Bourse Backlash Wipes Rs 1950 Crore Off Itc M-Cap

The proposed amalgamation of ITC Bhadrachalam with the parent ITC may have a positive impact on the merged entity in the long run but it has taken its toll on the stock markets.

The merger proposal saw ITC's market capitalisation eroded by nearly Rs 1,950 crore in a single trading session today.

Analysts said the loss of 'confidence' on ITC by financial institutions was responsible for the dramatic reduction in stock prices today. "The inclusion of a paperboards maker into ITC will reduce the confidence ITC used to enjoy from the institutions. The outlook on a tobacco giant is worldwide more positive than that on a conglomerate engaged in business prone to cyclical fluctuations," an analyst said.

The selling pressure, generated by financial institutions-both domestic as well as foreign- saw the ITC scrip breach its 52-week low today on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). In the process, market capitalisation of the company went down by Rs 1937 crore, from Rs 18,484 crore to Rs 16,547 crore on BSE. The fall was even sharper on NSE where the M-Cap lost Rs 1950 crore-from Rs 18441 crore to Rs 16491 crore.

Analysts said ITC had been enjoying "very good discounting" of the financial institutions because the tobacco business remained buoyant over the past few years irrespective of whether the economy was in recession or boom. In addition, ITC did not face any legal problem on health grounds unlike global counterparts in developed countries. They said the factors had made ITC an attractive stock to the financial institution what would not be same again once the merger proposal was cleared.

On the BSE, the scrip closed at Rs 674.25, a 10.48 per cent fall from the overnight closing of Rs 753.20 and a marginal reduction from the one-year low of Rs 680. The picture was almost the same with NSE as the scrip closed at Rs 672 against the overnight closing of Rs 751.45. Today's closing was 10.57 per cent lower than the previous closing and Rs 5 less than the 52-week low.

Analysts said the charting of the stock movement suggested that the scrip might fall to Rs 550 as it breached the technical resistance level of Rs 705. Analysts are certain the near future at the counter "does not look very bright" unless some "external factors" are applied to stop the freefall of the scrip.

The ITC Bhadrachalam counter, on the other hand, witnessed a hectic activities on BSE as well as NSE. On BSE, the scrip closed at Rs 54.05 which was 47.05 per cent more than the overnight closing. On NSE, it closed at Rs 53, an 11.47 per cent higher than the previous closing of Rs 47.55.