10:1 Swap Ratio Likely For Classic, Icici Merger

Market analysts feel that the swap ratio for the ITC Classic Finance Ltd and Industrial Credit and Investment Corporation of India (ICICI) is most likely to be fixed at 10:1.

The swap ratio will determine the future of shareholders investments in ITC Classic. The NBFC and the financial institution will have separate board meetings on December 1 to consider the details of the amalgamation. Meanwhile, the ITC Classic board met over the weekend to finalise its first half results. The board met over the weekend and will again sit in Mumbai on Monday, ITC Classic managing director Mukesh Palta told Business Standard.

 

ITC Classic watchers are expecting the company to log losses in the region of Rs 60 crore in the first half of 1997-98 if it does not make any provisions. If provisions are made, then the losses may touch Rs 100 crore. Classic posted a loss of Rs 285 crore in 1996-97. The firm began the current fiscal with an asset base of Rs 1,119 crore and capital of Rs 58 crore which included preference capital of Rs 22 crore. Classic has a negative net worth of Rs 62 crore.

On the proposed amalgamation, a leading Calcutta-based broker says: This is the best deal ITC could give to ITC Classic considering the fact that the NBFC has incurred almost insurmountable losses.

However, corporate watchers cannot help wondering why ICICI went in for such a deal, as this entails 17 per cent roll-over for three years on the fixed deposits, in the backdrop of the interest regime being substantially brought down.

The deal will help ITC as it will entail complete divestment from the financial services business, which will help it to consolidate its core competencies, which are at the moment tobacco, paper and packaging, hotels, and real estate.

ICICI will absorb Classics retail distribution network of 10 offices and 12 franchisee offices spread over south and east India.