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ITC shareholders vote for buyout

More than 92 per cent of shareholders in India's largest cigarette firm, ITC Ltd, voted to buy out a paperboard subsidiary, the firm said on Sunday.

The Calcutta-based tobacco giant said in newspaper advertisements that 611 of 658 people present at a shareholders' meeting on Friday voted to buy a 40 per cent stake in its subsidiary ITC Bhadrachalam.

ITC Ltd currently owns 60 per cent of the paperboard firm which is based in Andhra Pradesh.

British American Tobacco Plc, the world's second-largest tobacco group and owner of a 31.7 per cent stake in ITC, also voted in favour of the buyout.

ITC sees paperboard as a niche, high-growth area that would protect it from troubles in the cigarette business.

Under local laws, the buyout proposal needed the support of 75 per cent of shareholders to carry it through. Local financial institutions, banks, insurance companies and mutual funds together hold 35.43 per cent of ITC.

The 40 per cent shareholders of ITC Bhadrachalam -- mostly financial institutions and the public -- will receive one share of ITC for 16 Bhadrachalam shares.

"FAVOURABLE IMPACT"

On Friday, ITC Chairman Yogi Deveshwar told shareholders the firm's earnings per share would benefit from the buyout and it would improve prospects for both companies.

Analysts said the focus should be on the long-term benefits for ITC.

"ITC is looking for opportunities to expand. Cigarette volumes are falling, younger people are smoking less. It makes sense to diversify especially with new restrictions on smoking," Mathew Easow, head of Mathew Easow Securities, told Reuters.

In early November, the Supreme Court banned smoking in public places and on public transport.

"I think ITC presents a great opportunity for investors at lower levels between Rs 620 to Rs 640," Easow said.

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