As per the agreement, Gujarat Lease Finance will provide its network in Gujarat to the bank as a vehicle for selling its finance products and other finance schemes. The compnay has 26 branches in the state. The NBFC will be paid a commission by the bank towards its operating expenses. On its part, HongkongBank will be able to increase its presence considerably in Gujarat by piggy-back riding a known NBFC. Gujarat Lease Finance managing a director Vasant Shah confirmed that a tie-up was being finalised between his company and HongkongBank but did not give details of the agreement.

Corporate sources said that Gujarat Lease Finance was on the block for quite some time but there were no takers for the company onaccount of its poor financial health. As on March 31, 1998, the company had declared a total income of Rs 21.4 crore but the profits were a meagre Rs 32 lakh.

At that time, it was alleged that camouflaging was done to conceal the actual financial state of the company, rumoured to have incurred losses worth Rs 35 crore. Thereafter, as per the 1998-99 third-quarter results, the total income of Gujarat Lease Finance was Rs 31.89 crore, with a registered loss of Rs 8.68 crore. To make matters worse for the ailing Torrent group company, recently rating agency Icra downgraded its status from `MA' to `MB', which puts the company below the investment grade.

According to the sources, this means the company will have to repay its fixed deposits to investors within the next three years. The tie-up with the bank will, therefore, not only help to restore investor confidence but also help to prevent the flight of capital from the company.

Gujarat Lease Finance is a joint venture between the Torrent group and theGujarat Industrial Investment Corporation, with Torrent holding controlling stake.