CALCUTTA, NOV 25: ICICI is considering merging with ITC Classic Finance Ltd. A deal to rescue the beleaguered financial services company, which is 49 per cent owned by ITC Ltd, is expected to be formally announced shortly.

Sources confirmed that merger was one of the options being seriously considered to bail out ITC Classic. The other two options are a strategic alliance and the extension of a line of credit to Classic. "We hope to close the deal shortly," said the sources. Top ITC officials, when contacted, neither confirmed nor denied the news.

According to sources, a valuation of ITC Classic Finance has already been done by the Mumbai-based chartered accountant firm of Ratan Mama. A swap ratio of 15:1 has also been talked about, but the Classic management is said to be bargaining for a better exchange ratio of 10:1.

On the face of it, the exchange ratio appears to loaded in favour of ICICI but experts point out that the valuation takes into account the high level of non-performing assets of Classic (estimated to be close to Rs 300 crore). The ICICI share is currently quoted at Rs 71 and ITC Classic at Rs 21.75. Their 52-week high-low figures are Rs 111.50/Rs 50 and Rs 55/Rs 18 respectively.

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