A PROJECT REPORT ON

“MERGER AND CONSOLIDATION OF ICICI LTD. AND ICICI BANK”
CONTENTS Chapter No. 1 2 3 4 5 6 7 8 9 Objective General Introduction Merger Procedure, Process & Details Research Methodology Scope of the Study Financial Reports Findings Conclusions Bibliography Title Page No. 2 3 5 56 58 59 62 63 64

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OBJECTIVE OF THE STUDY
1. To study about merger and consolidation of bank.
2. To know about services provided by the ICICI bank limited after merging.

3. Analysis of impact of merger on ICICI bank.

4. Study about working of the bank after merge.

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INTRODUCTION
We have been learning about the companies coming together to from another company and companies taking over the existing companies to expand their business. With recession taking toll of many Indian businesses and the feeling of insecurity surging over our businessmen, it is not surprising when we hear about the immense numbers of corporate restructurings taking place, especially in the last couple of years. Several companies have been taken over and several have undergone internal restructuring, whereas certain companies in the same field of business have found it beneficial to merge together into one company. In this context, it would be essential for us to understand what corporate restructuring and mergers and acquisitions are all about. All our daily newspapers are filled with cases of mergers, acquisitions, spin- offs, tender offers, & other forms of corporate restructuring. Thus important issues both for business decision and public policy formulation have been raised. No firm is regarded safe from a takeover possibility. On the more positive side Mergers & Acquisition’s may be critical for the healthy expansion and growth of the firm. Successful entry into new product and geographical markets may require Mergers & Acquisition’s at some stage in the firm's development. Successful competition in international markets may depend on capabilities obtained in a timely and efficient fashion through Mergers & Acquisition's. Many have argued that mergers increase value and efficiency and move resources to their highest and best uses, thereby increasing shareholder value. Opt for a merger or not is a complex affair, especially in terms of the technicalities involved. We have discussed almost all factors that the management may have to look into before going for merger. Considerable amount of brainstorming would be required by the managements to
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4 . Decision has to be taken after having discussed the pros & cons of the proposed merger & the impact of the same on the business. addition to shareholders' value. administrative costs benefits.g. A due diligence report would clearly identify the status of the company in respect of the financial position along with the net worth and pending legal matters and details about various contingent liabilities. tax implications including stamp duty and last but not the least also on the employees of the Transferor or Transferee Company. E.reach a conclusion.

MERGER & CONSOLIDATION: OVERVIEW Merger: A contractual and statutory process by which one corporation (the surviving corporation) acquires all of the assets and liabilities of another corporation (the merged corporation). causing the merged corporation to become defunct. and The successor corporation acquires all of the assets and liabilities of the original (now defunct) corporations. As part of the merger process. (2) (3) The original corporations cease to exist and to do business. 5 . the shareholders of the merged corporation receive (1) (2) Payment for their shares in the merged corporation and/or Shares in the surviving corporation. Consolidation: A contractual and statutory process by which (1) Two or more corporations join to become a completely new corporation (the successor corporation).

thereafter. 6 . (2) The shareholders of each (original) corporation involved in the proposed transaction must. (3) The approved plan must be filed with the appropriate state officials. approve the merger or consolidation plan by vote at a called or scheduled shareholders’ meeting. a certificate of merger to the surviving corporation or a certificate of consolidation to the successor corporation. the state will issue. However. each of which sets forth its own procedural requirements. and (4) Once all state-law formalities have been satisfied.MERGER & CONSOLIDATION: PROCEDURE Any merger or consolidation is governed by the laws of one (or more) of the states. as appropriate. in general: (1) The boards of directors of each (original) corporation involved in the proposed transaction must approve the merger or consolidation plan.

it will go forward. any “extraordinary” matter – such as a merger or consolidation – must be approved by the corporation’s shareholders. are generally left to the corporation’s officers and directors. Instead. and the shareholders will be compensated as previously discussed. he or she may exercise appraisal rights.Short-Form Merger: A merger between a parent and a subsidiary (at least 90% owned by the parent) which can be accomplished without shareholder approval. and even the policies governing its ongoing operations. 7 . However. If the necessary majority of the corporation’s shareholders approve a merger or consolidation. MERGER & CONSOLIDATION: SHAREHOLDERS’ RIGHTS While the day-to-day operations of a corporation. no shareholder who votes against the transaction is required to accept shares in the surviving or successor corporation.

ASSET PURCHASE When a corporation acquires all or substantially all of the assets of another corporation. 8 . and (2) To be paid the fair market value of his shares by the pre-merger or pre-consolidation corporation.Appraisal Right: The right. the purchasing (or acquiring) corporation simply extends its ownership and control over the additional assets. created by state law. The acquiring corporation does not need shareholder approval unless the purchase is to be paid for with stock and the acquiring corporation must issue additional shares to make the purchase. in which case its shareholders must approve the additional shares. by direct purchase. of a dissenting shareholder who objects to an extraordinary transaction (such as a merger or consolidation): (1) To have his shares of the pre-merger or pre- consolidation corporation appraised.

of the other corporation. However. enabling the acquiring corporation to exercise control over the target corporation. The tender offer is publicly advertised. the acquiring corporation only purchases the assets. there are exceptions when: (1) The acquiring corporation impliedly or expressly assumes the seller’s liabilities. A stock purchase is generally facilitated by a tender offer to the target corporation’s shareholders. (2) (3) The sale is a de facto merger or consolidation. 9 . available to all shareholders. or (4) The sale is fraudulently executed in an effort to avoid liability. STOCK PURCHASE Stock Purchase: The purchase of a sufficient number of voting shares of a corporation’s stock. not the liabilities. and offers to pay a higher-than-market price for shares of the target corporation. The acquiring corporation continues the seller’s business andretains the same personnel.Generally.

A tender offer may be conditioned on receiving a specified number of outstanding shares in the target corporation by a specified date. Cash Tender Offer: An offer to pay cash in exchange for shares of the target corporation. The terms and duration of. 10 . a tender offer are strictly regulated by federal securities laws. most states impose additional regulations on tender offers. and the circumstances underlying.Exchange Tender Offer: An offer to give shares in the acquiring corporation in exchange for shares in the target corporation. In addition.

.TAKEOVER DEFENSES Takeover Defenses include various measures included in a corporation’s articles and/or by-laws that automatically take effect in the event of a proxy fight or unfriendly takeover attempt in order to make the corporation a substantially less attractive target for the purchaser (e. Shareholder approval of a dissolution proposal submitted by the directors. An act by the authorized officer of the state of incorporation.g.BHOPAL . “golden parachutes.g.” “poison pills”).” “white knights”). which may occur by (1) (2) (3) (4) (5) Unanimous action by all shareholders. as well as conscious efforts of management in response to a particular situation (e. Expiration of the time period set forth in the certificate of incorporation.  Liquidation: The process by which corporate assets are converted into cash and distributed among creditors and shareholders according to specific rules of preference. “crown jewels. GGITM. TERMINATION  Dissolution: The formal disbanding of a corporation.11 - . or Court order..

savings in transportation costs. Faster growth may be had through product improvement and competitive position. etc.BHOPAL . overhead costs in buying department. To standardize product specifications. improvement of quality of product.. 2.Purpose of Mergers & Consolidation The purpose for an offer or company for acquiring another company shall be reflected in the corporate objectives. The basic purpose of merger or business combination is to achieve faster growth of the corporate business. Expanding 3. To achieve economies of scale by amalgamating production facilities through more intensive utilization of plant and resources. 2. To obtain improved production technology and know-how from the offered Company GGITM.12 - . To share the benefits of suppliers economies by standardizing the materials (2) Revamping production facilities: 1. 4. To safeguard the source of supplies of raw materials or intermediary Product. To obtain economies of purchase in the form of discount. Market and aiming at consumers’ satisfaction through strengthening after sale Services. 3. Other possible purposes for acquisition are short listed below: - (1) Procurement of supplies: 1. It has to decide the specific objectives to be achieved through acquisition.

Strengthening retain outlets and sale the goods to rationalize distribution.13 - . 5. To improve liquidity and have direct access to cash resource. 6. To improve its own image and attract superior managerial talents to manage its affairs. 2. (3) Market expansion and strategy: 1.BHOPAL . 3. 4. 4. improve quality and produce competitive products to retain and improve market share. To reduce cost. To enhance gearing capacity. 2. To eliminate competition and protect existing market. To obtain a new market outlets in possession of the offered. 3. To offer better satisfaction to consumers or users of the product. GGITM. To dispose of surplus and outdated assets for cash out of combined enterprise. 5. Strategic control of patents and copyrights (4) Financial strength: 1. To avail tax benefits. 2. To obtain new product for diversification or substitution of existing products and to enhance the product range. borrow on better strength and the greater assets backing. To improve EPS (Earning per Share) (5) General gains: 1. To reduce advertising cost and improve public image of the offered company.5.

BHOPAL . product expansion. (7) Strategic purpose: The Acquirer Company view the merger to achieve strategic objectives through alternative type of combinations which may be horizontal.(6) Own developmental plans: The purpose of acquisition is backed by the offered company’s own developmental plans. Thus. market extensional or other specified unrelated objectives depending upon the corporate strategies. valuation. A company thinks in terms of acquiring the other company only when it has arrived at its own development plan to expand its operation having examined its own internal strength where it might not have any problem of taxation. but might feel resource constraints with limitations of funds and lack of skill managerial personnel’s. etc.14 - . It has to aim at suitable combination where it could have opportunities to supplement its funds by issuance of securities. various types of combinations distinct with each other in nature are adopted to pursue this objective like vertical or horizontal combination. secure additional financial facilities eliminate competition and strengthen its market position. vertical. 8) Corporate friendliness: Although it is rare but it is true that business houses exhibit degrees of cooperative spirit despite competitiveness in providing rescues to each other from hostile takeovers and cultivate situations of collaborations sharing GGITM. accounting.

Types of Merger Merger or acquisition depends upon the purpose of the offeror company it wants to achieve. horizontal. This gives birth to conglomerate combinations. (1) Vertical combination: A company would like to takeover another company or seek its merger with that company to expand espousing backward integration to assimilate the resources of supply and forward integration towards market outlets. (9) Desired level of integration: Mergers and acquisition are pursued to obtain the desired level of integration between the two combining business houses.15 - . The purpose and the requirements of the offered company go a long way in selecting a suitable partner for merger or acquisition in business combinations. GGITM. combinations could be vertical. The acquiring company through merger of another unit attempts on reduction of inventories of raw material and finished goods. In other words. in vertical combinations.goodwill of each other to achieve performance heights through business combinations. the merging undertaking would be either a supplier or a buyer using its product as intermediary material for final production. implements its production plans as per the objectives and economizes on working capital investments. circular and conglomeratic as precisely described below with reference to the purpose in view of the offeror company. Based on the offerors’ objectives profile. Such integration could be operational or financial.BHOPAL .

The following main benefits accrue from the vertical combination to the acquirer company i.e. It gains a strong position because of imperfect market of the intermediary products. increase in market segments and exercise better control on market.BHOPAL . (3) Circular combination: Companies producing distinct products seek amalgamation to share common distribution and research facilities to obtain economies by elimination of cost on duplication and promoting market enlargement. The basic purpose of such amalgamations remains utilization of financial resources and enlarges debt capacity through re- GGITM. scarcity of resources and purchased products. The acquiring firm belongs to the same industry as the target company. elimination in competition concentration in product. The mail purpose of such mergers is to obtain economies of scale in production by eliminating duplication of facilities and the operations and broadening the product line. 1. The acquiring company obtains benefits in the form of economies of resource sharing and diversification . (2) Horizontal combination: It is a merger of two competing firms which are at the same stage of industrial process. reduction in investment in working capital. Has control over products specifications. (4) Conglomerate combination: It is amalgamation of two companies engaged in unrelated industries like DCM and Modi Industries. 2.16 - . reduction in advertising costs.

The sale of shares from one company’s shareholders to another and holding investment in shares should give rise to greater values i.17 - . Mergers and acquisitions are caused with the support of shareholders.BHOPAL . Shareholders in the buying company gain in the long run with the growth of the company not only due to synergy but also due to “boots trapping earnings”. manager’s ad promoters of the combing companies.organizing their financial structure so as to service the shareholders by increased leveraging and EPS. GGITM. (1) From the standpoint of shareholders: Investment made by shareholders in the companies subject to merger should enhance in value. which motivate the shareholders and managers to lend support to these combinations and the resultant consequences they have to bear.e. Merger enhances the overall stability of the acquirer company and creates balance in the company’s total portfolio of diverse products and production processes. are briefly noted below based on the research work by various scholars globally. The factors. Shareholders in the selling company gain from the merger and takeovers as the premium offered to induce acceptance of the merger or takeover offers much more price than the book value of shares. lowering average cost of capital and thereby raising present worth of the outstanding shares. Advantages of Mergers Mergers and takeovers are permanent form of combinations which vest in management complete control and provide centralized administration which are not available in combinations of holding company and its partly owned subsidiary.

Mergers where (3) Promoter’s gains: All these things are the guaranteed outcome get support from the managers.18 - . From the gains and achievements of the company i.the opportunity gains in alternative investments. Shareholders may gain from merger in different ways viz. through (a) Realization of monopoly profits. They can convert a closely held and private limited company into a public company without contributing much wealth and without losing control. managing the affairs of the company effectively for all round gains and growth of the company which will provide them better deals in raising their status. (e) Better investment opportunity in combinations. Mergers do offer to company promoters the advantage of increasing the size of their company and the financial structure and strength. perks and fringe benefits. (d) Acquisition of human assets and other resources not available otherwise. One or more features would generally be available in each merger where shareholders may have attraction and favors merger.BHOPAL . where managers have fear of displacement at the hands of new management in amalgamated company and also resultant depreciation from the merger then support from them becomes difficult. (b) Economies of scales. (c) Diversification of product line. At the same time.e. (2) From the standpoint of managers: Managers are concerned with improving operations of the company. GGITM.

Two sides of the impact as discussed by the researchers and academicians are: fir style. Secondly. quality of products.BHOPAL .(4) Benefits to general public: Impact of mergers on general public could be viewed as aspect of benefits and costs to: (a) Consumer of the product or services. The balance of benefits in favour of consumers will depend upon the fact whether or not the mergers increase or decrease competitive economic and productive activity which directly affects the degree of welfare of the consumers through changes in price level. (b) Workers of the companies under combination.19 - . any restrictions placed on such mergers will decrease the growth and investment activity with corresponding decrease in GGITM. (b) Workers community The merger or acquisition of a company by a conglomerate or other acquiring company may have the effect on both the sides of increasing the welfare in the form of purchasing power and other miseries of life. mergers with cash payment to shareholders provide opportunities for them to invest this money in other companies which will generate further employment and growth to uplift of the economy in general. after sales service. etc. (c) General public affected in general having not been user or consumer or the worker in the companies under merger plan. (a) Consumers The economic gains realized from mergers are passed on to consumers in the form of lower prices and better quality of the product which directly raise their standard of living and quality of life.

This enforces competition in the market as consumers are free to substitute the alternative products. Such monopolists affect social and political environment to tilt everything in their favors to maintain their power ad expand their business empire. Both workers and communities will suffer on lessening job Opportunities. preventing the distribution of benefits resulting from diversification of production activity. (c) General public Mergers result into centralized concentration of power. it is difficult to generalize that mergers affect the welfare of general public adversely or favorably. These advances result into economic exploitation. Therefore. Economic power is to be understood as the ability to control prices and industries output as monopolists. Every merger of two or more companies has to be viewed from different angles in the business practices which protects the interest of the shareholders in the merging company and also serves the national purpose to add to the welfare of the employees.employment.20 - . consumers and does not create hindrance in administration of the Government polices PROCEDURE OF MERGERS & CONSOLIDATION GGITM. But in a free economy a monopolist does not stay for a longer period as other companies enter into the field to reap the benefits of higher prices set in by the monopolist.BHOPAL .

To make a public announcement an acquirer shall follow the following procedure: (1) Appointment of merchant banker: The acquirer shall appoint a merchant banker registered as category – I with SEBI to advise him on the acquisition and to make a public announcement of offer on his behalf. (2) Use of media for announcement: Public announcement shall be made at least in one national English daily one Hindi daily and one regional language daily newspaper of that place where the shares of that company are listed and traded. (3) Timings of announcement: Public announcement should be made within four days of finalization of negotiations or entering into any agreement or memorandum of understanding to acquire the shares or the voting rights.21 - . Procedure of Bank Merger GGITM. (4) Contents of announcement: Public announcement of offer is mandatory as required under the SEBI Regulations.BHOPAL .

The Registrars. ➢ After the Board approval of the merger proposal.22 - .BHOPAL . a registered valuer is appointed to valuate both the banks. will be ensuring that the due process prescribed in the Statutes has been complied with before they seek the approval of the RBI. an extra ordinary general meeting of the shareholders of the respective banks is convened to discuss the proposal and seek their approval. a scheme is prepared incorporating therein the all the details of both the banks and the area terms and conditions. it is tabled in the meeting of Board of directors of respective banks. ➢ Once the scheme is finalized. its reach and anticipated growth and sends its report to the respective banks. ➢ Before deciding on the merger.➢ The procedure for merger either voluntary or otherwise is outlined in the respective state statutes/ the Banking regulation Act. assets and liabilities. They would also be ensuring compliance with the statutory procedures for notifying the amalgamation after obtaining the sanction of the RBI. The board discusses the scheme thread bare and accords its approval if the proposal is found to be financially viable and beneficial in long run. market capital. After the conclusion of the discussions. being the authorities vested with the responsibility of administering the Acts. The valuer valuates the banks on the basis of its share capital. the authorized officials of the acquiring bank and the merging bank sit together and discuss the procedural modalities and financial terms. ➢ After the board approval of the merger proposal. GGITM.

➢ Although the Banking Regulation Act.➢ Once the valuation is accepted by the respective banks . it has been decided to frame guidelines to encourage merger/amalgamation in the sector . authorized officials of both the banks sit together and discuss and finalize share allocation proportion by the acquiring bank to the shareholders of the merging bank SWAP ratio ➢ After completion of the above procedures. inter alia.BHOPAL . ➢ After obtaining approvals from all the concerned institutions. 1949 (AACS) does not empower Reserve Bank to formulate a scheme with regard to merger and amalgamation of banks. the State Governments have incorporated in their respective Acts a provision for obtaining prior sanction in writing. a merger and acquisition agreement is signed by the bank RBI Guidelines on Mergers & Consolidation of Banks ➢ With a view to facilitating consolidation and emergence of strong entities and providing an avenue for non disruptive exit of weak/unviable entities in the banking sector. for sanctioning a scheme of amalgamation or reconstruction.23 - . valuation report etc to Reserve Bank of India and other regulatory bodies such Security & exchange board of India(SEBI) for their approval. GGITM. they send the proposal along with all relevant documents such as Board approval. shareholders approval. of RBI for an order.

if all concerned including administrators of the concerned Acts are agreeable to order merger/ amalgamation. it is felt that. Reserve Bank will confine its examination only to financial aspects and to the interests of depositors as well as the stability of the financial system while considering such proposals BANK PROFILE GGITM. RBI may consider proposals on merits leaving the question of compliance with relevant statutes to the administrators of the Acts. over of a co-operative bank registered under the State Act by a co-operative bank registered under the CENTRAL ➢ Although there are no specific provisions in the State Acts or the Central Act for the merger of a co-operative society under the State Acts with that under the Central Act.24 - .➢ The request for merger can emanate from banks registered under the same State Act or from banks registered under the Multi State Co-operative Societies Act (Central Act) for takeover of a bank/s registered under State Act. In other words.BHOPAL .

Sri Lanka. Hong Kong. ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).219 ATMs in India and presence in 18 countries. it acquired the Bank of Madura Limited in GGITM. Our UK subsidiary has established branches in Belgium and Germany. branches in United States. The Bank currently has subsidiaries in the United Kingdom.00 billion (US$ 81 billion) at March 31. in 1994. In the next year.BHOPAL . Bangladesh.25 - . Singapore. ICICI's shareholding was reduced to 46%. ICICI Bank offered made an equity offering in the form of ADRs on the New York Stock Exchange (NYSE). Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates. an Indian financial institution. 3. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries in the areas of investment banking.009 branches and about 5. life and non-life insurance. South Africa. ICICI Bank started as a wholly owned subsidiary of ICICI Limited. The Bank has a network of 2. venture capital and asset management. when the company offered ICICI Bank's shares to the public. thereby becoming the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE. Bahrain. 2010 and profit after tax Rs.25 billion (US$ 896 million) for the year ended March 31. Malaysia and Indonesia. Thailand. 40. Four years later. 2010. Russia and Canada.ICICI BANK ICICI Bank is India's second-largest bank with total assets of Rs.634. In the year 2000. China.

Malaysia and Indonesia. for the nine months. In the following year.644 ATMs.an all-stock amalgamation. Singapore. the High Court of Gujarat at Ahmedabad as well as the High Court of Judicature at Mumbai and the Reserve Bank of India Present Scenario ICICI Bank has its equity shares listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited. the bank has 1.26 - . 3. Bangladesh. In India alone. ICICI Personal Financial Services Limited and ICICI Capital Services Limited. 30.14 billion. ICICI is India's second-largest bank.BHOPAL .10 billion and profit after tax Rs. Branches & ATMs ICICI Bank has a wide network both in Indian and abroad. and Hong Kong. Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates. It was in 2001 that the Boards of Directors of ICICI and ICICI Bank sanctioned the amalgamation of ICICI and two of its wholly-owned retail finance subsidiaries.United States. 2008. the merger was approved by its shareholders. Talking about foreign countries. Sri Lanka.744. Thailand. the management of both ICICI and ICICI Bank were of the opinion that a merger between the two entities would prove to be an essential step. ICICI Bank has made its presence felt in 18 countries . With a change in the corporate structure and the budding competition in the Indian Banking industry. Bahrain. with ICICI Bank. Overseas.420 branches and about 4. its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE). boasting an asset value of Rs. South Africa. 2008. Later in the year and the next fiscal year. that ended on December 31. the bank made secondary market sales to institutional investors. China. As of December 31. The Bank proudly GGITM.

BHOPAL .holds its subsidiaries in the United Kingdom. Russia and Canada out of which.27 - GGITM. the UK subsidiary has established branches in Belgium and Germany. Products & Services Personal Banking • • • • • • • Deposits Loans Cards Investments Insurance Demat Services Wealth Management NRI Banking • • • • • • Money Transfer Bank Accounts Investments Property Solutions Insurance Loans Business Banking • • • • • • Corporate Net Banking Cash Management Trade Services FX Online SME Services Online Taxes .

826.28 - .• Custodial Services Head Office ICICI Bank 9th Floor. South Towers ICICI Towers Bandra Kurla Complex Bandra (East) Mumbai Present Stock Market Position of ICICI Bank Limited ICICI Bank Limited (the Bank) is an India-based banking company engaged in providing a range of banking products and services to corporate and retail customers through a variety of delivery channels.9 billion ($94. OVERALL GGITM.9 billion). the Bank had total assets of Rs. 4. 2009 (fiscal 2009). During the fiscal year ended March 31.BHOPAL .

29 - .BO Industry Sector P/E (TTM): EPS (TTM): ROI: ROE: 28.01 ---- 56.23 -0.926.64 2.84 12.29 38.66 MERGER OF ICICI WITH ICICI BANK GGITM.43 FINANCIALS ICBK.114.): Annual Dividend: Yield (%): 1.00 2.Beta: Market Cap (Mil.48 939.): Shares Outstanding (Mil.66 -0.BHOPAL .00 1.12 1.

The share exchange ratio approved for the merger was one fully paid-up equity share of ICICI Bank for two fully paid-up equity shares of ICICI. carried out by two separate financial advisors and an independent accounting firm.13 billion. creating an optimal structure for the retail business and allowing the full range of asset and liability products to be offered to all retail customers. 6. The merger of ICICI and two of its subsidiaries with ICICI Bank has combined two organizations with complementary strengths and products and similar processes and operating architecture. were operating as a “virtual universal bank”.ICICI Bank and ICICI. With the merger taking effect. offering a wide range of financial products and services. these shares have been transferred to a Trust to be divested by appropriate placement. In accordance with the provisions of the Scheme of Amalgamation.10 each. The proceeds of such divestment would accrue to the merged entity. The merger has also resulted in the integration of the retail finance operations of ICICI. and ICICI Bank into one entity. The merger has combined the large capital base of ICICI with the strong deposit raising capability of ICICI Bank.30 - . while lowering the overall cost of funding through access to lower-cost retail deposits. and its two merging subsidiaries.BHOPAL . giving ICICI Bank improved ability to increase its market share in banking fees and commissions. The equity shares of ICICI Bank held by ICICI have not been cancelled in the merger. the paid-up share capital of the Bank has increased to Rs. comprising 613 million shares of Rs. GGITM. seamlessly providing the whole range of financial products and services to corporate clients. ICICI Bank would now be able to fully leverage the strong corporate relationships that ICICI has built. This was determined on the basis of a comprehensive valuation process incorporating international best practices. along with other ICICI group companies.

in addition to normal resource mobilization for ongoing business requirements.00 billion in five months. 180. including the distribution network acquired in the merger of the erstwhile Bank of Madura Limited with ICICI Bank in fiscal 2001. As both ICICI and ICICI Bank were listed in Indian and US markets. 210. the merger has been accounted for under the purchase method of accounting under Indian GAAP. The merger of a financial institution with a commercial bank to create the country’s first universal bank had significant implications for the entire financial system. in order to mitigate the interest-rate risk arising from the acquisition of a portfolio of about Rs. The merger of India’s largest financial institution with its largest private sector bank also involved significant accounting complexities. The merger process was required to satisfy legal and regulatory procedures in India as well as to comply with United States Securities and Exchange Commission requirements under US securities laws. This required resources of about Rs. ICICI’s assets have been fair-valued for their GGITM. to grow our retail deposit base. effective communication to a wide range of investors was a critical part of the merger process.31 - . It was equally important to communicate the rationale for the merger to international and domestic institutional lenders and to rating agencies.The merger process was complex and posed significant challenges. Consequently. particularly the reserve requirements. We also achieved significant success in securitizing loans and developing a market for securitized debt in India.00 billion to be raised in less than six months for investment in Government securities and cash reserves. It therefore involved extensive dialogue with the Government and Reserve Bank of India. We also adopted proactive strategies to minimize the duration of our Government securities portfolio. We leveraged our strong retail franchise.BHOPAL . In accordance with best practices in accounting. The merger also posed the challenge of compliance with regulatory norms applicable to banks in respect of ICICI’s assets and liabilities.

The merger was approved by the shareholders of both companies in January 2002. The challenge of mobilization of resources for compliance with statutory reserve requirements applicable to banks. while ICICI’s equity and related investment portfolio was fair-valued by determining its market value. was met successfully within the target date of March 30.32 - . 37.80 billion have de-risked the loan and investment portfolio and created a significant cushion in the balance sheet. and by the High Court of Judicature at Mumbai and the Reserve Bank of India (RBI) in April 2002. by the High Court of Gujarat at Ahmedabad in March 2002. While the merger became effective on May 3. 2002. Boards of ICICI and ICICI Bank Approve Merger GGITM. on ICICI’s outstanding liabilities on merger. 2002.BHOPAL . The fair value of ICICI’s loan portfolio was determined by an independent valuer. while maintaining healthy levels of capital adequacy. The total additional provisions & write-offs required to reflect the fair values of ICICI’s assets determined at Rs. in accordance with the provisions of the Scheme of Amalgamation and the terms of approval of RBI. 2002. the Appointed Date for the merger was March 30.incorporation in the books of accounts.

The merger of two wholly-owned subsidiaries of ICICI. ICICI and ICICI Bank jointly appointed the leading accounting firm. or the date from which RBI's approval becomes effective. the Appointed Date of merger is proposed to be March 31. the ADS holders of ICICI would be issued five ADS of ICICI Bank in exchange for four ADS of ICICI. JM Morgan Stanley was appointed by ICICI to advise it on a fair exchange ratio. The share exchange ratio approved by the Boards of the two entities was based on a valuation process incorporating international best practices in respect of a merger of two affiliate companies. ICICI Personal Financial Services Limited and ICICI of two wholly-owned subsidiaries of ICICI. the High Courts of Mumbai and Gujarat. Deloitte. including the approval of the shareholders of the respective companies. and the Government of India as may be required. The proposal has been submitted to the Reserve Bank of India (RBI) for its consideration and approval. ICICI Personal Financial Services Limited and ICICI Capital Services Limited.BHOPAL . The Scheme of Amalgamation ("the Scheme") approved by the respective Boards envisages a share exchange ratio of one domestic equity share of ICICI Bank for two domestic equity shares of ICICI.The Board of Directors of ICICI Limited (NYSE:IC) and the Board of Directors of ICICI Bank Limited (NYSE:IBN) in separate meetings at Mumbai. As each American Depositary Share (ADS) of ICICI represents five domestic equity shares while each ADS of ICICI Bank represents two domestic equity shares. while ICICI Bank appointed DSP Merrill Lynch for the same purpose. The share exchange ratio has been determined in accordance with best practices in GGITM. Thereafter. Haskins & Sells to recommend the final share exchange ratio to the Boards of the two entities. Consequently. and shall be subject to various other approvals.33 - . approved the merger of ICICI with ICICI Bank. 2002. whichever is later. with ICICI Bank was also approved by the respective Boards.

396 existing branches/ extension counters of ICICI Bank. strong brand franchise and vast talent pool. The retail segment will be a key driver of growth for the merged entity. 140 existing retail finance offices and centres of ICICI. Shroff & Co. are the domestic legal counsel for the merger.BHOPAL . The merged entity would leverage on its large capital base. with respect to both assets and liabilities. extensive corporate and retail customer relationships. 2001).000 crore (proforma at September 30. Davis Polk & Wardwell are the international legal counsel and Amarchand & Mangaldas & Suresh A. 95. 2001). discounted cash flows and book values. The merger would enhance value for shareholders of ICICI through the merged entity's access to low-cost deposits. which compares favourably with that of other Indian banks of comparable size and scale of operations. The merger would enhance value for shareholders of ICICI Bank through the large capital base and scale of operations. The merged entity would be the second largest bank in India with total assets of about Rs. and would adhere to RBI's decision in the matter. access to GGITM. and 8.valuation. technology-enabled distribution architecture. The merger is expected to be beneficial to shareholders of both entities. The Scheme will be filed before the High Courts of Mumbai and Gujarat and subsequently placed for approval at the meetings of shareholders of the respective companies. comprehensive suite of products and services.275 employees. greater opportunities for earning fee-based income and the ability to participate in the payments system and provide transaction-banking services.34 - . using the relative market prices. The merged entity's competitive edge in the financial system is reflected in the combined cost-to-income ratio of 27 per cent (proforma for the half-year ended September 30. ICICI and ICICI Bank have submitted to RBI the proposal for the merger and compliance with regulatory norms applicable to banks.

Mukherji. ICICI currently holds 46% of the paid-up equity share capital of ICICI Bank. which is mandatory under US GAAP. Nachiket M. 1949 and in accordance with best practices in corporate governance. Sinor and Mrs. Gupte as Joint Managing Directors and Mrs. N. N. The proceeds from the divestment will accrue to the merged entity. including a higher general provision against standard assets. ICICI Bank has decided to adopt the "purchase method" of accounting. Lalita D. Kamath as Managing Director and Chief Executive Officer. Vaghul as the non-executive Chairman. and access to the vast talent pool of ICICI and its subsidiaries. ICICI's assets and liabilities will therefore be fair GGITM. It is proposed that the Board of Directors of the merged entity would be headed by Mr. Consequent to the merger of ICICI with ICICI Bank. The process of integration between ICICI Bank and ICICI is expected to be smooth due to the strong synergies between the two entities. H. in accordance with international best practices in accounting.BHOPAL . V. Mrs. It is proposed to be held in trust for the benefit of the merged entity. The executive management at the Board level would not constitute more than one-half of the total strength of the Board. MOR as Executive Directors. Kochhar and Dr. S.35 - . ICICI Bank would align the Indian GAAP accounting policies of ICICI to those of ICICI Bank. to account for the merger under Indian GAAP as well. K. entry into new business segments. higher market share in various business segments.ICICI's strong corporate relationships built up over five decades. particularly fee-based services. Mr. Mr. At the time of the merger. The executive management at the Board level would comprise Mr. Kalpana Morparia. and divested through appropriate placement in fiscal 2003. Chanda D. the Board of Directors of ICICI Bank is proposed to be reconstituted in compliance with the Banking Regulation Act. Further. This holding would not be cancelled under the scheme of amalgamation.

Full compliance with the prudential norms applicable to banks on all of ICICI's existing liabilities is likely to have some adverse impact on the overall profitability of both entities in fiscal 2002. ICICI had set up the Special Asset Management Group for focus on recovery and resolution of credit exposures.valued for the purpose of incorporation in the accounts of ICICI Bank on the Appointed Date.BHOPAL . where the operations of the borrower companies had been adversely impacted due to systemic or other factors. RBI and other institutions and banks to create an enabling framework for an industry-wide mechanism that would maximize the economic value of distressed assets in the financial system. This initiative has yielded significant benefits. ICICI proposes to work actively with the Government of India. which would own and manage nonperforming loans. due to the creation of a focused team of professionals and development of the specialized skill sets essential for asset resolution. In 1998. ICICI is exploring several options for the creation of an asset reconstruction company.36 - . GGITM.

IMPACT OF MERGER OF ICICI BANK WITH ICICI LIMITED • Retail Banking • Wholesale Banking • Project Finance & Special Assets Management • International Business • Corporate Centre The Project Finance Group comprises our project finance operations for infrastructure. GGITM. human resources and corporate branding and communications.37 - .BHOPAL . including finance and secretarial. oil &gas. investor relations. The International Business Group is responsible for ICICI Bank’s international operations as well as coordinating the international strategies and alliances of its subsidiaries and affiliates The Corporate Centre comprises all shared services and corporate functions. risk management. manufacturing and shipping sectors. legal. The Special Assets Management Group is responsible for large non-performing loans and accounts under watch.

its wholly-owned subsidiary) at March 31. Our retail asset products include mortgages. This product received excellent response from customers cross the country and was a key driver of growth in the mortgages segment. It also enabled us to price loans competitively GGITM. with the objective of diversifying the asset portfolio and building a low-cost stable resource base. In the mortgages business.00 billion at March 31. 76. ICICI Bank is today a retail financial supermarket with the ability to cross-sell the entire range of credit and investment products and other banking services to our customers. Changing demographics and the trend towards upward migration in income levels coupled with existing low retail credit penetration levels have created a major growth opportunity in retail finance. ICICI Bank’s retail portfolio (including the portfolio of ICICI Home Finance Company Limited.BHOPAL . personal loans and credit cards. 2002 was over Rs.38 - . The key dimensions of our retail strategy are products. 29. wide distribution. We were the first to introduce adjustable rate home loans. With a complete product suite across both asset and liability products as well as a wide range of banking services. we expanded our reach to more than 140 locations across the country. consumer durable loans. ICICI Bank’s retail assets business is capitalizing on this opportunity with a competitive positioning and strategy comprising innovative products. channels and processes. automobile and two-wheeler loans. commercial vehicles and construction equipment financing. 2001. as compared to the combined retail portfolio of ICICI and ICICI Bank of about Rs.00 billion. strong credit controls and high customer service standards and rapidly growing volumes in each segment to achieve economies of scale.Retail Banking The retail business is the key driver of ICICI Bank’s growth strategy. under a strong customer focus. with interest rates linked to a floating prime lending rate.

During the year we launched two co-branded cards. The total number of cards in force increased by 450. During fiscal 2002 we consolidated our position as clear market leaders in automobile loans. We rapidly increased our presence in other segments as well. The key drivers of growth were the strength of our corporate relationships with leading automobile manufacturers. GGITM. We expanded our distribution network to 145 cities and towns across the country. We also entered the merchant acquiring business during the year. In the credit cards business we expanded our distribution to 36 locations.000 at the end of fiscal year 2002. As at March.000 debit cards. ICICI Bank also implemented two smart card projects. Wealso introduced a domestic debit card variant primarily for our payroll customers. We were able to offer competitive products to our customers by leveraging economies of scale resulting from the rapid growth in operations.000 to about 650. During fiscal 2002. Other products and product variants introduced this year included loans against existing property as well as several value-added features – retail property services and home insurance policies bundled with the loan. at a corporate worksite and an educational institution. with Hindustan Petroleum Corporation Limited (HPCL) and BPL Mobile respectively. strong distribution capability and customer service focus. ICICI Bank partners manufacturers in distributing their products and therefore enjoys preferred status with them. We expanded our two-wheeler business to over 140 locations. The card is valid internationally and earns loyalty points on usage.and achieve better asset-liability management. ICICI Bank’s “Ncash” debit card is a deposit access product that allows cash withdrawals through ATMs and also enables purchases at merchant establishments with point-of-sale terminals. ICICI Bank is the largest incremental issuer of cards (including both debit and credit cards) in India.BHOPAL . 2002. ICICI Bank had issued about 600. 31.39 - . During fiscal 2002 we emerged as a leading player in the mortgages business.

The enhanced convenience that this offers the customer has supported our customer acquisition efforts and migration of customer transactions from branches to lower-cost technology-enabled channels. Power Pay for salaried employees. The number of customer accounts increased from 3. ICICI Bank’s life stage segmentation strategy offering differentiated liability products to various categories of customers (kid-e-bank for children. ICICI Bank continued to expand its non-branch channels aggressively and successfully migrated customer transaction volumes to these channels. Cirrus and Maestro cards can now be used on all our ATMs. ICICI Bank has pioneered a multi-channel distribution strategy in India. taking the ATM network to over 1. They also provide online trading facilities through www. Master.2 millionto over 5 million. ICICI Select for high net worth individuals and Business Multiplier for businessmen) contributed significantly to the rapid growth in the retail ability base.000 ATMs.40 - . ICICI direct has also launched India’s first Digitally Signed Contract Notes (DSCN). ICICI direct provides complete end-to-end integration for seamless electronic trading on the stock exchanges and has been rated “TxA1” by CRISIL. bank@campus for students. ICICI Bank set up over 500 new ATMs during fiscal 2002. Reserve Bank of India relief bonds and insurance products . which allows a customer to view and print their contract notes online. GGITM. indicating highest ability to service broking transactions. we continued our focus on retail deposits in fiscal 2002.In order to reduce our funding cost and create a stable funding base.BHOPAL .ICICIdirect. This allows us to meet all customer needs through products that are complementary to those that we offer directly. giving our customers24x7 access to banking services. while leveraging our distribution capability to earn fee income from third parties. They have developed a successful third party distribution model with a growing market share in distribution of mutual funds. During the year.com. Only 35% of customer induced transactions now take place at branches.

It provides various self-service options and also personalized communication with customer service officers for a full range of transactions and account and product related queries. and is India’s largest domestic call centre. ICICI Bank’s mobile banking services provide the latest information on account balances previous transactions. bill payments and prepaid mobile card recharge facility. ICICI Bank offers its customers the facility of paying utility bills online in over 120cities in India. Customers can also open a fixed or recurring deposit. in eight cities through Cheques. GGITM. India’s first Internet based inter-bank fund transfer facility. credit card outstanding and payment status and allow customers to request a chequebook or account statement.BHOPAL . ICICI Bank also offers the facility of transferring funds to accounts in any branch of any bank. ICICI Bank’s call centre can now be accessed by customers in 100 cities. All major online shopping services are linked to ICICI Bank’s online payments facility.Other new initiatives on ATMs include multilingual screens. ICICI Bank has also focused on the call centre as a key channel. The call centre is a single point of contact for customers across all products. transfer funds between their own accounts and to any other ICICI Bank account. The call centre uses state-of-the-art voice-over Internet-protocol technology and cutting-edge desktop applications to provide a single view of the customer’s relationship. The call centre is now evolving into a complete relationship management channel not only for complaint resolution but also for cross-selling on inbound calls. ICICI Bank now has over one million retail Internet banking accounts.41 - . Customers can write to the account manager through the secure channel and subscribe to account statement by e-mail. make a stop-cheque request and inquire into the status of a cheque online. Retail Internet banking customers can view their bank accounts.

com. 1. through structuring and advisory services. rapid growth in fee-based services and extensive use of technology to deliver high levels of customer satisfaction in a cost effective manner.72trillion for fiscal 2002. We also targeted high value current accounts to reduce our cost of funding. ICICI Bank has taken advantage of emerging opportunities in the public sector disinvestment process. The Corporate Internet GGITM. which would help to expand and deepen the debt markets . we were successful in creating a market for securitized corporate debt. ICICI Bank provides Internet banking services to its wholesale banking clients through ICICImarkets.structured transactions and channel financing. a finance portal that is the single point web-based interface for all our corporate clients. In longer-term loans. We focused strongly on transaction banking services such as cash management and nonfund-based facilities such as letters of credit and bank guarantees to increase our market share in banking fees and commissions. Our focus in fiscal 2002 was on expanding the range and depth of our corporate relationships. tailored to meet their specific requirements. acquiring new clients and cross-selling all our corporate banking products and services to the existing client base.42 - .BHOPAL . The corporate banking strategy focuses on careful management of credit risk and adequate return on risk capital through risk-based pricing and proactive portfolio management. We implemented a customer-level profitabilitybased pricing model. As the pioneers of securitization in India. in the absence of traditional capital expenditure financing opportunities and limited corporate-credit growth. We have already achieved significant success in cash management services. with total volumes of Rs.During the year we enhanced our technology-based delivery platforms and expanded the scope of our web-based services.Corporate Banking ICICI Bank’s corporate banking strategy is based on providing customized financial solutions to clients. We continued to focus on working capital finance for highly-rated clients .

BHOPAL . This Group is also responsible for managing the asset GGITM. providing sophisticated banking services to its clients. ICICI Bank’s focus is on establishing structured financing arrangements and implementing a liability-led business strategy. The corporate banking business is organized into special relationship groups for the Government and public sector.43 - . ICICI Bank’s dedicated Structured Products & Portfolio Management Group. emerging corporate and agribusiness. In the emerging corporate segment. ICICI Bank is also involved with several other state government initiatives. including dairy farming. and is leveraging CORPORATE STRATEGY These relationships expand the range of services that it is offered to them. ICICI Bank has been empanelled in eight states for collection of sales tax. Clients can view accounts online. In the corporate client segment. with access to expertise in financial structuring and related legal. ICICI Bank is focusing on increasing its share of banking business with its corporate clients. actively supports the business groups in designing financial products and solutions. large corporate. ICICI Bank has strong linkages with several large public sector companies. ICICI Bank is working with state governments and agri-based corporate to evolve viable and sustainable systems for financing agriculture. ICICI Bank has also established relationships with several state governments. and avail of other such services. accounting and tax issues. having financed state-level enterprises. ICICI Bank has also developed several innovative structures for agri-business. ICICI Bank offers forex trading through the Internet on FX Online and Government of India securities trading through Debt Online. transfer funds between their own accounts or to other accounts. Besides.Banking (CIB) platform of ICICI markets allows clients to conduct banking business online in a secure environment.

180.00 billion in an environment of low interest rates. mobilization of resources from domestic and international financial institutions and banks. A dedicated Corporate Operations & Technology Group has been set up for developing and managing back-office processing and delivery capabilities.portfolio by structuring portfolio buyouts and sell-downs. thereby benefiting from economies of scale. To minimize the risk of adverse mark-to-market impact on any rise in interest rates. The Treasury is also responsible for ICICI Bank’s capital markets and custodial services operations. and proprietary trading. Treasury The principal responsibilities of the Treasury include management of liquidity and exposure to market risks. Yields on Government securities reached historic lows during 2001-2002 as a consequence of the easy liquidity environment and RBI’s soft-interest-rate policy.44 - . the focus was on the challenge of meeting regulatory reserve requirements on ICICI’s liabilities prior to the merger for meeting the reserve requirements and managing the interest-rate risk arising from the acquisition of Government securities aggregating about Rs. ICICI Bank is leveraging technology to set up centralized processing facilities to process large transaction volumes.BHOPAL . ICICI Bank adopted GGITM. Additionally. The enhanced capital base consequent to the merger will significantly increase ICICI Bank’s ability to leverage its strong corporate relationships and provide non-fund-based facilities and trade finance services to its corporate clients. the Treasury is leveraging its strong relationships with financial sector players to provide a wide range of banking services in addition to its liability products. During fiscal 2002.

ICICI had raised a foreign currency loan of USD 75 million at LIBOR + 70 basis points. A significant portion of the requirement of Government securities was acquired through active participation in primary auctions of floating-rate bonds and short-maturity Treasury bills. Our presence has been viewed by most sponsors as critical to the success of their projects. GGITM. gas and petrochemicals sectors. for twelve-and-a-half years. we have developed considerable expertise in financing complex project finance transactions and effectively allocating the associated risks. on account of our proficiency in developing enforceable contract models. a German financial institution. broad-based market-making in key markets including corporate bonds. Over the years.BHOPAL . in addition to its resource mobilization from the wholesale segment. Substantial reduction in interest rates provided an opportunity to capture gains in the fixed-income market by active churning of the trading portfolio. setting a new benchmark for a five-year borrowing by an Indian entity in the international markets after the Asian currency crisis. Government securities and interest-rate swap markets. Project Finance and Special Assets ICICI BANK project finance activities include financing new projects as well as capacity additions in the manufacturing sector and structured finance to the infrastructure and oil. This was the first borrowing by ICICI from KfW without a Government of India guarantee. and with DEG. \Prior to the merger. Germany for an 8-year USD 25 million loan. The focus of trading operations was active.a strategy of acquiring securities of lower duration.45 - . ICICI also entered into an agreement with Asian Development Bank (ADB) for availing a 25-year USD 80 million loan for housing finance. ICICI had also borrowed USD 50 million from Kreditanstalt fur Wiederaufbau (KfW).

cellular and national and international long-distance licenses presented a significant non-fund based business opportunity. in addition to telecom and roads. the telecom and road sectors witnessed considerable activity. We view our role not only as providers of project finance but as arrangers and facilitators. Ports would also require significant expansion and modernization of facilities. Guarantees to Department of Telecommunications on behalf of various telecom companies for basic.46 - . While there were few opportunities in the power sector.syndicating requisite funds and working out complex issues related to Government regulations. we expect ports and urban infrastructure sectors. The pace of growth in the road sector is expected to increase both due to NHAI’s National Highway Development Programme and the larger state-level projects. The power sector is also expected to pick up with opportunities in the privatization GGITM. including lead arranger mandates for four road projects of National Highway Authority of India (NHAI).BHOPAL . mainly due to policy-levelis sues and delay in closure of various projects. Our project finance business is focused on structuring and syndication of financing for large projects by leveraging our expertise in project financing. We have also capitalized on opportunities in the road sector. creating appropriate financing structures that may serve as financing and investment vehicles for a wider range of market participants. in both annuity and toll-based projects. Corporatization has already been initiated for five out of twelve major ports. Infrastructure Sector The infrastructure sector has not witnessed the anticipated growth. Going forward. We were appointed lead arrangers for a chemical port terminal project. to provide significant business opportunities. and churning our project finance portfolio to prevent portfolio concentration and to manage portfolio risk.

BHOPAL . developing a comprehensive blueprint for private sector participation in hydropower. Cyclical downturns in commodity demand and prices have adversely affected the performance of several sectors. Our focus in this sector is on projects sponsored by entities that have proven ability to commit the required financial resources and implement projects successfully within planned time-frames. financial closure of select private projects with competitive tariffs. which presents opportunities for structuring and syndicating acquisition financing. We provided advisory services to the Ministry of Power. set up to manage large non-performing loans and large accounts under watch GGITM. This has impacted asset quality in the financial system.47 - . We are also implementing tighter security measures. We also believe that there is significant scope for consolidation in several segments in the manufacturing sector. such as security interests in project contracts and escrow accounts to capture cash flows. Manufacturing Sector Fiscal 2002 saw few new projects in the manufacturing sector on account of lower economic growth and existing over-capacities in several commodities. The Managing Director & CEO was a member of the Distribution Policy committee which submitted a report improving efficiency in power distribution in the country.of distribution. capacity additions in the public sector and its own reform and restructuring. Special Assets Management Liberalization and integration with the global economy have posed major competitive challenges for Indian industry. ICICI Bank’s efforts at asset resolution are driven by the Special Assets Management Group (SAMG).

in addition to its resource mobilization from the wholesale segment. In respect of exposures to unviable and essentially uneconomical projects. To minimize the risk of adverse mark-to-market impact on any rise in interest rates. enforcing collateral and driving consolidation. setting a new benchmark for a five-year borrowing by an Indian entity in the international markets after the Asian currency crisis. Yields on Government securities reached historic lows during 2001-2002 as a consequence of the easy liquidity environment and RBI’s soft-interest-rate policy. primarily in the areas of information technology.that require close monitoring. International Business ICICI BANK have already established a presence in the international markets.48 - . ICICI had also borrowed USD 50 million from GGITM. Prior to the merger. ICICI had raised a foreign currency loan of USD 75 million at LIBOR + 70 basis points. completion of projects under implementation. 180. investment banking and banking products and services for the This posed the dual challenge of raising resources for meeting the reserve requirements and managing the interest-rate risk arising from the acquisition of Government securities aggregating about Rs.BHOPAL . During fiscal 2002. ICICI Bank adopted a strategy of acquiring securities of lower duration. SAMG’s approach includes operational and financial restructuring.00 billion in an environment of low interest rates. sale of unproductive assets and catalyzing consolidation. The accent is on time-value of recovery and a pragmatic approach towards settlements. we adopt an aggressive approach aimed at out-of-court settlements. SAMG was strengthened by the induction of some of our highest-rated performers into the group. A significant portion of the requirement of Government securities was acquired through active participation in primary auctions of floating-rate bonds and shortmaturity Treasury bills.

This was the first borrowing by ICICI from KfW without a Government of India guarantee.Kreditanstalt fur Wiederaufbau (KfW). The focus of trading operations was active. a German financial institution. ICICI became the first Indian company to be rated higher than the sovereign rating for India by Moody’s Investor Service. ICICI also entered into an agreement with Asian Development Bank (ADB) for availing a 25-year USD 80 million loan for housing finance. ICICI Bank’s credit ratings as per various credit rating agencies (including ratings assigned to debt instruments issued by ICICI now transferred to ICICI Bank on merger) are given below: Agency Rating – Foreign currency debt – Foreign currency deposits Standard & Poor’s (S&P) Credit Analysis & Research Limited (CARE) Investment Information and Credit Rating Agency (ICRA) Ba1 Ba3 BB CARE AAA LAAA Human Resources GGITM. broad-based marketmaking in key markets including corporate bonds. Government securities and interest-rate swap markets. one notch above the sovereign rating for India. Credit Rating During the year. when its senior and subordinated long term foreign currency debt was rated Ba1 i.e. for twelve-and-a-half years. Substantial reduction in interest rates provided an opportunity to capture gains in the fixed income market by active churning of the trading portfolio. The same rating has been assigned to ICICI Bank post-merger. and with DEG.BHOPAL .49 - . Germany for an 8-year USD 25 million loan.

ICICI Bank views its human capital as a key source of competitive advantage. Consequently the development and management of human capital is an essential element of our strategy and a key management activity .Human resources management in fiscal 2002 focused on smooth integration of the employee sand human resource management systems in the context of the merger, as well as on continuous improvement of recruitment, training and performance management processes. The process of integration involved defining the organizational structure of the merged entity people placement in various positions across the business and corporate groups, and integration of the grade and remuneration structure for the employees of the four entities. The organizational structure was announced in February 2002 and became effective on May 3, 2002. The people placement process was based on appropriate competency profiling tools and matching employee profiles to job specifications. The grade integration process has also been success fully completed, using job evaluation techniques. While ICICI Bank is India’s second-largest bank, it had just over 7,700 employees at March 31, 2002, demonstrating our unique technology-driven, productivityfocused business model. The recruitment process has been streamlined and a uniform recruitment policy and process implemented across the merged organization. Robust ability-testing and competency -profiling tools are being used to strengthen the campus recruitment process and match the profiles of employees to the needs of the organization. ICICI Bank continues to be a preferred employer at leading business schools and higher education institutions across the country, offering a wide range of career opportunities across the entire spectrum of financial services. In addition to campus recruitment, ICICI Bank also undertakes lateral recruitment to bring new skills, competencies and experience into the organization and meet the requirements of rapidly growing businesses. A Six Sigma initiative has been undertaken for the lateral recruitment process to
GGITM,BHOPAL - 50 -

improve capabilities in this area. ICICI Bank encourages cross-functional movement, enriching employees’ knowledge and experience and giving them a holistic view of the organization while ensuring that the bank leverages its human capital optimally. The rapidly changing business environment and the constant challenges it poses to organizations and businesses make it imperative to continuously enhance knowledge and skill sets across the organization. ICICI Bank believes that building a learning organization is critical for being competitive in products and services and meeting customer expectations. ICICI Bank has built strong capabilities in training and development to build competencies. Training on products and operations is imparted through webbased training modules. Special programmes on functional training and leadership development to build knowledge as well as management ability are conducted at a dedicated training facility. ICICI Bank also draws from the best available training programmes and faculty, both international and domestic; to meet its training and development needs and build globally benchmarked skills and capabilities. ICICI Bank seeks to build in all its employees a total commitment towards exceptional standards of performance and productivity, adaptability to changing organizational needs and the demands of the business environment and a willingness to learn and acquire new capabilities. ICICI Bank believes in defining clear performance parameters for employees and empowering them to achieve their goals. This has helped to create a culture of high performance across the organization. ICICI Bank also has a structured process of identifying and developing leadership potential the focus on human resources management as a key organizational activity has resulted in the creation of an exceptional pool of talent, a performance-oriented organizational culture and has imparted agility and flexibility to the organization, enabling it to capitalize on opportunities and deliver value to its stakeholders.
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ORGANIZATIONAL EXCELLENCE
ICICI Bank recognizes the importance of organizational excellence in its business. Developing and deploying world-class skills in a variety of areas such as technology, financial engineering, transaction processing and portfolio management, credit evaluation, customer segmentation and product design, and building and maintaining deep and enduring relationships of trust with our retail and wholesale customers are essential elements of our strategy. Different businesses across the ICICI group have over the past few months used successfully the Six Sigma methodology to focus on customer satisfaction and enhanced efficiency in operations. Application of Six Sigma techniques in regional processing centres, branch layout and design, and the home finance and demat services businesses have reduced turnaround time and significantly improved operational efficiency. In recognition of the critical importance of excellence in internal processes and delivery to customers, we have set up an Organizational Excellence Group headed by a Senior General Manager reporting to the Managing Director & CEO. This group will be responsible for institutionalization of quality initiatives, including Six Sigma, and for building the skills necessary for implementing and accelerating quality initiatives, reporting to the management the progress and value generated from these initiatives and replicating the successes across ICICI Bank as well as group companies.

Benefits of merger

GGITM,BHOPAL

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insurance. investment banking and venture capital • Access to the ICICI group’s talent pool improved ability to further diversify asset portfolio and business revenues Lower funding costs • Ability to accept/ offer checking accounts • Availability of float money due to active participation in the payments system • Diversified fund raising due to access to retail funds Increased fee income opportunities • Ability to offer all banking products GGITM.53 - .• Forward leap in the hierarchy of Indian banks • A discontinuous jump in size and scale • Achieve size and scale of operations • Leverage ICICI’s capital and client base to increase fee income • Higher profitability by leveraging on technology and low cost structure • Offer a complete product suite with immense cross-selling opportunities • ICICI’s presence in retail finance.BHOPAL .

BHOPAL .54 - .Competitive advantages of the merged entity GGITM.

JM Morgan Stanley  ICICI Bank .55 - . with an asset base of over Rs.DSP Merrill Lynch  Jointly appointed independent accountant to recommend the final exchange ratio  Deloitte.After the merger. Transfer of ICICI’s shareholding in ICICI Bank to an SPV prior to the merger  Divestment in FY2003 by way of appropriate placement GGITM. Valuation  Independently appointed investment bankers  ICICI . which was approved by the respective Boards 2. 1 trillion Merger process of ICICI BANK AND ICICI LIMITED highlights 1.BHOPAL . the combined entity would be the second-largest bank in India. Haskins & Sells appointed  Recommended one share of ICICI Bank for two shares of ICICI.

Consolidation of retail operations  Merger of ICICI PFS and ICICI Capital Services with ICICI Bank Merger process . mandatory under US GAAP. 2002 or the date of RBI approval.3. whichever is later  Shareholders’ approval  High court approval  Accounting for the merger in line with international best practices  Purchase method. to be adopted under Indian GAAP as well GGITM.BHOPAL .56 - .regulatory issues  Merger effective on  March 31.

57 - .BHOPAL . they tend to be rigid and its approach can not be changed every now and then. why data have been collected and what particular technique of analyzing data has been used and a best of similar other question are usually answered when we talk of Research methodology concerning a research problem or study. used in context of research study and explanation of using of a particular method or technique so that research results are capable of being evaluated either by researcher himself or by others. Descriptive study can be divided in two categories: (A) Cross sectional (B) Longitudinal GGITM. Research methodology constitutes of research methods. selection criterion of research methods. how the research problem has been formulated. The main aim of research is to find out the truth which is hidden and which has not been discovered as yet The research methodology that I undertook for the purpose of this study is enumerated below- RESEARCH DESIGN: DESCRIPTIVE Descriptive studies are well structured.RESEARCH METHODOLOGY Research methodology is a way to systematically solve the research problem. Why a research study has been undertaken.

I have taken descriptive because my research includes the knowing the merger and consolidation of ICICI bank and ICICI limited. GGITM.58 - .Descriptive study is undertaken in many circumstances: 1. When the researcher is interested in knowing the proportion of people in given population who have behaved in a particular manner. making projection of certain things. profession.BHOPAL . 2. When the researcher is interested in knowing the characteristics of certain groups such as age.

including staffing. and career management and knowledge and learning. Whatever scope I observed in my project are not exactly having all the features of the scope which I described above but also not lacking all the features. performance management. We looked the key findings from the areas of production. Working management. Scope of the study not only consist one or two future business plan but sometime it also gives idea about a new business which becomes much more profitable for the researches then the older one.SCOPE OF THE STUDY Each and every project study along with its certain objectives also has scope for future. Scope of the study could give the projected scenario merger and consolidation of ICICI bank and ICICI limited. Satisfaction of the bank customer. survey of executive opinion in global organizations. within which we examined major operation. We highlight the major themes to emerge from the study. Strategy of bank after merging. • Factors which I observed while doing project study are following1. development. And this scope in future gives to new researches a new need to research a new project with a new scope. GGITM. 3. Quality of services provided by the bank. 2. rewards. 4.59 - .BHOPAL .

FINANCIAL REPORTS GGITM.BHOPAL .60 - .

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e) This merger successfully faces the competition of other bank. help full for growth of Indian economy. GGITM.FINDINGS a) Performance of ICICI BANK. after merging. increases the share value of ICICI BANK LTD. It increases their performance. After merger with ICICI LTD. in the competition of present scenario. are provide a multitude of ways to increase efficiency ICICI BANK LTD. f) Merger of ICICI BANK with ICICI LTD. It increase the value of the bank in their customer c) Merger of ICICI BANK & ICICI LTD. h) Merger of ICICI BANK with ICICI LTD. g) Most of the customers are attracted by new scheme of ICICI BANK LTD. This schemes for attract the customer and it also help to make a distinct image of ICICI BANK LTD. being effective in comparison of other bank. b) Most the customer is satisfied by the services provided by the ICICI BANK after merger.63 - .BHOPAL . d) ICICI BANK LTD. In this way they become successful to achieve their goal. provides the facility as per the expectations of their customer.

The making of ICICI Bank into a ‘Universal bank’ has shown the way. The trick is to neutralise the expected pitfalls while bringing the best out of operational synergies. Increase in profitability. This reverse merger has thus opened up a challenge to the banks and financial institutions in India to merge and become ‘financial conglomerate(s)’ by exploiting the present favourable business environment and also to de-risk their operating environment GGITM. global scale and other such reasons have replaced the social and political motives of yesteryears. with the banks firmly under the control of RBI. Earlier. The gradual privatisation and globalisation of the banking industry has now forced banks themselves to go in for merger.CONCLUSION Merger and acquisition is nothing new in the Indian banking industry. mergers were forced upon to save weak banks from collapsing. synergies in operation. Successful mergers can lead to prosperity both for the shareholders of the merged company and for the economy as a whole.BHOPAL . The true catalyst of a successful merger is the top executive whose pragmatic and dynamic leadership and a clear foresight can help a merger click. But there has been a change in impetus.64 - .

S.N Murty and U Bhojanna Website Address: www.org. 2nd edition.google.economictime.com GGITM.com www.BHOPAL .icici.icici bank.65 - .Kothari.R.com www.com www.BIBLIOGRAPHY Periodical: Business World Economics time ICICI BANK Annual Report 2002 Research Methodology: C.