Merger of icici and boR


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Merger of icici and boR

  1. 1. Merger of ICICI and BoR<br />Submitted By: Rahul Dixit<br />
  2. 2. About BoR and Merger <br />private sector lender Bank of Rajasthan on 18 may 2010 agreed to merge with ICICI Bank, India's second largest private sector lender<br />Bank of Rajasthan has a market value of $296 million<br />The acquisition of Bank of Rajasthan by ICICI bank is the first consolidation of country's crowded banking sector since 2008.<br />ICICI Bank and Bank of Rajasthan (BoR) boards on Sunday cleared their merger through an all-share deal, valued at about 30.41 billion rupees.<br />
  3. 3. ICICI offered to BoR<br />ICICI offered to pay 188.42 rupees per share, in an all-share deal, for Bank of Rajasthan, a premium of 89 percent to the small lender's closing price on Tuesday, valuing the business at $668 million.<br />ICICI is offering the smaller bank's controlling shareholders 25 shares in ICICI for 118 shares of Bank of Rajasthan.<br />
  4. 4. The Big Deal<br />The deal, which will give ICICI a sizeable presence in the northwestern desert state of Rajasthan, values the small bank at about 2.9 times its book value, compared with an Indian banking sector average of 1.84.<br />Bank of Rajasthan has a network of 463 branches and a loan book of 77.81 billion rupees ($1.7 billion).<br />
  5. 5. Why Merger???<br />In March, the Reserve Bank of India appointed consulting firms to conduct a special audit of the books and accounts of Bank of Rajasthan.<br />The government has called for consolidation in the banking sector in order to make lenders more competitive but there has been little activity.<br />RBI had imposed a penalty of Rs 25 lakh on Bank of Rajasthan for various violations.<br />
  6. 6. Totals of BoR<br />For the nine-month ended December’09, the bank had net loss of Rs 9 crore with total income of Rs 1,086 crore. For the year ended March’09, Bank of Rajasthan had net profit of Rs 117 crore with total income of Rs 1,507 crore.<br />Operating income fell 11% to Rs 373.78 crore in Q3 December 2009 over Q3 December 2008.<br />
  7. 7. Advantage for ICICI and BoR<br />ICICI Bank will gain marginally from the merger as Bank of Rajasthan has a reasonable penetration in its home state. As of March’09, it had 463 branches across the country. The deal will also help ICICI tackle increasing competition by HDFC Bank.<br />the deal values BoR at about 2.9 times its book value, compared with an Indian banking sector average of 1.84.<br />
  8. 8. Comparison OF ICICI and BoR<br />ICICI bank added CASA deposits totaling over 210 billion rupees in the year ended March 2010, compared with 41.63 billion rupees of BoR.<br />ICICI recorded a business per branch of 3 billion rupees compared with 47 million rupees of BoR for fiscal 2009.<br />For the quarter ended Dec 09, BoR recorded 1.05 percent of advances as NPA’s, which is far better than 2.1 percent recorded by ICICI Bank.<br />
  9. 9. Why is RBI allowing the merger of this bank? <br />This is very intriguing factor; when RBI claims that there is corporate governance. Finance Minister PranabMukherjee claims that there is corporate governance prevailing in SEBI, RBI and Finance Ministry.<br />
  10. 10. Hurdles <br />To protest the Bank of Rajasthan's management plan to merge with the ICICI Bank, more than 4200 employees of Bank of Rajasthan went on a two-day countrywide strike.<br />SEBI maintains that Tayals hold 55% in the bank and that would make them owners of nearly 1.87 crore ICICI Bank shares from new dilution by ICICI Bank, amounting to around 1.75% stake in the bank.<br />ICICI Bank found it economic as always to invest in this deal on a 100% stock swap basis.<br />
  11. 11. Impact of the Deal<br />The deal is very expensive<br />The proposed amalgamation would substantially enhance branch network and presence in northern and western India for ICICI<br />Bank of Rajasthan has a network of 463 branches and a loan book of 77.81 billion rupees ($1.7 billion).<br />As on March 2009, BoR had 463 branches and 111 ATMs, total assets of Rs 17,224 crore, deposits of Rs 15,187 crore and advances of Rs 7,781 crore.<br />
  12. 12. ICICI After merger <br />PE ratio22.97 10/06/10<br />EPS (Rs)36.10 Mar, 10<br />Sales (Rs crore)5,826.98 Mar, 10<br />Face Value (Rs)10 <br />Net profit margin (%)9.74 Mar, 09<br />Last dividend (%)120 26/04/10<br />Return on average equity7.58 Mar, 09<br />
  13. 13. Thank You<br />