Announcement of a Ten Million Dollar Loan to the Industrial Credit and Investment Corp. of India, Ltd. on December 23, 1954

HOLD FOR RELEASE o• ., ';. INTE"RNATIONAL BANK FOR RECONSTRUCTION AN,D DEVELOPMENT <WORLD BANK) 1818 H STREET, N.W., WASHINGTON 25, D.C. TELEPHONE: EXECUTIVE 3-6360 ...------------------------------------,-·---------"41 PRESS RELEASE NO. 3~2 <• FOR RELFASE SUBJECT: Bank approves $10 million loan A.M. Newspapers to Indus,trial Credit and Invest- Thursday., December 23, 1954 ment Corp. of India, Ltd. The World Bank has approveq: ~a loan of $10"" million which will be made to the Industrial Credit and Investment Corporatiop, of India, Limited, a corporation being fo~ed by p~t·vate investoz:s for the purpose of assisting the growth of pri- vate industry in India. It is expected that the Corporation will be established • in January 1955, at which time the Bank will enter into a fonnal loan agreement • Private investors from India, the United Kingdom and the United States will rubscribe the initial share capit9-l of the Corporation, which will be 50 million rupees (ll0,500.,000). A group of five prominent Indian industrialists and finan- ciers are arranging for the ;Sale of 35 million rupees ($7,350.,000) of share capi- tal in India, partly through private placement and. partly by public offerll\g. The British investors - some of the Eastern Exchange Banks, the Commonwealth Development Finance Company, Ltd. and several insurance companies and industrial finns - will subscribe 10 million rupees ($2,100,000) of capital. American in- vestors are the !/;Bank of America, the ·Rockefeller·· 'brothem, Olin Mathieson Chemical / Corp. and Westinghouse Electric International Corporation; they will subscribe 5 million rupees ($1,050,000) of share capital. In addition, the Government of India will make an interest-free advance of 7S million rupees ($15., 750,000) to the Corporation. (,·,··· \( ·. • \\ , , -2- \i • 11 The new co~~oration will make .long and medium term. loans to industrial e-ri.ter- c . prises;:· purchase shares of industrial enterprises; underwrite new is sues of si:cu- ri ties; guarantee loans from other irivestment sources; and help industry to obtain managerial, t echllical anf:l) admmistrati Ve,'::)advice and ~i.3Sistance. As "" \\ rapfdly as is prudent, the qorporation will sell its loans and share holdir).gs !,to other investors, thereby-~~nd:ing the capital market and recovering its own capital for further investment. Lack of risk capital has always been an impediment to the growth of (~ndl1-stry in India. . investments were possible during While substantial u World War I:t and c, ' () the period immediately following, - since 1948 it has. been di.ffiou~ t for even the lar-ges~· and. best esta~lished concerns to raise new capital in t~r- Indian markets, 0 ~ and even these concerns have had to r~ly mainly on issues of fixed-interest secu- • rities .1-ather than of equity capital • The First Five-Year Plan (1951-1956) re~ied to a g~eat extent upon private enterprise to bring about the indust-rial expansion thought necessary. Both new in vestment and investment envisaged for modernization and renewal of plant and equipment, however, have been below the level hoped for. The nature of the new corporation and its sponsorship by leading fin~ncial institutions in India and abroad, should enable it to tap funds in India not at present being ma.de available to industry, and in due course to() increase the flow (j of foreign investment into India. Furthermore, its powers to underwrite new, issues w.i.11 £ill a gap in the Indian c;apital market. The c.orporation will bene- " fit the Indian economy not only by the direct financing of industry., but also in ,0$~' other ways of equal importance. Through its connections abroad it will be in a position to help Indian industry to meet its needs for teclmical knowledge and ,~ :1,?:-.· =:.:;;;=:;:::::.::;:';:-/' ' c: • managerial experience, which are almost as pressing as the need tor finance •  ca;: 0 {? • 0 The possibilities of' ,,establishing a privately-owned. corporation which would enco~agi(the gr9wth of industry in Indial, were first discussed at the end of 1953. "In February 19S4 a mission organized by the World Bank visit,~d Indi~ to e)G?lore the {)matter further with Government officials and le~,ding businessmen; ';~} C ,~ \) (; • p'< the mission included George .Woods of The First ,, Boston CoI'pbration and Robert Craft of the American Sec:urities Corpo:r'a'\tionJ The main ~ .. outl:ines of the corpora- tion. were agreed upor, during tbat visit., and a Steerin~g Committee of five promi- o 0 0 nent Indian busin,essmen was set up to formulate definite""'plans for its organiza- 0 - tion: Meanwhile, the World Bank explored the possibil~:ty of obtaining pr~ vate C' (_j I! '~, :::- • C British and American participation in the corpo~ation's equity capital. Repre- sentatives of the Steering Committee, the· Government . I • of India· and of. the British and American inve~tors met with World Bank officials in wa:shington in October 1954 and reached· agreement on all points of substance and on draft,s of all docu- • · ments. It is expected that the initial Board of Directors of the Corporation will include Sir namaswami Mudalia:r (prominent public figure and businessman of Madras), Sir Biren Mookerjee (Martin Burn, Ltd. of Calcutta), Ka3turbhai Lalbhai (Bombay tt3xtile mill owner), A. D. Shroff (Tata & Sons :Ctd. of Bombay), G. D. Birla (Birla Bros • ., Ltd. of Calcutta), W. R. Cockburn (Chartered Bank of India., Australia & China), J. G. Beevor (Legal and G,eneral AsSllrance Society, Ltd. and Commonwealth Development Finance Company, Ltd.) and Russell Smith (Bank of America). The Gove:mme:r.rE of India will also appoint a Director. The General Manager of the Corporation will be P. S. Beale, who is resigning hi.s position as Chief Cashier of the Bank of England to accept this appointment. ,The authorized capital of the Corporation will be 2$0 million rupees ($52.5 " Inillion) divided into 500.,00Q Ordinary shares (common stock) and 2,000.,000  (/ 0 0 (j • unclassified shares, all with a par value of 100 ruRees each. (', Corporation vrl.11 issue only the Ordinary shares of 50 million rupees llO. 5 million) which will be offered for subscription, in cash at par. Initially, the " ·1 Investors in the United Kingdom w.ill subscribe /I to 100,000 shares, , and :investors in t,he United 1 States', to 50,000 sm,res. The remaining 350,000 shares m.11 b : sold in India; iJ it is expecte,d. that 150,000 will be s,old by private placement and 200,00Q,will be offered for public subscription. () Thr) Government of India will make a 30-year advance of 75,dmillion rupees ,$15., 7501 000)° to the Corporation, free of ii"'lterest and repayable in fifteen equal annual instalments, beginning in the sixteenth year. This advance will be provided out of funds derived from the proceeds of the sal~ of steel supplied by tlie1 Foreign Operations Adm:inistrati.on of the United Sta.tes, and will be made to the Corporation when the share capital has been subscribed. I0 • The proceeds of the $10 million World Bank loan will be us eG} for the pur- chase of imported material,. equ:j.pment and services needed to carry out private - ,,,~~~ :1.1 ··:industrial projects financed by the Corporation. Ttle loan will be for a term of 15 years and bear interest of' 4-5/8% per annwn, including the statutory 1% commission charged by the Bank. Amortize.tion will begin January 1, 1960. The Government of India 1-Jill guarantee the loan. This will be the seventh loan made by the Bank for ,>development projects in India, and ldll bring the total lent to $126. 7 million. The other loans were for the development of electric power, agriculture, railways and iron and steel •  • Supplement to Press Release on World Bank Loan to Industrial Credit and Investment Corporation ot. India 1 . 14Jniteci The British group subscribing to the equity capital of the Industrial Credit and Investment Corporation of India, L~ted includes: 1. Eastern "Ex.cha.llge Banks )j Chartered Bank ofltndia, Australia & China Hongkong & Shanghai Banking Corporation MercantilecBank of India // 0 Mati~nal Bank of India The Eastern Bank The,British Bank for the Middle East Lloyds Bank (Eastern Department) 0 Grindlays Bank D (! 2~ British Insurance Companies Alliance Assura..~ce Company Limited. Atlas ~i'.ssurance Company Limited Caledoniari Insurance Company Century Insurance Company Limited • Commercial Union Assurance Company Limited /, Eagle Star Insurance Company Limited ..,};;,/ Employers' Liability Assurance Corporation Lirn1ted Gresham Life Assurance Society Limited Gu:-1.x-dian Assurance Company Limited Le·gal & General Assurance Society Limited London Assurance London & Lancashire Jnsurance Company Limited National Employers' Mutual General Insurance Association Limited · New Zealand Insurance Company Limited No~th British & /,~erca.ntile Insurance Company Ltd. Northern Assurance Company Limited Norwich Union F~"re Insurance Society Limited Norwich Union Life Insurance Society Pearl Assurance Company Limited Phoenix Assurance Company Limited PrudentialJ~s~urance Company Limited Royal Insurfance JI Company Limited Royal Exc~ange Assurance Sc.ottish Uhion & National Insurance Cornpany South British Insurance Company Limited Sun Insurance Office Limited Sun Life 'Assurance Company or Canada Union Insurance Society of Canton Limited Western Assurance~\2ompany • Yor~hire ,Insurance Company Limited ,l . ...6- 1-\ '(\ • 0 • 3. The Connnonwealth ~eitelopment Finance Com~~~LiJlii. ted D "'" ) 4. Other indqstrial Companies in the u. K. j' Associated Electrical Industries Ltd. English Electric Company Ltd. General Electric Company Ltd. Guest, Keen & Nettlefold Ltd. Gray ··Dawes & Company • p.. \.\ • ,\ \\ \) :