Classic Must Find Promoter To Escape Bifr

Tobacco major ITC Ltds top management is considering two alternative strategies to deal with ailing financial services company ITC Classic. One of the options being considered by ITC is to part-fund a revival plan for Classic, provided the latter identifies another partner who will pick up an equity stake in Classic. Alternatively, ITC may let Classic be referred to the Board for Industrial and Financial Reconstruction (BIFR).

The ITC board, which met on Tuesday to approve the companys unaudited financial results for 1996-97, did not even consider a suggestion by some sections within the group that Classic should be merged into the flagship company.

 

Sources pointed out that since ITC is only a shareholder in Classic, it is under no legal compulsion to take on the latters liabilities. ITC is willing to put in fresh investments to revive Classic, but it would need a partner to share the tab, the sources added.

The ITC board meeting on Tuesday also cleared a company proposal to apply to the government for permission to raise $100 million through external commercial borrowings (ECB). The ECB will be used to part-fund ITCs Rs 1,900 crore expansion plan, which will be undertaken over the next five years.

The troubled ITC Classic is in urgent need of cash infusion. According to one estimate, the company needs more than Rs 400 crore to emerge from the woods.

ITC group companies hold 56.43 per cent of ITC Classics equity, while 39.7 per cent is held by the public. About 2 per cent of the companys equity is held by foreign institutional investors while the remaining portion is with domestic financial institutions, including the Industrial Credit and Investment Corporation of India (ICICI). The company has an independent board of directors.