Our Bureau

Kolkata, September 5

ITC Ltd, the Rs.8,816 crore cigarette and hotels company, has decided to merge its subsidiary, the Rs.623 crore ITC Bhadrachalam Paperboards Ltd, with itself. The ITC move follows the dramatic turnaround in fortunes of the paperboards maker, which has been transformed from an ailing venture to one of the most efficient producers in the world in the financial year ended March 31, 2001.

Confirming the development, ITC sources said the board would meet on September 21 to consider the merger proposal. The sources, however, declined to comment further on the proposed merger on the plea that there was nothing to share with the media before the ITC board took a final decision on the issue.

Analysts said the merger will help both the companies. ITC's topline will grow straight by Rs 611 crore (ITC Bhadrachalam's turnover in 2000-01) while the paperboards maker will be benefited by ITC's immense marketing and distribution strength.

Shareholders of ITC Bhadrachalam, a subsidiary in which ITC holds 61.6 per cent including 20.34 per cent of Russell Credit, are likely to receive ITC shares against their holdings in the paperboards maker once the merger proposal is cleared. ITC directly holds 41.26 per cent of the paid-up equity of ITC Bhadrachalam and controls 18.99 per cent stake in the paper company through its wholly-owned subsidiary Russell Credit. ITC also holds 25.72 lakh preference shares of Rs.100 each in the paper firm.

Following the merger, ITC - Bhadrachalam's investment subsidiaries namely BFIL Finance, BFIL Securities and MRR Trading & Investment Company will come under direct ownership of ITC.

ITC Bhadrachalam holds 99.99 per cent stake in BFIL Finance which controls 99.99 per cent stake in BFIL Securities as well as MRR Trading & Investment Company.

The paper maker returned to the black last year with a net profit of Rs.34.89 crore as against the previous year's net loss of Rs.32.12 crore. Despite the paper industry facing a global slowdown in demand, coupled with continuing over-supply, ITC Bhadrachalam's total sales grew to 2.04 lakh tonnes (Rs.611 crore) in 2000-01 from 1.79 lakh tonnes (Rs.444 crore).