Itc Board Meet Crucial For Classic

The three-day ITC board meeting scheduled for this weekend is expected to be a crucial one for the company's financial services associate, ITC Classic Finance. The board is expected to take a final view on some key issues like whether it will go ahead with the revival plan first before a partner comes in, and the extent of financial support the revival plan would entail.

Out of the three days, one full day is expected to be taken up for discussions on the revival of ITC Classic which is at the crossroads owing to a substantial funding requirement to erase the company's non-performing assets and enable it to begin on a fresh slate.

 

The major issues which are expected to come up in relation to Classic is whether ITC will go ahead with the revival plan initially without a partner or whether the partner would have to step in first before the revival begins. The ITC board has decided to support a revival package but is fine-tuning it to suit the tobacco major's requirements. The board had earlier decided that the funding requirement for the bailout needs to be minimised as far as possible and the plan made to suit ITC.

Interestingly, ITC is also attempting to take a stand that Classic is not strictly its own company but is a trade investment where the tobacco major holds 49 per cent equity. Sources say it would be much better for Classic if ITC came out with a clear indication that it is committed to it as a parent company. ITC, however, seems to feel its liability being limited to 49 per cent, and it is not entirely feasible for the tobacco major to fund too much of the revival package.

The revival plan drawn up for ITC Classic has already found favour with the Reserve Bank of India. Detailed discussions will also be necessary to find ways to reduce Classic's losses.

According to ITC sources, one of the ITC Classic investments which may be taken up by the board is the Rs 10 crore capital contribution to ITC Classic Threadneedle Asset Management Company since ITC has said it is not averse to taking up the mutual fund business and running it jointly with the BAT affiliate, Threadneedle. This will free funds for Classic on which the company is paying interest.

The real estate properties of ITC Classic subsidiaries may also be acquired by ITC since it meshes with ITC's other core business of hotels. ITC feels it can make money later through the properties it could acquire from Classic.