Calcutta, June 30: ITC Classic Finance Ltd on Monday reported a whopping loss of Rs 285 crore for 1996-97, which has nearly wiped out its net worth. Its net worth, which was Rs 302.46 crore on March 31, 1996, has been whittled down to Rs 16.08 crore.

ITC Ltd, which holds 49 per cent in the non-banking finance company, said in a press release that Classic's net income from operations for the year to March 31, 1997, dropped to Rs 176.17 crore from Rs 310.92 crore the previous year.

The release also said ITC's intended support to Classic would be through injection of funds, strengthening of the company's management and concluding an alliance with a partner of repute.

Sources confirmed that Mukesh Palta, ITC's senior vice-president for finance, has taken over as the managing director of Classic. This follows the appointment of a core team of ITC professionals to monitor Classic's recovery.

ITC Classic's income in the second half has fallen drastically to Rs 42.98 crore from Rs 167.97 crore in the comparable period in 1995-96. As a result of an interest burden of Rs 182.65 crore in 1996-97 (previous year Rs 174.24 crore), there was a cash loss of Rs 62.39 crore against a cash profit of Rs 100.40 crore in 1995-96.

The net loss ballooned to Rs 284.99 crore as a result of Rs 41 crore provided for depreciation and a record provisioning of Rs 181.59 crore (previous year Rs 13.85 crore). In 1995-96, the company had shown a net profit of Rs 31.34 crore.

A breakup of the provisioning reveals that the company has provided Rs 53.88 crore against receivables, Rs 39.47 crore against erosion in value of investments, Rs 82 crore for contingency and a write-back of tax provision of Rs 78 lakh in the second half of 1996-97

The company has attributed the loss to the liquidity crunch faced by its corporate clients and the "unprecedented premature withdrawals" of the company's fixed deposits during October 1996-January 1997.

The company has made provisions against receivables of Rs 60.12 crore based on a prudent credit review, which is higher than the Rs 21.40 crore required in terms of the norms laid down by the Reserve Bank of India. It has also provided Rs 39.47 crore for diminution in value of investments to realign their value with market rates.

Company sources claim that in the case of advances to at least 20 corporate clients, the company has had to treat them as non-performing assets because they have remained outstanding for more than six months.

Financial institutions that have made advances to the same clients are not required to treat them as NPAs unless they remain outstanding for more than a year, sources pointed out.

The contingency provision of Rs 82 crore represents the anticipated diminution in the value of equity and debt in subsidiaries and former subsidiaries due to adverse market conditions.

The ITC release said the three-year revival package prepared by ITC Classic in consultation with its consortium of banks and the RBI was considered by ITC "in the larger interests of stabilising the NBFC sector" although ITC has "no legal obligation" to support the plan.

The ITC board has approved, in principle, support to Classic's revival package, subject to the approval of the concerned authorities, including the concessions sought in it.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.