AllBank Finance, the wholly-owned financial services subsidiary of Calcutta-based Allahabad Bank, is set to gain about Rs 25.05 crore as a consequence of the recent Supreme Court judgement granting ownership of securities declared tainted earlier, to commercial banks.
The apex court has set aside the ruling of special court judge Justice S N Variava, that ready forward transactions were void and illegal.
As a consequence of this judgement, AllBank Finance, which holds tainted securities of several blue-chip companies like Reliance Industries, ACC, Tata Tea, Tata Power and Castrol, will be able to take back the provisions they had made.
V M Swami, general manager, Allahabad Bank, told Business Standard that the bank had acquired the securities from a Mumbai-based broker against a deficit in the brokers account in April 1992.
It was only in June 1992 that the notification stating that shares in the name of certain notified people would be considered tainted, came in, he said.
He added that AllBank Finance holds 87,000 Reliance shares, 1,27,000 Tata Power shares, 1,46,000 Tata Tea shares, 50,750 Castrol shares and 10,000 ACC shares which had so far been considered tainted. These figure do not include the bonus shares received by the company in the intervening period. Valuing these securities at their market price as on March 19, 1997, the company is set to gain Rs 25.05 crore, he said. Swami, however, pointed out that if the current bullish trends continue, the company may well gain more than this amount when it actually sells these scrips.
He told Business Standard, The company has a carry forward loss of Rs 38 crore. By virtue of this judgement, most of the carry forward loss will be made good. He added that the paid-up capital of AllBank Finance had been eroded from Rs 60 crore to a net worth of Rs 22 crore because of its losses. The companys net worth will now be revised upwards by Rs 25 crore to Rs 47 crore, he said.
The Calcutta-based financial services company, AllBank Finance, is engaged in merchant banking, leasing and syndication business. The company has three branches at Calcutta, Mumbai and New Delhi.
This fiscal the company hopes to make a profit of about Rs 2 crore a turnaround from having made a net loss of about Rs 11.55 crore in 1995-96. According to Swami, most of this loss was due to the provisioning requirements for the above securities.
The Supreme Court judgement having done away with the need for such provisioning, the financial services company hopes to make further progress next year and post a profit of about Rs 5 crore.
