Itc Classic Posts Rs285cr Loss, Palta Is New Md

ITC Classic Finance, the financial services associate of tobacco major ITC Limited, has posted a whopping loss of Rs 284.99 crore for the year ended March 31, 1997 even as ITC kicked off a management strengthening exercise in the company and deputed Mukesh Palta, its senior vice president (finance), to take over as Classics new managing director yesterday.

The larger-than-expected loss was announced after a crucial board meeting of ITC Classic. The company has blamed the liquidity crunch affecting the companys corporate clients and the unprecedented premature withdrawals of the fixed deposits between October 1996 to January 1997 as the two key reasons why the company floundered into a massive loss from a Rs 31.34 crore profit in the previous fiscal.

The loss, however, did not affect the companys stock, which moved up marginally from Rs 24.30 to close at Rs 24.60 on the Calcutta Stock Exchange yesterday.

As if on cue, Credit Rating Information Services of India Ltd (Crisil) yesterday downgraded ITC Classics Rs 50 crore non-convertible debenture programme to BB from A- and its fixed deposit programme to FB from FA. The revised ratings, a Crisil statement said, indicate inadequate safety with respect to timely payment of interest and principal on the instruments. Crisil is clearly not

impressed with ITCs support to Classic and said the nature and quantum of the infusion from ITC into Classic was unlikely to correct Classics weakening business and financial risk profile in terms of profitability, capital adequacy and asset quality.

During the year 1996-97, net sales dipped by 43.33 per cent to Rs 176.17 crore as against Rs 310.92 crore in the previous year 1995-96.

Total expenditure, however, increased from Rs 37.48 crore to Rs 57.17 crore.

After providing for a sum of Rs 182.85 crore as interest, the cash loss in the last fiscal stood at Rs 62.39 crore compared with a cash profit of Rs 100.4 crore in 1995-96.

While the companys paid-up equity share capital stands at Rs 36.02 crore, the paid-up preference capital is Rs 21.8 crore. Reserves, excluding revaluation reserves were at a negative figure of Rs 41.74 crore, from Rs 244.63 crore the previous fiscal.

As a measure of prudence, the company has made provisions against:

* Receivables of Rs 60.12 crore based on a prudent credit review, which is higher than Rs 21.4 crore required in terms of stipulated norms of the RBI

* Diminution in value of investments amounting to Rs 39.47 crore to realign their value, and

* For contingencies amounting to Rs 82 crore representing anticipated diminution in value of equity and debt in subsidiaries and former subsidiaries due to adverse market conditions.

To tide over the problems of liquidity and asset composition, ITC Classic management has finalised a revival plan which will be premised on financial support from ITC Ltd and concessions sought from the companys consortium banks and the Reserve Bank of India.

In consultation with its consortium of banks and the Reserve Bank of India, the regulatory authority for the non-banking finance companies sector, ITC Classic has prepared a three-year revival package.

A separate statement from ITC Ltd yesterday said: Even though ITC Ltd has no legal obligation to support such a revival package, as a responsible corporate citizen, ITC has given serious consideration to the proposal, in the larger interest of stabilising the NBFC sector, and thereby, supporting orderly economic growth.

Keeping the larger interest of NBFCs in mind, the ITC board has in-principle approved the revival package for ITC Classic through injection of funds, strengthening of the companys management and in due course, concluding an alliance with a partner of repute.

The revival package for the ailing non-banking finance company, however, is subject to the approval of its consortium of banks and the apex banks, including the concessions sought therein. According to the official release, discussions to finalise the revival package for the ailing financial company are at an advanced stage.