Calcutta, Sept. 21 :    Calcutta, Sept. 21:  The board of ITC Ltd today approved the merger of ITC Bhadrachalam Paperboards with itself and fixed a share swap ratio of 1:16, implying that the shareholders of Bhadrachalam will receive one share of the tobacco major for every 16 held in the subsidiary. The ratio was based on a report of valuation prepared by S.B. Billimoria and Company. ITC held 41.26 per cent of Bhadrachalam, while Russell Credit, its investment subsidiary, held 20.34 per cent. Prior to the merger, ITC will buy out Russell Credit's 1.78 crore shares of Bhadrachalam at Rs 71.36 apiece-the average cost at which the shares were acquired. Following the transfer of shares from Russell Credit to ITC, the entire holding of the tobacco major in Bhadrachalam will be cancelled. As a result of the merger, ITC's Rs 245.41 crore equity base will expand by about Rs 2 crore. The consequent decline in British American Tobacco's holding in ITC will be marginal. London-based BAT holds a shade under 32 per cent in ITC. Stock markets, however, were not impressed by the merger. The ITC stock was beaten down Rs 39.55 on the Bombay Stock Exchange today and the tobacco major's scrip closed over 6 per cent lower at Rs 602.85. The Bhadrachalam scrip took a worse beating. It shed close to Rs 4 to close 9.6 per cent lower at Rs 37.15 on the BSE today. According to an ITC release, 'The merger would support ITC's strategic intent of scaling up Bhadrachalam's manufacturing capacity.' ITC chairman Y.C. Deveshwar had earlier said his company would be investing about Rs 1,500 crore in the operations of its paperboard subsidiary over the next five to seven years to expand capacity and improve technology. The ITC release also said the company would consolidate the operations of Bhadrachalam with its own speciality paper and packaging divisions. This will not only yield greater operational synergy, but also enhance ITC's earnings per share, the release added. ITC uses Bhadrachalam's packaging for its cigarettes and for its greetings card business. The high courts of Calcutta and Karnataka will soon be moved by the two companies to convene separate meetings for shareholders' approval to the merger, the release said.