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ACKNOWLEDGEMENT

Work is Worship- so goes the old adage, Herculean task have been

overheard by dedicated and concerted effort of various people who havesensibly and systematically blended their thoughts. We acknowledge

deep sense of gratitude towards our faculty guide Mr. Mohit Jain, for

giving us time and support. We express our profound sense of gratitude

towards to each and every person in NIAS for have provided us with

facilities and help for the successful completion of the report and also

for the moral support and co-operation. Finally, we would like to thank

our family and all our friends for helping us to overcome the hurdles

that we faced during the preparation of the report.

Rupes Dey, Soumen Das, Suva Biswas,Gourav Haldar, Debraj Das

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INDEX

Introduction 3

History of ICICI Bank 4

Products and service 7

What is merger? 8

Procedure of merger 9

RBI guidelines on mergers and acquisitions 10

Merger of ICICI Bank with ICICI Ltd 11

Merger of ICICI Bank with Bank of Madura 14

Financial standing of ICICI Bank and Bank of Madura 16

Merger of ICICI Bank with Anagram Finance Ltd 16

Merger of ICICI Bank with Sangli Bank 17

5 years balance sheet of ICICI Bank 19

Annual results of ICICI Bank in details 20

SWOT analysis of ICICI Bank 21

TOWS matrix 24

Conclusion 25

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INTR DUCTION

ICICI is a diversified financial services company that provides a range of banking and

financial services to customers, including retail banking, project and corporate finance,

working capital finance, insurance, venture capital and private equity, investment

banking, broking, and treasury products and services. The company operates in, India,

the UK, Canada and Russia. It is headquartered in Mumbai, India and employs about

40,686 people. The company recorded revenues of INR600.5 billion (approximately

$14.9 billion) in the financial year ended March 2008, an increase of 45.2% over 2007.

The net profit was INR33.9 billion (approximately $0.8 billion) in the financial year 2008,

an increase of 35.1% over 2007.

ICICI Bank started as a wholly owned subsidiary of ICICI Limited, an Indian financial

institution, in 1994. Four years later, when the company offered ICICI Bank's shares to

the public, ICICI's shareholding was reduced to 46%. In the year 2000, ICICI Bank

offered made an equity offering in the form of ADRs on the New York Stock Exchange

(NYSE), thereby becoming the first Indian company and the first bank or financial

institution from non-Japan Asia to be listed on the NYSE. In the next year, it acquired

the Bank of Madura Limited in an all-stock amalgamation. Later in the year and the next

fiscal year, the bank made secondary market sales to institutional investors.

With a change in the corporate structure and the budding competition in the Indian

Banking industry, 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. 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, ICICI Personal Financial

Services Limited and ICICI Capital Services Limited, with ICICI Bank. In the following

year, the merger was approved by its shareholders, the High Court of Gujarat at

Ahmedabad as well as the High Court of Judicature at Mumbai and the Reserve Bank

of India.

ICICI Bank has its equity shares listed in India on Bombay Stock Exchange and the

National Stock Exchange of India Limited. Overseas, its American Depositary Receipts

(ADRs) are listed on the New York Stock Exchange (NYSE). As of December 31, 2008,

ICICI is India's second-largest bank, boasting an asset value of Rs. 3,744.10 billion and

profit after tax Rs. 30.14 billion, for the nine months, that ended on December 31, 2008.

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4

HISTORY OF ICICI

1955 The Industrial Credit and Investment Corporation of India Limited (ICICI)was incorporated at the initiative of World Bank, the Government of India andrepresentatives of Indian industry, with the objective of creating a developmentfinancial institution for providing medium-term and long-term project financing toIndian businesses.

1994 ICICI established Banking Corporation as a banking subsidiary. FormerlyIndustrial Credit and Investment Corporation of India. Later, ICICI Banking

Corporation was renamed as 'ICICI Bank Limited'. ICICI founded a separate legalentity, ICICI Bank, to undertake normal banking operations - taking deposits,credit cards, car loans etc.

2001 ICICI acquired Bank of Madura (est. 1943). Bank of Madura was a Chettiarbank, and had acquired Chettinad Mercantile Bank (est. 1933) and Illanji Bank(established 1904) in the 1960s.

2002 The Boards of Directors of ICICI and ICICI Bank approved the reversemerger of ICICI, ICICI Personal Financial Services Limited and ICICI CapitalServices Limited, into ICICI Bank. After receiving all necessary regulatoryapprovals, ICICI integrated the group's financing and banking operations, bothwholesale and retail, into a single entity.

o Also in 2002, ICICI Bank bought the Shimla and Darjeeling branches thatStandard Chartered Bank had inherited when it acquired Grindlays Bank.

o ICICI started its international expansion by opening representative officesin New York and London.

2003 ICICI opened subsidiaries in Canada and the United Kingdom (UK), and inthe UK it established an alliance with Lloyds TSB.

o It also opened an Offshore Banking Unit (OBU) in Singapore andrepresentative offices in Dubai and Shanghai.

http://en.wikipedia.org/wiki/Bank_of_Madurahttp://en.wikipedia.org/wiki/Chettiarhttp://en.wikipedia.org/w/index.php?title=Chettinad_Mercantile_Bank&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Illanji_Bank&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=ICICI_Personal_Financial_Services_Limited&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=ICICI_Capital_Services_Limited&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=ICICI_Capital_Services_Limited&action=edit&redlink=1http://en.wikipedia.org/wiki/Shimlahttp://en.wikipedia.org/wiki/Darjeelinghttp://en.wikipedia.org/wiki/Standard_Chartered_Bankhttp://en.wikipedia.org/wiki/Grindlays_Bankhttp://en.wikipedia.org/wiki/New_Yorkhttp://en.wikipedia.org/wiki/Londonhttp://en.wikipedia.org/wiki/Londonhttp://en.wikipedia.org/wiki/New_Yorkhttp://en.wikipedia.org/wiki/Grindlays_Bankhttp://en.wikipedia.org/wiki/Standard_Chartered_Bankhttp://en.wikipedia.org/wiki/Darjeelinghttp://en.wikipedia.org/wiki/Shimlahttp://en.wikipedia.org/w/index.php?title=ICICI_Capital_Services_Limited&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=ICICI_Capital_Services_Limited&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=ICICI_Personal_Financial_Services_Limited&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Illanji_Bank&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Chettinad_Mercantile_Bank&action=edit&redlink=1http://en.wikipedia.org/wiki/Chettiarhttp://en.wikipedia.org/wiki/Bank_of_Madura

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2004 ICICI opens a rep office in Bangladesh to tap the extensive trade betweenthat country, India and South Africa.

2005 ICICI acquired Investitsionno-Kreditny Bank (IKB), a Russia bank withabout US$4mn in assets, head office in Balabanovo in the Kaluga region, andwith a branch in Moscow. ICICI renamed the bank ICICI Bank Eurasia.

o Also, ICICI established a branch in Dubai International Financial Centreand in Hong Kong.

2006 ICICI Bank UK opened a branch in Antwerp, in Belgium. ICICI openedrepresentative offices in Bangkok, Jakarta, and Kuala Lumpur.

2007 ICICI amalgamated Sangli Bank, which was headquartered in Sangli, inMaharashtra State, and which had 158 branches in Maharashtra and another 31in Karnataka State. Sangli Bank had been founded in 1916 and was particularlystrong in rural areas.

o ICICI also received permission from the government of Qatar to open abranch in Doha.

o ICICI Bank Eurasia opened a second branch, this time in St. Petersburg.

2008 The US Federal Reserve permitted ICICI to convert its representative officein New York into a branch.

o ICICI also established a branch in Frankfurt.o ICICI Banks has exposure to Subhiksha Trading Ltd which is facing Credit

Crunch.

http://en.wikipedia.org/wiki/Balabanovohttp://en.wikipedia.org/wiki/Kalugahttp://en.wikipedia.org/wiki/Moscowhttp://en.wikipedia.org/wiki/Dubaihttp://en.wikipedia.org/wiki/Hong_Konghttp://en.wikipedia.org/wiki/Antwerphttp://en.wikipedia.org/wiki/Belgiumhttp://en.wikipedia.org/wiki/Bangkokhttp://en.wikipedia.org/wiki/Jakartahttp://en.wikipedia.org/wiki/Kuala_Lumpurhttp://en.wikipedia.org/wiki/Sanglihttp://en.wikipedia.org/wiki/Maharashtrahttp://en.wikipedia.org/wiki/Karnatakahttp://en.wikipedia.org/wiki/Qatarhttp://en.wikipedia.org/wiki/Dohahttp://en.wikipedia.org/wiki/US_Federal_Reservehttp://en.wikipedia.org/wiki/New_Yorkhttp://en.wikipedia.org/wiki/Frankfurthttp://en.wikipedia.org/wiki/Frankfurthttp://en.wikipedia.org/wiki/New_Yorkhttp://en.wikipedia.org/wiki/US_Federal_Reservehttp://en.wikipedia.org/wiki/Dohahttp://en.wikipedia.org/wiki/Qatarhttp://en.wikipedia.org/wiki/Karnatakahttp://en.wikipedia.org/wiki/Maharashtrahttp://en.wikipedia.org/wiki/Sanglihttp://en.wikipedia.org/wiki/Kuala_Lumpurhttp://en.wikipedia.org/wiki/Jakartahttp://en.wikipedia.org/wiki/Bangkokhttp://en.wikipedia.org/wiki/Belgiumhttp://en.wikipedia.org/wiki/Antwerphttp://en.wikipedia.org/wiki/Hong_Konghttp://en.wikipedia.org/wiki/Dubaihttp://en.wikipedia.org/wiki/Moscowhttp://en.wikipedia.org/wiki/Kalugahttp://en.wikipedia.org/wiki/Balabanovo

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Head Office : ICICI Bank

9th Floor, South Towers

ICICI Towers

Bandra Kurla Complex

Bandra (E)Mumbai

Website : http://www.icicibank.com

Phone : 91-022-653 7914

Employees : 84,134

Net income : $779.8M

Income growth : 28.6%

Key People : Kundapur V. Kamath Chairman

Chanda D. Kochhar Managing Director and CFO

N. S. Kannan Executive Director and CFO

Total Assets : Rs. 3793.01 billion (US$ 75 billion) at March 31, 2009

http://www.icicibank.com/http://www.icicibank.com/http://www.icicibank.com/http://www.icicibank.com/

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PRODUCTS AND 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

Custodial Services

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MERGERWhat is Merger?

A merger occurs when two companies combine to form a single company. A merger isvery similar to an acquisition or takeover, except that in the case of a merger existingstockholders of both companies involved retain a shared interest in the new corporation.By contrast, in an acquisition one company purchases a bulk of a second company'sstock, creating an uneven balance of ownership in the new combined company.

The entire merger process is usually kept secret from the general public, and often fromthe majority of the employees at the involved companies. Since the majority of mergerattempts do not succeed, and most are kept secret, it is difficult to estimate how manypotential mergers occur in a given year. It is likely that the number is very high,

however, given the amount of successful mergers and the desirability of mergers formany companies.

A merger may be sought for a number of reasons, some of which are beneficial to theshareholders, some of which are not. One use of the merger, for example, is to combinea very profitable company with a losing company in order to use the losses as a taxwrite-off to offset the profits, while expanding the corporation as a whole.

Increasing one's market share is another major use of the merger, particularly amongstlarge corporations. By merging with major competitors, a company can come todominate the market they compete in, giving them a freer hand with regard to pricing

and buyer incentives. This form of merger may cause problems when two dominatingcompanies merge, as it may trigger litigation regarding monopoly laws.

Another type of popular merger brings together two companies that make different, butcomplementary, products. This may also involve purchasing a company which controlsan asset your company utilizes somewhere in its supply chain. Major manufacturersbuying out a warehousing chain in order to save on warehousing costs, as well asmaking a profit directly from the purchased business, is a good example of this.PayPal's merger with eBay is another good example, as it allowed eBay to avoid feesthey had been paying, while tying two complementary products together.

A merger is usually handled by an investment banker, who aids in transferringownership of the company through the strategic issuance and sale of stock. Some havealleged that this relationship causes some problems, as it provides an incentive forinvestment banks to push existing clients towards a merger even in cases where it maynot be beneficial for the stockholders.

http://www.wisegeek.com/what-is-a-corporation.htmhttp://www.wisegeek.com/what-is-a-write-off.htmhttp://www.wisegeek.com/what-is-market-share.htmhttp://www.wisegeek.com/what-is-a-corporation.htmhttp://www.wisegeek.com/what-is-a-supply-chain.htmhttp://www.wisegeek.com/what-are-manufacturers.htmhttp://www.wisegeek.com/what-is-investment-banking.htmhttp://www.wisegeek.com/what-is-investment-banking.htmhttp://www.wisegeek.com/what-are-manufacturers.htmhttp://www.wisegeek.com/what-is-a-supply-chain.htmhttp://www.wisegeek.com/what-is-a-corporation.htmhttp://www.wisegeek.com/what-is-market-share.htmhttp://www.wisegeek.com/what-is-a-write-off.htmhttp://www.wisegeek.com/what-is-a-corporation.htm

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Procedure of Bank Merger

The procedure for merger either voluntary or otherwise is outlined in the

respective state statutes/ the Banking regulation Act. The Registrars, being the

authorities vested with the responsibility of administering the Acts, will be

ensuring that the due process prescribed in the Statutes has been complied with

before they seek the approval of the RBI. They would also be ensuring

compliance with the statutory procedures for notifying the amalgamation after

obtaining the sanction of the RBI.

Before deciding on the merger, the authorized officials of the acquiring bank

and the merging bank sit together and discuss the procedural modalities and

financial terms. After the conclusion of the discussions, a scheme is prepared

incorporating therein the all the details of both the banks and the area terms and

conditions.

Once the scheme is finalized, it is tabled in the meeting of Board of directors of

respective banks. 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.

After the Board approval of the merger proposal, an extra ordinary general

meeting of the shareholders of the respective banks is convened to discuss the

proposal and seek their approval.

After the board approval of the merger proposal, a registered valuer is appointed

to valuate both the banks. The valuer valuates the banks on the basis of its share

capital, market capital, assets and liabilities, its reach and anticipated growth and

sends its report to the respective banks.

Once the valuation is accepted by the respective banks , they send the proposal

along with all relevant documents such as Board approval, shareholders

approval, valuation report etc to Reserve Bank of India and other regulatory

bodies such Security & exchange board of India SEBI for their approval.

After obtaining approvals from all the concerned institutions, authorized officials

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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 , a merger and acquisition agreement

is signed by the bank

RBI Guidelines on Mergers & Acquisitions 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, it has been decided to frame guidelines to encourage merger/amalgamation

in the sector.

Although the Banking Regulation Act, 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, of RBI for an order, inter alia, for sanctioning a

scheme of amalgamation or reconstruction.

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. While the State

Acts specifically provide for merger of co-operative societies registered under them,

the position with regard to take 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, it is felt that, if all concerned including administrators of the concerned Acts are

agreeable to order merger/ amalgamation, RBI may consider proposals on merits

leaving the question of compliance with relevant statutes to the administrators of the

Acts. In other words, Reserve Bank will confine its examination only to financial

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aspects and to the interests of depositors as well as the stability of the financial

system while considering such proposals.

ICICI merger creates India's 2nd largest bank

ICICI create the nation's first universal bank, or one-stop provider of virtually all types offinancial services.The merged entity represent ICICI to India's second-largest bankafter state-run colossus State Bank of India, which along with its subsidiaries accountsfor a third of the Indian banking industry's loans and deposits.

"This is basically a survival move from ICICI, as their core business doesn't look toogood and they need some kind of a bank because only a bank has access to low-cost

funds."

Another reason for merging is to get access to cheaper funds after the Reserve Bank ofIndia said it would begin processing applications to create universal banks. The movetowards a universal bank will be positive for the firm in the long term.

Current rules prohibit ICICI and other long-term lenders from raising deposits of lessthan one-year maturity, which usually pay lower rates of interest. But that restriction isnot applicable to commercial banks.

That was enable ICICI to compete more effectively in the retail finance market

dominated by banks, to compensate for slowing loan demand from corporations and forbig projects.

MERGER OF ICICI BANK WITH ICICI LTD.

India's largest finance company and largest private bank were merging on 31 March,2002, thus creating the nation's first universal bank, or one-stop provider of virtually alltypes of financial services.

The merged entity was create India's second-largest bank after state-run colossusState Bank of India, which along with its subsidiaries accounts for a third of the Indianbanking industry's loans and deposits. The swap ratio has been decided at 2:1 that is 1share of ICICI Bank for every 2 shares held in ICICI Ltd.

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It is also include merger of two ICICI subsidiaries, namely, ICICI Personal FinanceServices Limited and ICICI Capital Services Limited with ICICI Bank. The AmericanDepository Shares (ADS) holder of ICICI would be issued five ADS of ICICI Bank inexchange for four ADS of ICICI.

The ICICI universal bank was control assets of Rs 940 billion, surpassed only by SBI'sRs 3.16 trillion and ahead of third-placed state-run Industrial Development Bank of Indiawith Rs 718 billion.

The merged entities have a capital base of Rs 95 billion, 8,300 employees and a hugenationwide branch network.

As of September 30, 2002, ICICI Bank had 396 branches, India's largest ATM networkof 601 automatic teller machines, and 3.2 million retail customers, including bothdepositors and borrowers.

ICICI founded ICICI Bank eight years ago and owns a 46 per cent stake. Bothcompanies are listed on the New York Stock Exchange and are based in Bombay, theIndian financial capital.

Financials

Before merging financial statements of two firms:-

ICICI Bank (Rs. In Crs.)

Particulars Q2 01-02 Q2 00-01 % Change H1 FY02 H1 FY01%

Change

Interest income 464.69 287.34 61.7 933.0 570.9 63.4

Other Income 95.11 34.12 178.8 222.3 65.3 240.2

Total Income 559.80 321.46 74.1 1155.3 636.2 81.6

Operatingexpenses

139.26 71.56 94.6 277.4 126.2 119.7

Interest expense 323.58 191.36 69.1 642.1 389.5 64.9

Gross Profit 96.96 58.54 65.6 235.6 120.4 95.7

Provisions & cont. 1.25 22.43 -94.4 46.91 36.5 28.5

PBT 95.71 36.11 165.1 188.7 83.9 124.9

Tax 29.56 6.05 388.6 57.3 13.7 318.1PAT 66.15 30.06 120.1 131.4 70.2 87.2

Int. exp/Int. inc.(%)

69.6 66.6 68.8 68.2

NPM (%) 11.8 9.4 11.4 11.0

EPS (Rs) 3.00 1.53 5.96 3.57

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Financial Highlights:

Net Profit up by 120 per cent to Rs 66.2 crs. Operating Profit up by 66 per cent to Rs 97 crs. Total Deposits up by 80 per cent to Rs 17515 crs since September 00. Total customer assets up by 80.4 per cent to Rs 11409 crs. Return on Assets up from 1.29 per cent to 1.37 per cent on annualized basis. Return on Net Worth up from 11.85 per cent to 19.07 per cent on annualized

basis. Market share in Deposits up from 0.97 per cent to 1.52 per cent in the first half. Market share in customer assets up from 1.26 per cent to 2.01 per cent in first

half. Cost to Income ratio up from 51.2 per cent to 54.1 per cent in first half.

ICICI Ltd.

Particulars Q2 FY02 Q2 FY01%

ChangeH1 FY02 H1 FY01

%Change

Income fromOperations

2381.17 2191.91 8.6 4809.7 4329.68 11.1

Other Income 24.49 15.01 63.2 47.86 31.04 54.2

Total Income 2405.66 2206.92 9.0 4857.56 4360.72 11.4

Total Expenditure 195.19 193.09 1.1 410.6 397.88 3.2

Interest Expense 1739.33 1639.56 6.1 3474.48 3176.08 9.4

Gross Profit 471.14 374.27 25.9 972.48 786.76 23.6

Depreciation 115.28 97.35 18.4 230.98 196.37 17.6

PBT 355.86 276.92 28.5 741.5 590.39 25.6

Provision for Tax

Current Tax 26.45 23 15.0 74.45 49 51.9

Deffered Tax 47.55 0 59.55 0

PAT 281.86 253.92 11.0 607.5 541.39 12.2

Int. exp/Total

Income73% 75% 72% 73%

NPM 14.9% 12.6% 15.4% 13.6%

EPS 3.6 3.2 7.7 6.9

Financial Highlights:

Net Profit up by 11 per cent to Rs 282 crs. Total assets up by 8.7 per cent to Rs 74371 crs. Return on Assets remained stable at 1.8 per cent on an annualized basis in the

first half.

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Return on Net Worth up from 13.5 per cent to 14.7 per cent on annualized basisin the first half.

Overheads / Net Income from Operations down from 18.5 per cent to 14.2 percent on an annualized basis in the first half.

Overheads / Average net assets down from 0.6 per cent to 0.5 per cent on an

annualized basis in the first half.

MERGER OF ICICI BANK WITH BANK OF MADURA

The merger between ICICI Bank and Bank of Madura (BoM) is a remarkable one. The

pre--merger market capitalization of ICICI Bank was roughly Rs.2500 crore while BoM

was at roughly Rs.100 crore. BoM is known to have a poor asset portfolio.

As a benchmark calculation, however, suppose we pretend that there are no synergies,and focus on a purely financial evaluation of the merged entity. This is not easy to do

using conventional accounting measures. Instead, arguments based on option pricing

theory yield useful insights.

In applying these ideas to ICICI Bank and to BoM, we need to believe that the stock

market effectively processes information to produce estimates of the price and volatility

of the shares of both these banks. This assumption is suspect, because both securities

have poor stock market liquidity. Hence, we should be cautious in interpreting the

numbers shown here. There are many other aspects in which this reasoning leans on

models, which are innately imperfect depictions of reality.

Pre-Merger status ofICICI Bank: The pre--merger status of ICICI Bank is as follows: ithad liabilities of Rs.12,073 crore, equity market capitalization of Rs.2,466 crore andequity volatility of 0.748. Working through options reasoning, we find that this shareprice and volatility are consistent with assets worth Rs.13,249 crore with volatility 0.15.Thus, ICICI bank had assets which are 9.7% ahead of liabilities, which is roughlyconsistent with the spirit of the Basle Accord, and has leverage of 5.37 times.

Pre-Merger Status ofBank of Madura: The pre--merger status of Bank of Madura is asfollows: it had liabilities of Rs.4,444 crore, equity market capitalization of Rs.100 croreand equity volatility of 0.69. Working through options reasoning, we may say that thestock market thinks that its assets are worth Rs.4,095 crore with a volatility of 0.02.Hence, BoM is bankrupt (with assets which are Rs.350 crore behind liabilities) and hasa leverage of 41 times. If we needed to bring BoM up to a point where its assets were10% ahead of liabilities, which is broadly consistent with the Basle Accord, this wouldrequire an infusion of Rs.800 crore of equity capital.

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How do we combine these to think of the merged entity? Assets and liabilities areadditive, so the total assets of the merged entity would prove to be roughly Rs.17,345crore and the liabilities would prove to be Rs.16,517 crore. The merged entity wouldhence need roughly Rs.800 crore of fresh equity capital in order to come up to a pointwhere assets were at least 10% ahead of liabilities.

How can we estimate the market capitalization of the merged entity? The value of equityis the value of a call option on the assets of the merged entity. Pricing the call requiresan estimate of the volatility of the merged assets, i.e. it requires a knowledge of theextent to which the assets of the two banks are uncorrelated. We find that using valuesof the correlation coefficient ranging from 80% to 95%, the volatility of assets of themerged entity proves to be around 0.12. In this case, the valuation of the call option, i.e.an estimate of the market capitalization of the merged entity, proves to be roughlyRs.2,500 crore.

This number is not far from the pre--merger market capitalization of ICICI Bank, which

was Rs.2,466 crore. Hence, we can say that on purely financial arguments, the mergeris roughly neutral to ICICI Bank shareholders if BoM was merged into ICICI Bank forfree. Indeed, if banking regulators took their jobs more seriously, theywould force theshareholders of BoM to walk into such a merger at a zero share price as a way ofreducing the number of bankrupt banks in India by one. Such a forced-merger would bea politically easier alternative for the RBI when compared with closing down BoM.

The shareholders of ICICI Bank have paid a non-zero fee for BoM. This reflects a hopethat the products and processes of ICICI Bank will rapidly improve the value of assets ofBoM in order to compensate. In addition, the merged entity will have to rapidly raiseroughly Rs.800 crore of equity capital to obtain a 10% buffer between assets and

liabilities.

Hence, this proposed merger is a godsend for BoM, which was otherwise a bankruptentity which was headed for closure given the low probability that it would manage toraise Rs.800 crore of equity on a base of Rs.100 crore of market capitalization. It isuseful to observe that BoM probably did not see things in this way, given the willingnessof India's banking regulators to interminably tolerate the existence of bankrupt banks.Closure of BoM would normally involve pain for BoM's shareholders and workers;instead both groups will get an extremely pleasant ride if the merger goes through.

The proposed merger is a daunting problem for ICICI Bank. It will need to rapidly find

roughly Rs.800 crore in equity. If India's banking regulators were serious about capitaladequacy, ICICI Bank should have to pay roughly zero to merge with BoM (it is doing afavor to BoM and to India's banking system); instead ICICI Bank has paid a positiveprice for BoM. The key question that will be answered in the next two/three years is: WillICICI Bank's superior knowledge of products and processes revitalise the assets andemployees of BoM, and generate shareholder value in the merged entity? ICICI's topmanagement clearly thinks so, and it would be a very happy outcome if this did indeedhappen.

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The proposed merger is a good thing for India's economy, since the headcount ofbankrupt banks will go down by one, and there is a possibility of obtaining higher valueadded out of the poorly utilized assets and employees of BoM. If the merger goesthrough, then it will reduce the say of the management team of BoM in India's resourceallocation, which is a good thing

Financial standing of ICICI Bank & Bank of Madura

Parameters ICICI Bank Bank of Madura

1998-1999 1999-2000 1998-1999 1999-2000

Net worth 308.33 1129.90 211.32 247.83Total Deposit 6072.94 9866.02 3013.00 3631.00

Advances 3377.60 5030.96 1393.92 1665.42

Net Profit 63.75 105.43 30.13 45.58

Share Capital 165.07 196.81 11.08 11.08

Capital Adequacy Ratio 11.06% 19.64% 18.83% 14.25%

Gross Advances / Gross

NPs

4.72% 2.54% 8.13% 11.09%

Net Advances /

Net NPs

2.88% 1.53% 4.66% 6.23%

MERGER OF ICICI BANK WITH ANAGRAM FINANCE LTD

Anagram Finance Ltd (AFL), a non banking finance company, amalgamated with the

Industrial Credit and Investment Corporation of India (ICICI). The swap ratio for the

amalgamation is expected to be in the region of 1:10-1:15.

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Financial Performance of Anagram Finance Ltd (Rs. In crore):

PARTICULARS 1997 1996

Total Income 140.06 142.45

Interest 71.33 71.36

Gross Profit 52.72 51.56

Depreciation 48.16 26.70

Tax 00.00 2.25

Net Profit 4.56 22.61

The impending merger of Anagram Finance Ltd (AFL) with the Industrial Credit and

Investment Corporation of India (ICICI) resulting in leveraging the complementary

strengths of the two companies. AFL, which is merged with ICICI, has presence in retail

car and truck financing. It has 50 branches in Gujarat, Rajasthan and Maharashtra and

a depositor base of 250,000. ICICI is expected to benefit from the merger as AFL will

give it a foothold in the western part of India.

MERGER OF ICICI BANK WITH SANGLI BANK

The merger, that was announced on APRIL18, 2007 between ICICI Bank and SANGLIBank. All branches of Sangli Bank functions as branches of ICICI Bank from April 19,said the Reserve Bank of India.

Sangli Bank is an unlisted private bank headquartered at Sangli in Maharashtra. As on

March 31, 2006, Sangli Bank had deposits of Rs. 2,004 crore, advances of Rs. 888

crore, net NPA (non-performing assets) ratio of 2.3 per cent and capital adequacy of 1.6

per cent. Its loss at the end of 2005-06 amounted to Rs. 29 crore.

It has 198 branches and extension counters, including 158 branches in Maharashtra

and 31 branches in Karnataka.

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About 50 per cent of the total branches are located in rural and semi-urban areas and

50 per cent in metropolitan and urban centers. The bank has about 1,850 employees.

ICICI Bank is the second largest bank in India and the biggest in terms of market

capitalization.

As on September 30, 2006, ICICI Bank had total assets of Rs. 282,373 crore. In the six

months ended September 30, 2006, it made a net profit of Rs. 1,375 crore.

It had 632 branches and extension counters and 2,336 ATMs as on that date, and is in

the process of setting up additional branches and ATMs pursuant to authorizations

granted by the RBI. It has about 31,500 employees.

ICICI Bank offers a wide range of financial products and services directly and through

subsidiaries in the areas of life and general insurance, asset management and

investment banking.

Its shares are listed on the Bombay Stock Exchange Limited and the National Stock

Exchange of India Limited and its American Depositary Shares are listed on the New

York Stock Exchange

Merger profile of ICICI Bank and Sangli Bank

(In Rs cr.)

ICICI Bank Sangli Bank

Advances 1,55,400 888

Deposits 1,90,000 2,004

Net NPAs(%) 0.9 2.3

CAR(%) 14.3 1.6

Branches 198 632

(Figures for ICICI Bank are as on Sept.30, 2006 and for Sangli Bank as on March31, 2006)

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5 YEARS BALANCE SHEET OF ICICI BANK LTD.

(All Items in Millions)

03/31/09 03/31/08 03/31/07 03/31/06 03/31/05Assets

Cash & Equivalents -93,406.48 11,326.50 9,208.61 4,104.11 5,300

Receivables N/A 0 0 0 23,317

Notes Receivable N/A 0 0 0 0

Inventories N/A 0 0 0 0

Other Current Assets N/A 0 0 0 1,699

Total Current Assets 6,592.52 11,326.50 9,208.61 4,104.11 30,316

Net Property & Equipment 6,152.52 1,169 1,006.99 931.40 597

Investments & Advances 22,672.76 39,991.69 27,985.31 18,888.01 8,841

Other Non-Current Assets N/A 0 0 0 0

Deferred Charges N/A 0 0 0 278

Intangibles N/A 0 0 0 266

Deposits & Other Assets 48,028.40 68,856.20 53,292 38,403.20 2,422

Total Assets 83,446.22 121,343.47 91,492.97 62,326.79 42,720

Liabilities & Shareholder's Equity

Notes Payable N/A 0 0 0 3,807

Accounts Payable 48,036.56 69,211.20 57,682.97 38,770.45 23,304

Current Portion Long-Term Debt N/A 0 0 0 0

Current Portion Capital Leases N/A 0 0 0 0

Accrued Expenses N/A 0 0 0 410

Income Taxes Payable N/A 0 0 0 0

Other Current Liabilities N/A 0 0 0 556

Total Current Liabilities 48,036.56 69,211.20 57,682.97 38,770.45 28,077

Mortgages N/A 0 0 0 0Deferred Taxes/Income N/A 0 0 0 13

Convertible Debt N/A 0 0 0 0

Long-Term Debt 20,417.10 21,130.94 14,306.15 10,116.89 8,425

Non-Current Capital Leases N/A 0 0 0 0

Other Non-Current Liabilities 4,018.30 19,556.19 13,744.07 8,298.54 3,199

Minority Interest (Liabilities) N/A 182.70 118.22 61.81 47

Total Liabilities 72,471.96 110,081.04 85,851.43 57,247.70 39,761

Shareholder's Equity

Preferred Stock 77 0 0 0 24

Common Stock (Par) N/A 0 0 0 169

Capital Surplus 244.86 365.48 289.87 278.74 2,220

Retained Earnings 10,652.40 10,896.93 5,351.66 4,800.34 472Other Equity N/A 0 0 0 74

Treasury Stock N/A 0 0 0 0

Total Shareholder's Equity 10,974.26 11,262.42 5,641.54 5,079.08 2,959

Total Liabilities & Shareholder's Equity 83,446.22 121,343.47 91,492.97 62,326.79 42,720

Total Common Equity 10,897.26 11,262.42 5,641.54 5,079.08 2,935

Shares Outstanding 556.50 547.50 447.10 444.70 368.20

Book Value Per Share 19.58 20.57 12.62 11.42 7.97

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Annual results of ICICI bank in details:-

Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05Other income 7,603.72 8,810.77 5,929.17 4,983.14 3,416.14

Stock adjustment - - - - -

Raw material - - - - -

Power and fuel - - - - -

Employee expenses 1,971.70 2,078.90 1,616.75 1,082.29 737.41

Excise - - - - -

Admin and selling expenses - - - - -

Research and development

expenses

- - - - -

Expenses capitalised - - - - -

Other expenses 5,073.41 6,075.28 5,073.81 3,918.86 2,561.74

Provisions made 3,808.26 2,904.59 2,226.36 1,594.07 428.80

Depreciation - - - - -

Taxation 1,358.84 898.37 537.82 556.53 522.00

Net profit / loss 3,758.13 4,157.73 3,110.22 2,540.07 2,005.20

Extra ordinary item - - - - -

Prior year adjustments - - - - -

Equity capital 1,113.29 1,112.68 899.34 889.83 736.78Equity dividend rate - - - - -

Agg.of non-prom. shares (Lacs) 11132.51 11126.87 8992.67 8898.24 7367.15

Agg.of non promotoHolding (%) 100.00 100.00 100.00 100.00 100.00

OPM (%) 65.09 64.08 61.22 53.90 60.38

GPM (%) 23.06 20.10 20.31 24.32 23.05

NPM (%) 9.71 10.50 10.75 13.17 15.63

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SWOT ANALYSIS OF ICICI

STRENGHTS:

1)Online Services: ICICI Bank provides online services of all its banking facilities. It

also provides D-Mart account facilities on-line, so a person can access his account from

anywhere he is.

[D-Mart is a dematerialized account opened by a salaried person for purchase & sale of

shares of different companies.]

2)Advanced Infrastructure: Branches of ICICI Bank are well equipped with advanced

technology to provide the customers with taster banking services. All the computerized

machines are located in suitable manner & are very useful to the customers & staff of

the bank.

3) Friendly Staff: The staff of ICICI Bank in all branches is very friendly & helps the

customers in all cases. They provide faster services along with bonding & personal

relationship with the customers.

4) 12 hrs. Banking services: Compared to other bank ICICI bank provides long hrs. of

services i.e. 8-8 services to the customers. This service is one of its kinds & is very

helpful for the customers who are in urgent need of money.

5) Other Facilities to the Customers & Employees: ICICI Bank also provides other

facilities like drinking water facilities, proper sitting arrangements to the customers. Andthere are also proper Ventilation & sanitary facilities for the employees of the bank.

6) Late night ATM services: ICICI bank provides late night ATM services to the

customers. The ATM centers of ICICI bank works even after 11:00pm. at night in certain

branches.

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WEAKNESSES:

1) High Bank Service Charges: ICICI bank charges highly to customers for the

services provided by them when compared to other bank & that are why it is only in the

reach of higher class of society.

2) Less Credit Period: ICICI bank provides credit facilities but only up to limited

period. Even when the credit period is not over it sends reminder letters to the

customers which may annoy them.

OPPORTUNITIES:

1) BankInsurance services: The bank should also provide insurance services. That

means the bank can have a tie-up with an insurance company. The bank will advertise

& promote the different policies introduced by the insurance company & convince their

customers to buy insurance policies.

2) Increase in percentage of Returns on increase: The bank should provide higher

returns on deposits in comparison of the present situation. These will also up to large

extent help the bank earn profits & popularity.

3) Recruit professionally guided students: Bank & Insurance is a special non-aid

course where the students specialize in the functioning & services of the bank & also

are knowledge about various tax policies. The bank can recruit these students through

tie-ups with colleges. Such students will surely prove as an asset to the bank.

4) Associate with social cause: The bank can also associate itself with social causes

like providing relief aid patients, funding towards natural calamities. But this falls in the

4th quadrant so the bank should neglect it

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THREATS:

1) Competition: ICICI Bank is facing tight competition locally as well as internationally.

Bank like CITI Bank, HSBC, ABM, Standard Chartered, HDFC also provide equivalent

facilities like ICICI do and also ICICI do not have consistency in its internationaloperation.

2) Net Services: ICICI Bank provides all kind of services on-line. There can be easy

access to the e-mail ids of the customers through wrong people. The confidential

information of the customers can be leaked easily through the e-mail ids.

3) Decentralized Management: Each branch manager is given the authority of takingdecisions in their respective branches. The decisions made by different managers are

diverse and any one wrong decision can laid to heavy losses to the bank.

4) No Proper Facilities to Uneducated customers: ICICI Bank provides all services

through electronic computerized machines. This creates problems to the less educated

people. But this threat falls in the 4th quadrant so its negligible. The company can avoid

this threat.

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TOWS MATRIX

STRENGTHS WEAKNESSES

OPPORTU

NITIES

S-O STRATEGIES

Strength: Large capital base.

Opportunity: Market expansion.

Strategy: Deep penetration into ruralmarket.

W-O STRATEGIES

Weakness: Workforce responsiveness.

Opportunity: Outsourcing of Non-Core

business.

Strategy: Outsource Customer Care &other E-helps.

TH

REATS

S-T STRATEGIES

Strength: Low operating costs.

Threat: Increased competition fromother private banks.

Strategy: Steps to ensure loyalty byold customers.

W-T STRATEGIES

Weakness: Not equal to internationalstanders.

Threat: Entry of many foreign banks.

Strategy: Consider additional benefits.

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Conclusion

Thus, ICICI has been able to use technology to provide value-added service to its

customers during the last few years. For ICICI, technology is an integral part of their

business. However, their overall progress could have been smoother but for certain

internal and extraneous factors and also a pressure on spread due to a competitive

market. E-banking has become a necessary survival weapon and is fundamentally

changing the banking industry worldwide. Today, the click of the mouse offers

customers banking services at a much lower cost and also empowers them with

unprecedented freedom in choosing vendors for their financial service needs. No

country today has a choice- whether to implement E-banking or not given the global andcompetitive nature of the economy. ICICI have to upgrade and constantly think of new

innovative customized packages and services to remain competitive. The invasion of

banking by technology has created an information age and commoditization of banking

services. ICICI have come to realize that survival in the new e-economy depends on

delivering some or all of their banking services on the Internet while continuing to

support their traditional infrastructure. The rise of E-banking is redefining business

relationships and the most successful banks will be those that can truly strengthen their

relationship with their customers. Without any doubt, the international scope of E-

banking provides new growth perspectives and Internet business is a catalyst for new

technologies and new business processes.

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