16:1 swap for ITC Bhadrachalam-ITC merger

By Our Staff Reporter

KOLKATA, SEPt. 21. The board of directors of ITC today approved the proposed merger of ITC Bhadrachalam Paperboards with ITC at a share exchange ratio of 16:1.

The swap ratio was based on valuation report submitted by Mr. Y. H. Malegam of S. S. Billimoria & Co.

The High Courts of Hyderabad and Kolkata will soon be moved to convene separate meetings of the shareholders of the respective companies to accord approval to the amalgamation.

According to official sources, ITC Bhadrachalam is a 61.6 per cent subsidiary of ITC and is a market leader in value-added paper boards segment.

ITC has recently engineered a successful turnaround of the company, posting a pre-tax profit of about Rs. 35 crores last fiscal.

The products of the company have substantially substituted imported paperboards for premium packaging and value-added graphic application in the domestic market.

The company has also more than doubled its export turnover to Rs. 90 crores last fiscal.

``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 is poised to emerge as a leader in the Afro-Asian region in the paperboard segment'', an ITC release said.

According to ITC, the merger will support the company's (ITC's) strategic intent of scaling up Bhadrachalam's production capacity to global standards to achieve quality and cost leadership.

It may be mentioned that ITC Chairman, Mr. Y. C. Deveswar, has already announced a Rs. 1,500 crore investment roadmap in the next ``five to seven years'' for capacity expansion and technological upgradation in ITC Bhadrachalam.

Stating that the amalgamation would consolidate ITC Bhadrachalam's operations with ITC's speciality paper and packaging division, an ITC release said the merger was expected to enhance ITC's earnings per share.

Since ITC Bhadrachalam's balance-sheet is already substantially funded by ITC in the form of equity, preference capital and loans, ``the merger is not expected to increase ITC's balance sheet size substantially''.

ITC's equity will increase by a marginal Rs. 2 crores after the merger.

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