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2. Amalgamation of ITC Classic Finance Ltd.
It was one of the first-of-its-kind mergers in the country's financial sector, ITC Classic Finance Ltd, the beleaguered non-banking financial arm of ITC Ltd, and country's premier development financial institution, Industrial Credit Investment Corporation of India (ICICI) to merge their operations and share swap ratio for ITC Classic-ICICI merger was 15:1.
Tobacco major, ITC was desperately scouting a buyer for ITC Classic, which had accumulated losses of over Rs. 300 crore.
ITC Classic Finance Ltd was named after ITC’s premium cigarette brand ‘Classic.’ It was incorporated in 1986. ITC Classic was a non-banking finance company (NBFC). Largely, it was engaged in hire, purchase, and leasing operations. In addition, the company undertook investment operations on a substantial scale. The company did very well in the initial years and developed a strong network to mobilize retail deposits. Its fund-based activities such as corporate leasing, bill discounting, and equities trading also grew substantially over the years. At a compounded annual growth rate of 78% during 1991-96, ITC Classic’s annual turnover increased from Rs. 17.3 crore to over Rs. 310 crore and net profits from Rs. 2.3 crore to Rs. 31 crore in the same period. By the June
1996, the company had a deposit portfolio of Rs. 800 crore consisting mainly of retail deposits. The capital market boom of the early 1990s was responsible largely for ITC Classic’s impressive financials growth. Around 50% of ITC Classic’s assets had to be kept in financing and a further 25% was to be held in liquid funds or cash to handle cash outflows. However, Classic was free to invest the remaining 25%, which happened to be in the ‘boom stocks.’ When the markets crashed in 1992, ITC
Classic had to face heavy losses.
As far as ICICI was concerned, it was totally a ‘win’ proposition. The biggest benefit and opportunity for ICICI was ITC Classic’s retail network, which
It was one of the first-of-its-kind mergers in the country's financial sector, ITC Classic Finance Ltd, the beleaguered non-banking financial arm of ITC Ltd, and country's premier development financial institution, Industrial Credit Investment Corporation of India (ICICI) to merge their operations and share swap ratio for ITC Classic-ICICI merger was 15:1.
Tobacco major, ITC was desperately scouting a buyer for ITC Classic, which had accumulated losses of over Rs. 300 crore.
ITC Classic Finance Ltd was named after ITC’s premium cigarette brand ‘Classic.’ It was incorporated in 1986. ITC Classic was a non-banking finance company (NBFC). Largely, it was engaged in hire, purchase, and leasing operations. In addition, the company undertook investment operations on a substantial scale. The company did very well in the initial years and developed a strong network to mobilize retail deposits. Its fund-based activities such as corporate leasing, bill discounting, and equities trading also grew substantially over the years. At a compounded annual growth rate of 78% during 1991-96, ITC Classic’s annual turnover increased from Rs. 17.3 crore to over Rs. 310 crore and net profits from Rs. 2.3 crore to Rs. 31 crore in the same period. By the June
1996, the company had a deposit portfolio of Rs. 800 crore consisting mainly of retail deposits. The capital market boom of the early 1990s was responsible largely for ITC Classic’s impressive financials growth. Around 50% of ITC Classic’s assets had to be kept in financing and a further 25% was to be held in liquid funds or cash to handle cash outflows. However, Classic was free to invest the remaining 25%, which happened to be in the ‘boom stocks.’ When the markets crashed in 1992, ITC
Classic had to face heavy losses.
As far as ICICI was concerned, it was totally a ‘win’ proposition. The biggest benefit and opportunity for ICICI was ITC Classic’s retail network, which