The merger of ITC Bhadrachalam with the parent company ITC will help the former compete with international players, said Y C Deveshwar, chairman of ITC Limited, at the extraordinary general meeting (EGM) for the approval of the merger ordered by the Calcutta High Court.
On markets today, the ITC scrip today decreased by 2.54 per cent to close at Rs 704.35 on BSE and by 1.97 per cent to close at Rs 706 on NSE.
ITC Bhadrachalam increased marginally on BSE to close at Rs 42.75 and decreased by 2.10 per cent to close at Rs 41.90 on NSE.
The meeting approved merger in the ratio of one ITC shares for every 16 Bhadrachalam shares held. As the price of 16 shares worked out to Rs 684, shareholders would get ITC shares cheap. Bhadrachalam would be holding its merger related EGM on December 14.
The long-term effect of the merger would work in ITC's favour. "Not only the earning per share (EPS) of ITC is expected to increase significantly, but the parent company will also get loss benefit that ITC Bhadrachalam had incurred in the past," Deveshwar told shareholders.
Deveshwar pointed out, ITC had invested substantially in the turnaround of ITC Bhadrachalam and now the board felt it was appropriate to merge the companies. ITC Bhadrachalam managed a net profit of Rs 35 crore in 2000-2001.
When asked whether ITC was mulling the option of merging ITC Hotels with ITC as well, Deveshwar declining comment said, it was a price sensitive issue.
Speaking to reporters on the sidelines of the EGM Deveshwar said, "The decline in sale of cigarettes over the past few years is a matter of grave concern to us".
The share of cigarettes in total consumption of tobacco in India had come down to 14 per cent from 19 per cent three years back and it was due to some loopholes in customs act and Foreign Exchange Management Act.
ITC, however, managed to sell 66,478 million sticks of cigarettes in 2000-2001 against 66,145 m sticks in the previous fiscal. Deveshwar added, the decline in cigarettes volumes was not only a concern for the industry alone, but it also affected government revenues.
