Scrapping Of Panel May Spell Trouble For New Venture
The recent changes in the ITC board, which virtually restored status quo ante at the company with the scrapping of the interim management panel, could spell trouble for the new 50:50 joint venture ITC is planning with BAT.
The venture was lined up in a view to introduce BATs new brands in the country.
While BAT officials are not publicly admitting to it, its strategy for has suffered a setback following the scrapping of the interim panel. Sources close to BAT admitted that the UK tobacco and financial services major has had its calculations completely distorted by the board changes.
The problem BAT is having with the present setup may manifest itself in the joint venture as well where things may get strained, sources associated with BAT told Business Standard.
This could spell big trouble for ITC, since all the three other global cigarette majors, Phillip Morris, RJ Reynolds and Rothmans, are planning to make grand entries into India. At this juncture, the board changes and the setback to BAT does not augur well for the relationship, the sources said.
In mid-December, the ITC board restored the powers of the executive directors BAT wanted out, and placed Deveshwar firmly in control by scrapping the interim panel. Deveshwar himself was placed in charge of the crucial Indian tobacco division.
The sources said the UK major is now trying hard to devise an alternative strategy to assert itself. Officially, however, the BAT stance remains rather non-committal.
Rt Hon Earl Cairns, in Calcutta with British Prime Minister John Majors delegation, said yesterday BAT remained fully supportive to ITC and wanted it to grow further. Cairns had a meeting yesterday with ITC chairman Yogi Deveshwar but declined to disclose what transpired there.
Sources said BAT was constantly in touch with the finance ministry and was trying to have a greater say in the management of ITC. However, Deveshwar firmly in the saddle, getting a firm hold in the management may be more difficult than it had bargained for.
The next move of ED will be crucial for BAT, since that would also determine how much control the UK major could attempt to have after the directorate action is taken.