At the meeting held on 21st September, 2001 at Kolkata, the ITC Board approved, subject to necessary statutory approvals, a Scheme for the amalgamation of ITC Bhadrachalam Paperboards Ltd. with ITC Ltd. The High Courts at Kolkata and Hyderabad will be moved to convene separate meetings of the members of the respective companies to accord approval to the Scheme.

As per the Scheme of Amalgamation approved by the Board, the merger will be effective from 1st April, 2001. As part of the Scheme, the Board approved a share exchange ratio of 16:1 (1 ordinary share of ITC for every 16 equity shares of ITC Bhadrachalam), based on the valuation report submitted by Mr Y H Malegam of S B Billimoria & Co.

ITC Bhadrachalam, a 61.6% subsidiary of ITC Ltd., is the market leader in the value-added paperboards segment which is forecast to grow at 20% per annum. ITC has enabled a successful turnaround of the company which posted a pre-tax profit of nearly Rs.35 crores in the financial year ending March, 2001. ITC Bhadrachalam's products, benchmarked against the global best-in-class, have substantially substituted imported paperboards for premium packaging and value-added graphic applications in the domestic market. In a testimony to the international quality of its products, ITC Bhadrachalam more than doubled its exports to over Rs.90 crores in the last financial year.

Given the quality of turnaround achieved by ITC Bhadrachalam and its strategy of enhancing competitiveness through focussed product development, sustained world class quality and cost management, it is poised to emerge as a leader in the Afro-Asian region in the paperboard segment.

The merger will support ITC's strategic intent of scaling up Bhadrachalam's manufacturing capacity to global standards in a bid to achieve quality and cost leadership. It will make possible accelerated investments in capacity expansion and technology upgradation over the next 5 to 7 years. Bhadrachalam's integration with ITC will consolidate its operations with ITC's Speciality Paper and Packaging Divisions, yielding significant operational synergies. The merger is expected to enhance ITC's earnings per share

.

ITC Bhadrachalam's balance sheet is already substantially financed by ITC. ITC's investment is in the form of equity, preference capital and loans. The merger, therefore, is not expected to add to ITC's balance sheet size significantly. Since the holding company's investment will stand cancelled upon merger, the share exchange ratio will result only in a marginal expansion of about Rs.2 crores in ITC's equity.

For FAQs click here