ITC Ltd's wholly owned subsidiary, Summit Investments, has decided to take a 10-year view of the ITC group's investment in the shares of Industrial Credit and Investment Corporation of India Ltd (ICICI), following the merger of ITC associate ITC Classic with ICICI.
Consequently, a Rs 31-crore provision has been created for the diminution in the value of the investments of Summit in Classic (now ICICI), and this would be reviewed every three years or earlier. The provision has been made based on the prevailing trends, both market related and company specific.
According to the directors' report of Summit Investments, Summit held 85,19,400 equity shares of Classic at an average price of Rs 82.55 per share. According to the terms of the ICICI-Classic merger, Classic shareholders would receive one ICICI share for every 15 Classic shares. Consequently, Summit's holding in ICICI following the merger would stand at 5,67,960 equity shares.
The directors' report says that though Summit's investment in ITC Classic may appear to be at a high cost as compared to the current market price, in the long run such investment, after conversion into ICICI shares, may hold significant potential for gains.
The report says the Summit directors had considered the issue of possible diminution in the value of long-term investments arising from the merger and taken a long-term view by creating the provision.
It says that as the financial sector reform takes shape, ICICI will emerge as a major player in the field and will give ICICI opportunities for strategic alliances and mergers with other financial institutions, banks and the like. ICICI, it says, is already doing that.
Debt-equity ratio at 0.74:1: ITC Ltd's debt-equity ratio has gone up to 0.74:1 at the end of 1997-98 from 0.53:1 in 1996-97, as the company mobilised a hefty Rs 847 crore during the last fiscal.
The company's huge long term funds mobilisation, together with the healthy internal generations helped the company match finance to service business requirements.
