CALCUTTA, July 20: ITC Ltd has decided to gradually wind up its investment subsidiaries Sage, Summit and Pinnacle. Over the last two years, the three investment subsidiaries have liquidated all quoted investments except holdings in group companies like ITC Classic Finance, ITC Bhadrachalam Paperboards Ltd (ITC-BPL), International Travel House etc.

Two key functionaries of the investment companies -- director Nandita Sen and Surakshit Mittal, managing director of the three companies -- have already resigned. Sen resigned on June 18 last year, and Mittal on December 31. Mittal relinquished his directorships on May 15 this year, when he reached ITC's retirement age of 58 years.

On March 31, 1997, ITC had a total investment of Rs 119.67 crore in the three investment subsidiaries. In turn, the companies have collectively invested Rs 105 crore in the equity of ITC Classic Finance. In addition, the exposure of these subsidiaries to other ITC group companies -- ITC Agro Tech, ITC-BPL and International Travel House -- was Rs 48.4 crore,according to company documents.

It is in the context of these investments in ITC group companies and in other secured debt instruments that the board of ITC has taken the view that there is no permanent diminution in value of the investment portfolios of these subsidiaries.

On March 31, 1997, the realisable value of long-term investments was significantly lower than the cost. In the case of Sage Investments, quoted securities costing Rs 41.32 crore were worth only Rs 19.52 crore at market value.

The long-term quoted securities of Summit costing Rs 76.97 crore were worth only Rs 30.14 crore at market value while in the case of Pinnacle Investments, quoted securities costing Rs 58.99 crore were worth Rs 36.94 crore, it is learnt.

All subsidiaries taken together had investments in quoted securities of Rs 177.28 crore which had a realisable value of only Rs 86.60 crore, resulting in a massive erosion of Rs 90.68 crore.

During 1996-97, ITC pumped in about Rs 20 crore into these investment subsidiaries by subscribing to their rights issues. The funds raised went into acquisition of shares of ITC-BPL and International House from ITC Classic Finance.

ITC also made direct acquisition of ITC-BPL shares from ITC Classic which raised its holdings in ITC-BPL to 171.16 lakh shares from 131.66 lakh shares held in the previous year, resulting in an outflow of Rs 39.49 crore.

At ITC's last annual general meeting, chairman Y C Deveshwar had made it clear that he would progressively reduce ITC's secondary market investments.

It is learnt that even in the case of ITC Classic Finance, it has been informally agreed upon to liquidate the quoted investments of other investment subsidiaries of the group and apportion the profits or losses made on disinvestment among the co-owners of these investment companies.

ITC's latest annual report states categorically that it had no "legal obligation" to support the revival package for ITC Classic. However, the board of ITC decided to "protect the interests of the company, both in terms of business as well as its standing as a promoter."

In 1996-97, ITC and its subsidiaries assisted ITC Classic to the extent of Rs 58 crore.ITC Classic made heavy losses last year.

A fresh infusion of Rs 48 crore was made in 1997-98 , either by acquiring "unencumbered assets" or extending inter-corporate deposits.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.