Chapter 6: Mergers in the Banking SectorICICI Bank INTRODUCTION I C I C I B a n k (formerly Industrial Credit and I n v e s t m e n t Corporation of India) is India 's

largest private bank. ICICI Bank has totalassets of about Rs.20.05bn (end-Mar 2005), a network of over 550 branchesand offices, and about 1900 atms . ICICI Bank offers a wide range of bankingproducts and financial services to corporate and retail customers through av a r i e t y o f d e l i v e r y c h a n n e l s a n d t h r o u g h i t s s p e c i a l i z e d subsidiaries andaffiliates in the areas of investment banking, life a n d n o n - l i f e i n s u r a n c e , venture capital and asset management. ICICI Bank's equity shares are listedin India on stock exchanges at Kolkata and Vadodara , the Stock Exchange, Mumbai a n d t h e National Stock Exchange of India Limited a n d i t s adrs are listed on the New York Stock Exchange (NYSE). During the year2 0 0 5 I C I C I bank was involved as a defendant in cases of alleged c r i m i n a l practices in its debt collection operations and alleged fraudulent tactics tosell its products.

The industrial Credit and Investment Corporation of India Limited now known asI C I C I Ltd. Was founded b the World bank, the Government of India andrepresentatives of private industry on January 5, 1 9 5 5 . T h e o b j e c t i v e w a s t o encourage and assist industrial d e v e l o p m e n t a n d i n v e s t m e n t i n I n d i a . O v e r t h e years, ICICI has evolved into a diversified financial institution. ICICIs principal business activities include: Project Finance Infrastructure Finance Corporate Finance Securitization Leasing Deferred Credit Consultancy services Custodial services The ICICI Groups draws its strength from the core competencies of itsindividual companies. Today, top Indian Corporate look towers ICICI as a business partner for providing solutions to their varied financial requirements. The Group a l s o offers a gamut of personal finance solutions to individuals. To l e a d t h e financial services into the new millennium, the Group is now truly positioned as aVirtual Universal Bank. The liberalization of the Indian economy in the 1990soffered ICICI an opportunity to provide a wide range of financial services. For regulatory and strategic reasons, ICICI set up specialized subsidiaries in the areaso f c o m m e r c i a l b a n k i n g , i n v e s t m e n t b a n k i n g , n o n - b a n k i n g finance, investor s e r v i c i n g brooking, venture capital f i n a n c i n g a n d s t a t e l e v e l i n f r a s t r u c t u r e financing.ICICI plans to focus on its retail finance business and expect the samet o c o n t r i b u t e u p t o 1 5 - 2 0 % o f i t s t u r n o v e r i n t h e n e x t f i v e y e a r s . I t i s t r y i n g t o change the

perception that it is a corporate oriented bank. The bank hard selling itsimage as a retail segment bank has for the first time come up with an advertisementthat addresses its products at the individual. This is to drive home the point that the b a n k h a s product and services catering to all individuals. For this purpose t h e network of ICICI Bank shall come into use. The parent plants to sell its productsand also raise retail funds through the banking subsidiary. THE ICICI GROUP COMPRISES OF: ICICI Bank Limited, ICICI Securities and Finance Company Limited (ICICI Securities), ICICI Credit Corporation Limited ( ICICI Credit), ICICI Investors Services Limited (ICICI Services), ICICI Venture Funds Management Limited (ICICI Venture), ICICI international Limited, ICICI -KINFRA Limited (I-KIN), Mr. K.V. Kamath, CEO of ICICI Limited, has recently voiced the intentionsof ICICI Limited towards banking and ICICI Bank. ICICI Limited is endeavoringto forge a closer relationship with ICICI bank. Mr. K V Kamath recently quoted ina leading daily Banking is dead. Universal banking is in offering with a whole range of financial products and services. The basic idea is for banks to do businessalong with banking. Bankers will have to emerge as businessmen.ICICI Bank is a focused banking company coping with the changing times of the banking industry. So it can be a lucrative target for other player in the sameline of operations. However, when merged with ICICI Limited the attraction is reduced manifold considering the magnitude of operations of the ICICI limited.O f c o u r s e , o n e w o u l d s t i l l n e e d a b a n k t o o p e n l e t t e r s o f c r e d i t , o f f e r guarantees, handle documentation, and maintain current account facilities etc. So banks will not superfluous. But nobody needs so many of them any more.Secondly, besides credit, a customer may also want from a bank efficient cash management, advisory services and market research on his product. Thus theimportance of fee based is increasing in comparison with the fund-based income.The pre--merger status of ICICI Bank is as follows: it had liabilities of Rs.12,073crore, equity market capitalization of Rs.2,466 crore and equity volatility of 0.748.Working through options reasoning, we find that this share price and volatility areconsistent with assets worth Rs.13,249 crore with volatility 0.15. Thus, ICICI bank had assets which are 9.7% ahead of liabilities, which is roughly consistent with thespirit of the Basle Accord, and has leverage of 5.37 times History of ICICI Bank The World bank the Government of India and representatives of Indian industryform ICICI Limited as a development finance institution to provide medium-termand long-term project financing to Indian businesses in1955.

1994 ICICI establishes ICICI Bank as a subsidiary. 1999 ICICI becomes the first Indian company and the first bank or financial institution from non-Japan Asia to list on the NYSE 2001 ICICI acquired Bank of Madura (est. 1943). Bank of Madura w a s a Chettiar bank, and had acquired Chettinad Mercantile Bank (est. 1933) and IllanjiBank (established 1904 ) in the 1960s. 2002 The Boards of Directors of ICICI and ICICI Bank approve them e r g e r o f I C I C I , ICICI Personal Financial Services Limited and ICICI Capital Services Limited with ICICI Bank. After receiving allnecessary regulatory approvals, ICICI integrates the group's financing and banking operations, both wholesale and retail, into a single.