Pat on the back from BAT to make Sanjiv Puri's job easier
ITC's largest shareholder expresses confidence in new chairman; indicates it has no plans for now to raise stake in the Indian co.
The British cigarettes multinational, which owns 29.58% in ITC, in an email response to ET also said it’s “happy” with its current shareholding. This ends speculations that BAT may want to increase its stake in the Kolkata-based company, especially after it turned down an ITC board proposal to issue stock options to its employees last October.
India, at present, does not allow foreign direct investment in the tobacco sector, but foreign companies can enter into technology collaboration, license trademark and undertake management contracts. The government periodically reviews the FDI norms for the sector.
Puri, who was the managing director at ITC, was named chairman and MD on Monday, following the death of company chairman YC Deveshwar on Saturday. Of the nine non-executive directors on ITC’s board, there is only one representative from BAT: David Robert Simpson. There are four executive directors, including Puri.
Congratulating Puri on his appointment, a BAT spokesperson said: “As ITC’s largest shareholder, we have always been happy with the performance of the company, and we are confident that this performance will continue under Puri’s leadership. We have been shareholders in ITC since it was incorporated and are happy with our current 29% stake in ITC.”
Life Insurance Corporation of India is the second largest shareholder in ITC with 16.19% holding, followed by Specified Undertaking of the Unit Trust of India (SUUTI’s) with 7.96% stake. ITC has no promoter holding.
BAT has been the only shareholder that often raises some issues with the board. It opposed the ESOP proposal, saying it would dilute its holding.
Around two decades back, BAT wanted to wrest ownership control of ITC which was strongly resisted by the then chairman KL Chugh.
Chugh’s successor Deveshwar had worked hard to ensure that SUUTI’s stake in ITC is not sold to BAT. He believed that BAT was only interested in tobacco and would reverse ITC’s diversification. Around 59% of the net segment revenue of ITC is currently derived from the non-cigarette businesses and is its future bet considering the increasing taxation on cigarettes.