ICICI BankEstablished in 1994, ICICI Bank is today the second largest bank in India and among the top 150 inthe world. In less than a decade, the bank has become a universal bank offering a well diversifiedportfolio of financial services. It currently has assets of over US$ 79 billion and a marketcapitalization of US$ 9 billion and services over 14 million customers through a network of about 950branches, 3300 ATMs and a 3200 seat call center (as of 2007). The hallmark of this exponentialgrowth is ICICI Bank’s unwavering focus on technology.Key Business DriversICICI Bank was set up when the process of deregulation and liberalization had just begun in India andthe Reserve Bank of India (India’s central bank) had paved the way for private players in the bankingsector, which at that time was dominated by state-owned and foreign banks. Serving the majority ofthe country’s populace, state owned banks had a large branch network, with minimal or no automationand little focus on service. Foreign banks, on the other hand, deployed high-end technology, hadinnovative product offerings, but had a very small branch network that serviced only corporate andindividuals with high net-worth. Sensing an untapped opportunity, ICICI Bank decided to targetIndia’s burgeoning middle class and corporates by offering a high level of customer service andefficiency that rivaled the foreign banks, on a much larger scale, at a lower cost. A crucial aspect ofthis strategy was the emphasis on technology. ICICI Bank positioned itself as technology-savvycustomer friendly bank
CASE STUDY COST SAVING PROPOSALSwastik Limited manufacturers of special purpose machine tools have two divisions which areperiodically assisted by teams of visiting consultants. The management is worried about the studyincrease of expenses in this regard over the years. An analysis of the last year expenses reveals thefollowing: Consultants Remuneration Rs. 250000 Travel and Conveyance Rs. 150000 Accommodation expenses Rs. 600000 Boarding Charges Rs. 200000 Special Allowances Rs. 50000The management estimates accommodation expenses to increase by Rs. 200000 annually.As part of cost reduction drive Swastik Limited is proposing to construct a consultancy centre to takecare of the accommodation requirements of the consultants. This centre will additionally save thecompany Rs. 50000 in boarding charges and Rs. 200000 cost of executive training program hithertoconducted outside the company premises every year.The following details are available regarding the construction and maintenance of the new centre. a) Land at a cost of Rs. 800000 already owned by the company will be used. b) Construction Rs. 1500000 including special furnishing. c) Cost of annual maintenance Rs. 150000 d) Construction cost will be written off (at a uniform rate) over five years being the useful life.Assuming that the write off of the construction cost as aforesaid will be accepted for tax purposes, thatthe rate of tax will be 35% and that the desired rate of return is 15%. You are required to analyze thefeasibility of the proposal and make recommendations.
Case StudyShane, an employee at a top investment bank, was sipping coffee at his desk when the phone rang. Onthe call was his client, John, the CEO of ABC Steel.Shane, Investment Banker John, CEO of ABC SteelShane: Hey John, how are you?John: I‘m fine, thank you. How are you?Shane: I‘m doing good. I hear things are going great for ABC Steel.John: Oh yeah, things are great – the economy is booming and there‘s a lot of demand for ourproducts.Shane: Wow! That‘s nice to hear. I also hear you bagged a big contract.John: Yeah, and we need to build a new production facility soon. But we have a problem…Shane: Tell me about it.John: Well, we need $200 million dollars to fund this new project…Shane: And you want to know how you can raise this money, right?John: Right. We spoke to the bank, but man those interest rates are ridiculous!Shane: I know. But there are other options you know.John: That‘s why I called. I was wondering if you could help us.Shane: Sure, John. Let me do some homework and get back to you. I‘ll call you tomorrow morning?John: Sounds perfect. Thanks Shane!Shane’s OptionsShane thought about John‘s funding requirements. He made a list of all funding options for John‘scompany and filtered the list down to three.
Taking a LoanABC Steel has a good credit rating. So getting a loan from any bank would be easy. But the rates ofinterest are quite high. Also, the new plant will generate revenue only after a few years. This wouldmake immediate repayment difficult, adding to the debt burden. But after few year growth would be35% to 40%.Saving MoneyABC could save a percentage of the profits and build a plant after few years. However, John couldn‘twait that long because this would make it difficult for ABC Steel to meet the demand for steel in thenear future.Stock sellingJohn could raise capital by offering company stocks to the public. Since the steel market is booming, alot of investors would buy ABC‘s shares. But the challenge is to manage the risks and complicationsinvolved in the IPO process, government regulations and market uncertainties.If you were in Shane‘s shoes, what option would you consider and why?