Anagram Finance set to merge with ICICI

The boards of directors of both ICICI and Anagram Finance will meet on May 23 to clear the merger. However, there is no proposal to merge any of the five Anagram subsidiaries. They are Anagram Securities Ltd, Anagram Capital Markets Ltd, Anagram Stockbroking Ltd, Anagram Housing Finance Ltd and Anagram Wellington Asset Management Company.

As a precondition to the merger, the investment companies of the Lalbhai family will pump in Rs 125 crore zero coupon advances which will be converted into "nominal equity" once the merger is ratified by the courts.

"The funds flow will make the net worth of the company positive and provide a cushionagainst its non-performing assets," ICICI officials said. Anagram has an asset base of Rs 983 crore.

ICICI has appointed Banshi Mehta and CC Choksi as the valuers for the scheme of merger with the Anagram Finance. The stock market is expecting a share swap ratio in the range of 4 to 5 shares of Anagram Finance in exchange for one share of ICICI. Anagram Finance shares have been quoting at around Rs 20 for the last few days. ICICI share price closed on Wednesday at Rs 102.40.

As a result of the merger, the Lalbhai group will get a stake in ICICI as the former holds 72.40 per cent stake in Anagram Finance. While public holds 25.26 per cent stake in Anagram, institutions and mutual funds hold 1.2 per cent.

Anagram had clocked a total income of Rs 257.25 crore and a net profit of Rs 34.76 crore for the year ended June 1997. On the other hand, ICICI’s net profit had shot up by 40 per cent to Rs 1080 crore for the year ended March 1998. Its assets also rose by 27 per cent to Rs 45,920 crore.

Anagram isprimarily engaged in retail financing of cars and trucks. Between 1992 and 1998 Anagram has built a strong retail franchise, a distribution network of more than 50 branches (predominantly located in the prosperous states of Gujarat, Rajasthan and Maharashtra) and it has a depositor base of 250,000.

"In recent times, as in the case of certain other NBFCs, Anagram has also been adversely affected by the problems being faced by this sector on account of diverse factors including accounting and financial issues such as non-performing assets and high cost of funding etc," Anagram said, explaining reasons for the merger. "A detailed examination and review of the operations and financial condition of the company including a conservative estimation of provisions required for non performing or potential non performing assets has resulted in the networth of the company becoming negative, necessitating infusion of further funds into the company," it said.

In order to protect the interests of the creditors includingdepositors and public shareholders, it said, the investment companies of the Lalbhai family have decided to infuse long term resources of Rs 125 crores convertible into nominal equity capital of the company upon the merger becoming effective in pursuance of the Articles of Agreement signed with ICICI on May 20, 1998.

"While this infusion of funds may restore the financial health of Anagram, given the high financing costs inherent in a NBFC a viable long term option could only be a merger with a strong and healthy financial institution. The divestiture of Anagram will enable the Lalbhai family to focus on its core businesses of textiles, dyes and chemicals," Anagram said.

Listing the reasons for the merger, ICICI said it has over the years consolidated its premier position as a wholesale provider of finance.

Anagram MD quits in a huff

MUMBAI: Even as ICICI and Anagram Finance announced a merger, Anagram’s CEO and Managing Director Satish Nadkar has resigned from the company. It is learnt Nadkarput in his papers after differences of opinion with the Lalbhais over the sale of Anagram Finance to ICICI. Nadkar had all along differed with the Lalbhais over the sale of their stake in Anagram Finance, sources said. "He had built this organisation from 1979 and did not want to give it up as his name was synonymous with Anagram Finance. He decided to go on leave after it became clear that ICICI was serious about buying out Anagram and later resigned after the decision to merge was taken," a source said.