Itc To Invest Rs 1,900cr In Core Businesses

ITC Ltd will invest the entire Rs 1,900 crore earmarked for the next five years in its core businesses and is not contemplating any diversification at this stage. The ITC board has also sought to minimise the amount to be pumped in to revive ailing financial services associate ITC Classic for which the detailed revival plan will have to be fine-tuned and placed before the board once again.

According to sources in the ITC board, the investments would go into the core businesses of cigarettes, tobacco and hotels, together with printing and packaging and cigarette paper. The company at this stage is not looking at investing in new areas, sources said. They said mobilising funds would be no problem for the tobacco major, since even if one took an average net profit of Rs 500 crore, together with Rs 200 crore of depreciation, over five years, retained earnings would be enough to fund the investment plan. Initially, however, the company could go in for some borrowings, since the present debt-equity ratio had left enormous room for leveraging. The market share in the tobacco business would be sought to be further increased by way of the fresh investments.

 

The ITC board also made clear that the amount which ITC will need to pump into Classic should be minimised, and the plan would have to be clear in that ITC would have to get back adequate returns from the investment in the Classic revival. The money should come back to ITC after a point. Only then can Classic be support-worthy, a board member said.

The board member said the Classic revival plan per-se had seen the problem from the Classic point of view, but from ITCs side, it now had to be weighed in the context of what ITC itself would gain from the investment. The concrete plan, which will point out how to fund the revival, is now expected to be placed before the next board meeting of ITC in June.

Board sources also said there was little reason to be disappointed with the results of the company, since there were provisions made which, if accounted for, would actually make the profit figure much higher. New BAT nominee Gary Armstrong also attended the board meeting.

The board also discussed the setting up of the management committee which would now run ITC. The committee of directors apart, senior managers would also figure in the panel, which would not consist of non-executive directors.