Industry sources said Nicco Uco is seriously considering the move and has already appointed two consultants - KPMG and Lodha & Co - to look into the pros and cons of it.

"Both companies have been holding discussions for the last two months. Recently, officials of Sanmar group were in Calcutta and made a presentation about their financial company. Though a final decision is yet to be taken by either side, it appears they have more or less decided to go ahead with the deal," industry sources said.

Nicco Uco Alliance Credit was formed last December out of the merger of erstwhile Nicco Uco Financial Services Ltd and Alliance Credit & Finance Ltd, promoted by incumbent Nicco Corp co-chairman Abhijit Sen.

After the merger, Nicco Corp holds a stake of around 30 to 35 per cent, Uco Bank and Hambros Bank hold 6-7 per cent each, Washington-based International Finance Corp holds around 10 per cent and the rest is with the public.

In 1998-99, Nicco Uco Alliance Credit registered a turnover of Rs 56.39 crore, a growth of 18 per cent over the previous year. Profit before tax increased from Rs 2.68 crore in 1997-98 to Rs 4 crore. Profit after tax also increased from Rs 2.44 crore to Rs 3.66 crore.

Top management sources of Nicco Uco confirmed the move and said they were getting due diligence done on Sanmar's proposal. "Yes, we are considering the proposal but nothing has been finalised. However, it must be noted that this is one of the many proposals we are considering to expand our activities," sources told The Financial Express.

Industry sources said if Nicco Uco goes ahead with the deal then Sanmar Overseas Finance, where Indian Overseas Bank holds a 15 per cent, will be merged into the company.

"KPMG and Lodha & Co are making a Swot analysis of the proposal. Once it is over and accepted by Nicco Uco then, Khaitan & Co, a city-based solicitor firm will work out the details of the merger plan," sources said.

Discussions with the Sanmar group is a calculated move of Nicco Uco Alliance Credit, an ISO 9001 company. The company is trying to expand its activities in the south. It has planned to open a service centre for its depositors in Chennai.

The company has a deposit base of around Rs 100 crore consisting of around 80,000 depositors. In the next three years it wants to reach a turnover of Rs 100 crore. Recently, the chairman of Nicco Uco said one third of this business will be generated from the south.

Nicco Uco has recently started financing white goods purchases of public sector employees like Assam State Electricity Board and Nalco. In these cases the employer company is standing as a guarantee.

Apart from this, Nicco Uco is also financing large corporate houses and some international transaction relating to import and export. It is also into the factoring business.