The Rs 6,900 crore ITC Ltd has resorted to about Rs 44 crore of provisioning on various counts before arriving at the Rs 526 crore net profits figure for 1997-98. The ITC Ltd board also took stock of the situation at its associate, ITC Bhadrachalam Paperboards Ltd (ITC-BPL), which ran up losses of Rs 49 crore for the year.
The board, which met today to consider the final accounts for 1997-98, also decided to go to shareholders for amending the objects clause of the company to allow ITC to specifically enter the leisure and lifestyle products business including amusement parks, resorts and the like. This would be done at the forthcoming annual general meeting.
According to sources, the broad provisioning resorted to by ITC, a figure which the stockmarkets had been madly looking for throughout the day, stood at Rs 44 crore, in addition to the restructuring charges for ITC Classic's merger with ICICI. Together, the figure worked out to Rs 99 crore.
Explaining the results of ITC Ltd in this context, the sources told Business Standard that the net profits, had these not been required, would have been higher at over Rs 600 crore.
"This basically means that ITC's operating results are very very healthy and there is no cause for concern", they said.
The sources explained that expenditure, net of excise, had also not gone up too much to Rs 2209.72 crore from last year's Rs 2142.74 crore, owing to saving on costs and better overall management. "Against this background, the Rs 526 crore net is no mean achievement", the sources said.
They explained that this year's net profits, up about Rs 180 crore from the previous fiscal's, had effectively gone into general reserve, since the company had decided to transfer an amount of Rs 200 crore from the profits into general reserve. This, together with the Rs 110 crore transferred into the contingency fund and the additional undistributed surplus totalled around Rs 342 crore, all of which had gone into increasing the net worth of the company for the shareholders.
"The company has, as an act of abundant caution, kept another Rs 110 crore into the contingency reserve, which, together with last year's figure of Rs 190 crore, now stands at Rs 300 crore", the sources explained.
Among other issues discussed at the board meeting were a possible financial assistance package which the ITC-BPL board would have to consider to get it back in the black. "Though it is the ITC-BPL board's job, as good corporate governance, the board was informed of the developments at the company", the sources said.
Financial institutions have been requested for assistance in the financing the turnaround plan for the company. The problem with the company is essentially being seen as one emanating from inadequate capacity utilisation owing to sluggish demand in the market.
ITC's printing and packaging division (PPD) also made a detailed presentation to the board about the prospects at the top end and the market share.
ITC's human resources development (HRD) policy thrust was also discussed.
