UTI denies selling stake in ITC

Mumbai: Speculators bit dust as the ITC stock nosedived 10 per cent on 2 November to close at Rs 663.90 on the Bombay Stock Exchange (BSE) after the Unit Trust of India (UTI) denied selling it's holding in ITC to British American Tobacco (BAT).

Before this, ITC shares had moved up in the beginning of this week to touch Rs 740 on rumours that UTI was talking to BAT to sell its entire holdings in ITC. The price talked about in the market was of the order of Rs 1,000 or thereabouts.

Almost 16 lakh shares were traded on the BSE. The scenario was no different on the National Stock Exchange (NSE), where too the scrip fell about 8 per cent to close at Rs 679. A total of 28 lakh shares were traded on the NSE.

Sources said selling of ITC shares by UTI to BAT would mean foreign investments in tobacco, which therefore required considering legal issues. They said these were mere rumours spread by speculators, who were trying to make a quick buck.

Another reason cited for ITC shares falling was the decision by the Supreme Court, which directed all states and union territories to ban smoking in public places. The move is one that is seen as hurting the interests of the tobacco industry.

On 30 October, the UTI board of trustees had considered the all-important Malegam Committee report and major objections were taken to its suggestion of inducting a strategic partner. One of Malegam Committee's major recommendations was to induct a strategic partner, who would infuse about Rs 600 crore into the company.

The main reason for raising objections is that UTI officials feel that inducting a strategic partner would require major changes to the UTI Act, which in turn would need the consent of the parliament – a time-consuming exercise. Since this would be unacceptable to most political parties, it would delay implementing other suggestions of the committee.

The board has now decided to finalise its views on the committee's report and feed it back to the government. The committee had also suggested scrapping the UTI Act, so as to totally bring it out of the clutches of the government and make it accountable to the Sebi instead.