The BAT-ITC Tussle

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Case Details:

Case Code : BECG012
Case Length : 11 Pages
Period : 1996-2002
Pub. Date : 2002
Teaching Note : Available
Organization : ITC BAT
Industry : Food, Beverages & Tobacco
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"ITC does not need BAT."

- J N Sapru, former ITC Chairman, in 1994.

Public Drama

In March 1995, a press release issued by the UK-based global tobacco major British American Tobacco (BAT) shocked the Indian corporate world.

Expressing a lack of confidence in K L Chugh (Chugh), the chairman of its Indian subsidiary, the Indian cigarette industry leader ITC, the press release demanded his resignation.

The incident took place soon after Chugh had accused BAT of trying to forcibly increase its stake in ITC to gain majority and that BAT was not in favor of ITC's diversification into the power generation business.

Though the ITC-BAT relationship had been strained for quite some time, the move took ITC by surprise.

The surprise element was BAT's claim that it was not demanding Chugh's resignation because of the shareholding issue, but because it had detected certain financial irregularities in the company. BAT said, "Chugh should resign in the interests of the company, its employees and its shareholders."

Soon after, Chugh called a press conference, at which he categorically refused to resign, "Just because one of the shareholders throws a tantrum does not mean the chairman goes."He reiterated his stand that BAT was trying to increase its stake and added that BAT only wanted to use ITC's funds for its own benefits.

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