Case Study/Research Paper of Mergers Icici and Icici Bank

&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212- case study &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212- MERGER DEAl &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212- icici with icici bank amalgamation For Mergers and Acquisitions in the BANKING SECTOR AAKANKSHA KUMAR * EXECUTIVE SUMMARY ICICI- Industrial Credit and enthronization Corpo symmetryn of India trammel (ICICI) was founded by the World commit, the Government of India and representatives of private pains on 5 January, 1995. The objective was to encourage and assist industrial organic evolution and coronation in India. Over the age, ICICI has evolved into a diversified financial institution.ICICIs principal occupancy activities include project pay, theme pay, corporate finance, securitization, leasing, deferred credit, consultancy go and custodial service. It has set up specialised subsidiaries in the areas of commercial banking, enthronisation banking, non banking finance, investor servicing broking, venture chapiter finance and state level substructure financing from where the convocation draws its strength. ICICI BANK- ICICI edge was set up by the ICICI pigeonholing as a commercial banking outfit on 5 January, 1994 and authentic its banking license from the rbi on 17 May, 1994.The for the frontmost time branch of ICICI affirm was started in Chennai in June 1994 and by 31 March, 1999 and before the jointure 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 finished VSAT technology. It offered a wide spectrum of domestic and international banking services to facilitate trade, investment, cross-border transmission line and treasury and foreign exchange services. This is in addition to a whole arena of deposit services offered to individuals and corporate bodies.ICICI c usss Infinity was the first Internet banking service in the country. Currently the posit has around 350000 customers. * about THE MERGER After conside ration of various corporate structuring alternatives in the scene of the emerging competitive scenario in the Indian banking Industry, and the move towards common keister banking, the managements of ICICI and ICICI vernacular decided to go for the unification of ICICI with ICICI depone which would be beneficial for some(prenominal) entities and would create the optimal legal structure for the ICICI groups habitual banking strategy.In October 2001, the Board of Directors of ICICI and ICICI bevel approved the union of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services control and ICICI Capital Services Limited, with ICICI margin. The merger was approved by assignholders of ICICI and ICICI assert in January 2002,by the High Court of Gujarat at Ahmada grown 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 deal of ICICI Bank Limited. With this merger, the second largest Bank in India was born. rbi had give approval for the reverse merger of ICICI Ltd. with its banking arm ICICI Bank. ICICI Bank with Rs. 1 lakh crore asset junior-grade bank is second only to State Bank of India, which is comfortably over Rs. 3 lakh crore in size. RBI in any case cleared the merger of two ICICI subsidiaries. FOR ICICI THE MERGER MEANT- 1. Increasing the speed in financing long-term projects 2.Obtaining access to cheaper funds for lending 3. Increasing its orison to investors for raising ceiling posterior needed to write off uncollectible loans 4. Competing more effectively in the retail finance grocery reign by banks FOR ICICI BANK THE MERGER MEANT- 1. Expanding geographically 2. Utilising large capita l base of ICICI 3. Gaining brand equity from the strong brand of ICICI 4. Deriving benefits from ICICIs healthy established corporate relationship * CONDITIONS LAID DOWN BY THE RBI BEFORE GIVING THE APPROVAL FOR THE MERGER (i) Compliance with Reserve Requirements The ICICI Bank Ltd. ould comply with the Cash Reserve Requirements ( down the stairs Section 42 of the Reserve Bank of India Act, 1934) and Statutory Liquidity Reserve Requirements ( be downhearted Section 24 of the Banking Regulation Act, 1949) as applicable to banks on the net demand and time liabilities of the bank, inclusive of the liabilities pertaining to ICICI Ltd. from the take in of merger (ii) Appointment of Directors The bank should hold compliance with Section 20 of the Banking Regulation Act, 1949, concerning granting of loans to the companies in which directors of such companies are overly directors. iii) Conditions relating to Swap balance As the proposed merger is between a banking company and a financi al institution, all matters connected with divideholding including the swap ratio, will be governed by the pabulum of Companies Act, 1956, as provided (iv) Subsidiaries While taking over the subsidiaries of ICICI Ltd. after merger, the bank should operate 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 ibidem v) Preference Share Capital Section 12 of the Banking Regulation Act, 1949 requires that capital of a banking company shall consist of ordinary grants only (except preference share issued before 1944). * BENEFITS OF MERGER Through the merger, ICICI Bank became Indias 1st ecumenical bank that is, one-stop shop financial services in India and acquired large grocery share of retail banking and offered a complete figure of speech of banking products. 1. Optimum example of human capital 2.Improved ability to further dive rsity asset portfolio and personal line of credit revenues 3. Reduced costs of funds 4. Availability of more float specie due to active participation in the payment system 5. diversify 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 menial cost structure 8. Access to ICICI groups talent pussycat and thereby suppuration of human resource at lower costs. * PROBLEMS confront . The insecurity of failure to obtain government and other approvals of the merger as per planned. 2. The hazard of failure of the High Courts of Mumbai and Gujarat to approve the scheme of Amalgamation. 3. The risk of concern 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 suppor t or other developments in Indian and international 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 equity share of ICICI Bank was swapped for two equity shares of ICICI. The merger brought operational strategies twain in terms of economies of scale and scope. Economies of scale achieved by means of increase in line of reasoning 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 increase to equity holders increased by 16% 21% increase in Indian GAAP consoli appointeed profits ICICI BANK There was ever so an increase seen in the profits after the merger The merger took tooshie in 2002 and its 2013 now the merger has successfully completed 11 years which shows that the merger created a stro ng entity, which will redefine banking in the extremely competitive era of globalisation and liberalisation. BIBLIOGRAPHY * www. google. com * www. economictimes. comCase Study/Research motif of Mergers Icici and Icici Bank&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212- case study &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212- MERGER DEAl &8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212&8212- icici with icici bank merger For Mergers and Acquisitions in the BANKING SECTOR AAKANKSHA KUMAR * EXECUTIVE SUMMARY ICICI- Industrial Credit and coronation Corporation of India Limited (ICICI) was founded by the World Bank, the Government of India and representatives of private sedulousness on 5 January, 1995. The objective was to encourage and assist industrial development and investment in India. Over the years, ICICI has evolved into a diversified financial institution.ICICIs principal channe l 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 level infrastructure financing from where the group draws its strength. ICICI BANK- ICICI Bank was set up by the ICICI group as a commercial banking outfit on 5 January, 1994 and authoritative 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-borde r business and treasury and foreign exchange services. This is in addition to a whole range of deposit services offered to individuals and corporate bodies.ICICI Banks Infinity was the first Internet banking service in the country. Currently the Bank has around 350000 customers. * approximately THE MERGER After consideration of various corporate structuring alternatives in the scene of the emerging competitive scenario in the Indian banking Industry, and the move towards global banking, the managements of ICICI and ICICI Bank decided to go for the merger of ICICI with ICICI Bank which would be beneficial 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 Personal 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 effrontery 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 speed in financing long-term projects 2.Obtaining access to cheaper funds for lending 3. Increasing its approach to investors for raising capital base needed to write off bad loans 4. Competing more effectively in the retail finance market prevail by banks FOR ICI CI 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 well established corporate relationship * CONDITIONS LAID DOWN BY THE RBI BEFORE GIVING THE APPROVAL FOR THE MERGER (i) Compliance with Reserve Requirements The ICICI Bank Ltd. ould comply with the Cash 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 demand 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 compliance 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 Swap proportionality As the pr oposed merger is between a banking company and a financial institution, all matters connected with shareholding including the swap ratio, will be governed by the pabulum 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 1st 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 practice session of human capital 2.Improved ability to further diversity asset portfolio and business revenues 3. Reduced costs of funds 4. Availability of more float gold due to active participation in the payment system 5. alter 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. Access to ICICI groups talent family and thereby development of human resource at lower costs. * PROBLEMS confront . 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 su pport or other developments in Indian and international 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 equity share of ICICI Bank was swapped for two equity shares of ICICI. The merger brought operational 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 get to equity holders increased by 16% 21% increase in Indian GAAP consolidated profits ICICI BANK There was perpetually 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 r edefine banking in the highly competitive era of globalisation and liberalisation. BIBLIOGRAPHY * www. google. com * www. economictimes. com