ITC appoints Arthur Andersen to strike buyback deal

Thursday, July 24 1997

ITC appoints Arthur Andersen to strike buyback deal

Rupali Mukherjee

NEW DELHI, July 23: ITC is reported to have engaged Arthur Andersen to negotiate a buy-back deal with Delhi-based industrialist Jai Prakash Gaur in respect of around 85 lakh shares of Jaiprakash Industries held by ITC Classic. ITC is keen to finalise the deal which will bring much-needed funds into the cash-strapped ITC Classic, which reported a loss of Rs 285 crore this year.

The US management consultants are expected to negotiate a mutually agreeable price for ITC's portfolio in Jaiprakash Industries. ITC Classic, along with some other ITC investment companies, had bought 1.16 crore shares of Jaiprakash Industries at Rs 54 per share. Sources said though there was no buy-back clause in the agreement between the two companies, this was being termed as a "goodwill measure".

At present, ITC Classic holds around 85 lakh shares of Jaiprakash Industries. The rest are understood to have been offloaded in the secondary market. The current price of the share quoting in the market is Rs 16.

Before Arthur Andersen was appointed, the price being talked about between the two parties was Rs 34 per share. Under the agreement, it was decided that JP Gaur would pay 10 per cent of the deal immediately and the balance amount, along with the interest, would be paid in two years. But the deal fell through as the ITC management felt that Rs 34 per share was too low a price.

Now, with the appointment of Arthur Andersen, discussions are on again to conclude the buy-back deal. ITC Classic's new managing director Mukesh Palta is believed to have had discussions in this regard. The company had received considerable flak for its investment in Jaiprakash Industries as the price of its holdings had dipped considerably in the secondary market.

ITC Classic has finalised a three-year revival plan to tide over the problems of liquidity and asset composition. The plan is based on financial support from its parent, ITC Ltd, and concessions are sought from its consortium of lenders and the Reserve Bank of India. The ITC board has taken an "in-principle" decision to support ITC Classic. It is understood that ITC is pumping in Rs 325-crore worth of fresh funds into Classic.