Case Study/Research Paper of Mergers Icici and Icici Bank

- case think - spinal fusion DEAl - icici with icici imprecate union For Mergers and Acquisitions in the coastING SECTOR AAKANKSHA KUMAR * EXECUTIVE heavyset ICICI- Industrial Credit and Investment grass of India exceptional (ICICI) was founded by the World posit, the regime of India and representatives of private industry on 5 January, 1995. The objective was to encourage and assist industrial development and enthronement funds in India. every steer the years, ICICI has evolved into a diversified monetary institution.ICICIs principal business activities include objectify pay, infrastructure finance, corporate finance, securitization, leasing, deferred credit, consultancy service and tutelary service. It has set up specialised subsidiaries in the areas of commercial jargoning, investment banking, non banking finance, investor servicing broking, endanger uppercase finance and state take aim infrastructure financing from where the separate draws its strength. ICIC I trust- ICICI trust was set up by the ICICI assembly as a commercial banking go on 5 January, 1994 and received its banking attest from the rbi on 17 May, 1994.The setoff branch of ICICI desire was started in Chennai in June 1994 and by 31 March, 1999 and before the coalition it had 64 branches across the country. From the beginning the branches were amply computerised with state-of-the-art engineering science and systems and networked by VSAT engineering. It offered a wide spectrum of domestic and international banking work to facilitate trade, investment, cross-border business and treasury and distant exchange op erate. This is in addition to a whole range of deposit services offered to individuals and corporate bodies.ICICI desires eternity was the firstly Internet banking service in the country. Currently the cant has around 350000 customers. * sound-nigh THE coalition After consideproportionn of dissimilar corporate structuring alternatives in the contex t of the rising competitive scenario in the Indian banking Industry, and the choke towards customary proposition banking, the managements of ICICI and ICICI lingo decided to go for the nuclear fusion of ICICI with ICICI Bank which would be unspoiled for both entities and would create the optimal profound structure for the ICICI groups universal banking strategy.In October 2001, the Board of Directors of ICICI and ICICI Bank approved the amalgamation of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI in-person Financial Services trammel and ICICI nifty Services Limited, with ICICI Bank. The optical fusion was approved by pieceholders of ICICI and ICICI Bank in January 2002,by the High dally of Gujarat at Ahmadabad in March 2002, and by the High act of Judicature at Mumbai and the bear Bank of India in April 2002.ICICI Limited merged with ICICI Bank Limited on 30 March 2002, with the shift proportion of 2 ICICI Shares for 1 division of ICICI Bank Limited. With this union, the mho largest Bank in India was born. run batted in had given approval for the reverse conjugation of ICICI Ltd. with its banking arm ICICI Bank. ICICI Bank with Rs. 1 hundred thousand crore asset base bank is help and(prenominal) to State Bank of India, which is s crocked up over Rs. 3 hundred thousand crore in size. RBI also cleared the coalition of two ICICI subsidiaries. FOR ICICI THE MERGER MEANT- 1. Increasing the hasten in financing long-term projections 2.Obtaining entree to cheaper funds for lending 3. Increasing its accumulation to investors for raising metropolis base inevitable to write off bad loans 4. Competing more than than than effectively in the retail finance commercialize dominated by banks FOR ICICI cuss THE MERGER MEANT- 1. Expanding geographically 2. Utilising large bully base of ICICI 3. Gaining brand candor from the immobile brand of ICICI 4. Deriving benefits from ICICIs wellhead established corporate r elationship * CONDITIONS fixed DOWN BY THE RBI out front GIVING THE APPROVAL FOR THE MERGER (i) residence with stockpile Requirements The ICICI Bank Ltd. ould comply with the detonator prevail Requirements (under instalment 42 of the mental reservation Bank of India Act, 1934) and Statutory Liquidity Reserve Requirements (under arm 24 of the Banking enactment Act, 1949) as applicable to banks on the net read and time liabilities of the bank, inclusive of the liabilities pertaining to ICICI Ltd. from the date of fusion (ii) Appointment of Directors The bank should ensure conformance with Section 20 of the Banking commandment Act, 1949, concerning granting of loans to the companies in which directors of such companies are also directors. iii) Conditions relating to switch Ratio As the proposed union is surrounded by a banking company and a fiscal institution, all matters connected with shareholding including the tack ratio, leave behind be governed by the provisio ns of Companies Act, 1956, as provided (iv) Subsidiaries While taking over the subsidiaries of ICICI Ltd. after(prenominal)ward union, the bank should ensure that the activities of the subsidiaries comply with the requirements of tol seasonble activities to be undertaken by a bank under Section 6 of the Banking Regulation Act, 1949 and Section 19 (1) of the Act ibidem v) Preference Share hood Section 12 of the Banking Regulation Act, 1949 requires that capital of a banking company shall consist of ordinary shares only (except preference share issued before 1944). * BENEFITS OF MERGER Through the merger, ICICI Bank became Indias maiden universal bank that is, one-stop shop monetary services in India and acquired large food market share of retail banking and offered a exonerate range of banking products. 1. Optimum utilisation of gay capital 2. modify ability to further smorgasbord asset portfolio and business revenues 3. Reduced be of funds 4. Availability of more squan der money due to active confederacy in the payment system 5. change fund raising due to nettle to retail funds 6. Leveraged the ICICIs capital and client base in monetary value of increase in fee income 7. amend profitability by leveraging technology and low cost structure 8. memory inlet to ICICI groups talent kitten and thereby development of gracious imaginativeness at lower cost. * PROBLEMS FACED . The dissemble of bankruptcy to obtain government and wise(prenominal) approvals of the merger as per planned. 2. The run a pretend of exposure of tribulation of the High Courts of Mumbai and Gujarat to approve the scheme of Amalgamation. 3. The risk of business which may not be integrated as smooth as planned. 4. Merger of ICICI Ltd and ICICI bank making it more difficult to maintain relationships with clients, employees and suppliers. 5. The risk of new and changing regulation and unfavourable governmental support or early(a) developments in Indian and internatio nal markets. CONCLUSION The swap ratio was based on the valuations and recommendations of investment bankers. The merger ratio was set as two ICICI shares for every ICICI Bank share that is one lawfulness share of ICICI Bank was swapped for two equity shares of ICICI. The merger brought working(a) strategies both in basis of economies of weighing machine and scope. Economies of measure achieved by means of increase in business volumes at lower operating(a)(a) costs and deployment of latest technology. Economies of scope were achieved through enlarged product range.FINANCIAL PERFORMANCE OF ICICI AND ICICI money box AFTER MERGER ICICI Ltd Profit to equity holders increased by 16% 21% increase in Indian generally accepted accounting principles consolidated acquire ICICI BANK there was always an increase seen in the lettuce after the merger The merger took ordain in 2002 and its 2013 now the merger has successfull executed 11 years which shows that the merger created a stron g entity, which leave delimitate banking in the highly competitive era of globalisation and liberalisation. BIBLIOGRAPHY * www. google. com * www. economictimes. comCase Study/ look into Paper of Mergers Icici and Icici Bank- case postulate - MERGER DEAl - icici with icici bank merger For Mergers and Acquisitions in the BANKING SECTOR AAKANKSHA KUMAR * EXECUTIVE succinct ICICI- Industrial Credit and Investment flowerpot of India Limited (ICICI) was founded by the World Bank, the semipolitical relation of India and representatives of private industry on 5 January, 1995. The objective was to encourage and assist industrial development and investment in India. all over the 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 and custodial services. It has set up specialised subsidiaries in the areas of commercial banking, investment banking, non banking finance, investor servicing broking, venture capital finance and state aim infrastructure financing from where the group draws its strength. ICICI BANK- ICICI Bank was set up by the ICICI group as a commercial banking supply on 5 January, 1994 and received its banking license from the RBI on 17 May, 1994.The first branch of ICICI Bank was started in Chennai in June 1994 and by 31 March, 1999 and before the merger it had 64 branches across the country. From the beginning the branches were fully computerised with state-of-the-art technology and systems and networked through VSAT technology. It offered a wide spectrum of domestic and international banking services to facilitate trade, investment, cross-border business and treasury and inappropriate exchange services. This is in addition to a whole range of deposit services offered to individuals and corporate bodies.ICICI Banks timeless existence was the first Internet banking service in the country. Currently the Bank has around 350000 customers. * intimately THE MERGER After consideration of non-homogeneous corporate structuring alternatives in the context of the acclivitous competitive scenario in the Indian banking Industry, and the incite towards universal banking, the managements of ICICI and ICICI Bank decided to go for the merger of ICICI with ICICI Bank which would be full for both entities and would create the optimal legal structure for the ICICI groups universal banking strategy.In October 2001, the Board of Directors of ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI face-to-face Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January 2002,by the High Court of Gujarat at Ahmadabad in March 2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002.ICICI Limited merged with ICICI Bank Limited on 30 March 2002, with the swap ratio of 2 ICICI Shares for 1 share of ICICI Bank Limited. With this merger, the second largest Bank in India was born. RBI had given approval for the reverse merger of ICICI Ltd. with its banking arm ICICI Bank. ICICI Bank with Rs. 1 lakh crore asset base bank is second only to State Bank of India, which is well over Rs. 3 lakh crore in size. RBI also cleared the merger of two ICICI subsidiaries. FOR ICICI THE MERGER MEANT- 1. Increasing the pep pill in financing long-term projects 2.Obtaining entree to cheaper funds for lending 3. Increasing its good luck charm to investors for raising capital base ask to write off bad loans 4. Competing more effectively in the retail finance market dominated by banks FOR ICICI BANK THE MERGER MEANT- 1. Expanding geographically 2. Utilising large capital base of ICICI 3. Gaining brand equity from the strong brand of ICICI 4. Deriving benefits from ICICIs we ll established corporate relationship * CONDITIONS located DOWN BY THE RBI in the first place GIVING THE APPROVAL FOR THE MERGER (i) form with Reserve Requirements The ICICI Bank Ltd. ould comply with the immediate payment Reserve Requirements (under Section 42 of the Reserve Bank of India Act, 1934) and Statutory Liquidity Reserve Requirements (under Section 24 of the Banking Regulation Act, 1949) as applicable to banks on the net admit and time liabilities of the bank, inclusive of the liabilities pertaining to ICICI Ltd. from the date of merger (ii) Appointment of Directors The bank should ensure respectfulness with Section 20 of the Banking Regulation Act, 1949, concerning granting of loans to the companies in which directors of such companies are also directors. iii) Conditions relating to sell Ratio As the proposed merger is amongst a banking company and a financial institution, all matters connected with shareholding including the swap ratio, will be governed by the p rovisions of Companies Act, 1956, as provided (iv) Subsidiaries While taking over the subsidiaries of ICICI Ltd. after merger, the bank should ensure that the activities of the subsidiaries comply with the requirements of permissible activities to be undertaken by a bank under Section 6 of the Banking Regulation Act, 1949 and Section 19 (1) of the Act ibid. v) Preference Share Capital Section 12 of the Banking Regulation Act, 1949 requires that capital of a banking company shall consist of ordinary shares only (except preference share issued before 1944). * BENEFITS OF MERGER Through the merger, ICICI Bank became Indias initiatory universal bank that is, one-stop shop financial services in India and acquired large market share of retail banking and offered a complete range of banking products. 1. Optimum utilisation of human capital 2.Improved ability to further novelty asset portfolio and business revenues 3. Reduced costs of funds 4. Availability of more ice-cream float money d ue to active affaire in the payment system 5. modify fund raising due to access to retail funds 6. Leveraged the ICICIs capital and client base in terms of increase in fee income 7. Improved profitability by leveraging technology and low cost structure 8. gateway to ICICI groups talent syndicate and thereby development of human imagery at lower costs. * PROBLEMS FACED . The risk of failure to obtain government and other approvals of the merger as per planned. 2. The risk of failure of the High Courts of Mumbai and Gujarat to approve the scheme of Amalgamation. 3. The risk of business which may not be integrated as smooth as planned. 4. Merger of ICICI Ltd and ICICI bank making it more difficult to maintain relationships with clients, employees and suppliers. 5. The risk of new and changing regulation and unfavourable political support or other developments in Indian and international markets. CONCLUSION The swap ratio was based on the valuations and recommendations of investmen t bankers. The merger ratio was set as two ICICI shares for every ICICI Bank share that is one equity share of ICICI Bank was swapped for two equity shares of ICICI. The merger brought in operation(p) strategies both in terms of economies of scale and scope. Economies of scale achieved through increase in business volumes at lower operating costs and deployment of latest technology. Economies of scope were achieved through enlarged product range.FINANCIAL PERFORMANCE OF ICICI AND ICICI BANK AFTER MERGER ICICI Ltd Profit to equity holders increased by 16% 21% increase in Indian generally accepted accounting principles consolidated profits ICICI BANK in that location was always an increase seen in the profits after the merger The merger took place in 2002 and its 2013 now the merger has successfully completed 11 years which shows that the merger created a strong entity, which will delimit banking in the highly competitive era of globalisation and liberalisation. BIBLIOGRAPHY * www. google. com * www. economictimes. com