that even the price of Rs150 did not reflect the true value of the VST scrip. The comment had become an embarrassment for Russell Credit. Powered by YOU MAY ALSO WANT TO READ:
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