After much soul-searching in the wake of the acrimonious exit of K L Chugh from the companys chairmanship and revelations about maladministration in the companys affairs, it was decided by the ITC board that the whole group would have to assume a new shape to exploit its core competencies in tobacco, financial services and hotels.
This would necessitate a shift in ITC Classics focus, the financial services subsidiary under which the group had decided to bring all other finance associates.
This, in turn, would involve a temporary downscaling of the firms international trading operations, including a probable closure of ITC Global, the 100 per cent owned international trading subsidiary that has ultimately proved to be the origin of some of the ITC groups major problems.
The restructuring plan also involved downscaling of ITC Agrotechs edible oil operations.
The seeds division of this company was spun off into a profitable joint venture with MNC Zeneca.
The most obvious and immediate effect of the enforcement directorate raids (something mentioned by chief enforcement troubleshooter Kabirpanthi at his press conference on Wednesday) is the probable closure of ITC Global Holdings Pte Ltd, the beleaguered tobacco majors global trading arm.
It may be forced to shut down, considering the huge liabilities it has incurred.
The companys dues to its trade creditors alone amounted to $11.39 million for 1995, while its bills payable amounted to $38.40 million.
The trading houses total current liabilities amounted to a whopping $76.85 million while its paid up capital stood at a meagre $9 million.
ITC Globals accumulated losses for 1995 amounted to $14.66 million while that years net loss of $16.34 million was set off against the companys retained earnings of $1.69 million.
ITC had then proposed to subscribe to a further $10 million of the companys equity and also to extend a term loan of a further $10 million.
Though this amount would have wiped out ITC Globals accumulated losses, it failed to get the necessary government clearance.
To make matters worse, the plan of the companys top officials to shift the head office to New Delhi from Singapore were put on hold in August 1995.
Ashutosh Garg submitted his resignation when ITC Global was expected to run up a loss of Rs 30 crore - a far cry from the situation in 1994 when the company even had plans to go public by 1996-97.
ITC Agro Tech Ltd, ITC Ltds agricultural products company, went through an exceptionally difficult year in 1994-95 though the companys branded oil, Sundrop, registered a growth of over 15 per cent.
Based on a valuation exercise by S B Billimoria & Co, it was decided that ITC Ltd would sell its various edible oil brands to ITC Agro Tech for Rs 25 crore.
ITC Bhadrachalam Paperboards Ltd, which embarked on a capacity expansion during 1995-96, may not see the spectacular rise in profits that it recorded in 1994-95.
With the paper industry expecting a slump in growth this year due to competitive international prices, it may not turn out to be a very good year for ITC Bhadrachalam.
ITC Hotels Ltd, on the other hand, has chalked out a Rs 700 crore phased expansion cum upgradation plan to be implemented over the next five years. In 1995-96, the company promoted Fortune Park Hotels Ltd in order to develop a chain of hotels in the mid-price segment, for which it signed MoUs with eight hotels with over 800 rooms.
The company recorded a net profit of Rs 26.52 crore in fiscal 1995-96 on an income of Rs 124.14 crore.
ITC Ltds financial arm, ITC Classic, may emerge as a financial services heavyweight if the parent companys plans to merge the other financial services companies in the group with ITC Classic materialise.
This move follows the recommendations of McKinsey & Company. While ITC Bhadrachalam Finance specialises in leasing, hire-purchase and bills discounting, ITC Agro Tech Finance Ltd specializes in investments. As on March 1995, the combined income of these three companies was Rs 281 crore.