The renewal of terms of some of the FI nominees on the ITC board, which were to have expired last month, would have been facilitated by the sanction of the IDBI-led consortiums term loan.
The FI nominees were reportedly trying to avoid a situation in which all loans would be repaid by the tobacco major as this would lead to an abrupt expiry of their tenure on its board.
But now, with the enforcement directorate raids and with the company having free assets worth only Rs 300 crore against which loans can be provided, events may move in precisely that direction.
The financial institutions are believed to have two extra positions on the ITC board on the strength of loans provided to the firm.
These two positions proved vital when they were filled practically overnight during the straight battle for control of ITC between BAT Plc and former ITC chairman K L Chugh.
It was the extra nominees of financial institutions who tilted the balance in Chughs favour, forcing BAT to wait for his resignation.
Citing the host of controversies relating to economic offences committed by senior ITC executives, IDBI sources yesterday ruled out chances of the tobacco giant receiving the loan - at least in the current financial year.
The loan will probably not be sanctioned until ITC is cleared of the cases against it. ITCs application for the term loan to increase its cigarette manufacturing capacity has been lying with the IDBI since June.
Such applications are normally cleared within one and a half months, IDBI sources said.
The delay in ITCs case has been necessitated by the inquiries and clarifications the financial institution is seeking on the Rs 803 crore excise evasion charge faced by the company, the related income tax investigations and Fera violations committed by the companys executives.
Source close to IDBI revealed that the issue of the term loan sanction to the beleaguered tobacco firm has not figured in the agenda of IDBI board meetings in the past couple of months.
At present, ITC has seven non-executive directors and 6 executive directors.
Of the non-executive directors, two are BAT nominees and one is an LIC nominee. The remaining four non-executive directors belong to Indian financial institutions.
The assets to be created and the plant and machinery to be installed at ITCs expanded unit have reportedly been demanded as securities against the term loan. At present ITC needs long term funds of Rs 500 crore to meet its capital expenditure commitments.
