Icici Bank and Bank of Rajasthan Merger Essay Example for Free

Icici banking concern and coast of Rajasthan Merger EssayMeaning A general term used to refer to the integrating of companies. A merger is a combination of two companies to form a new company, while an learning is the purchase of one company by another in which no new company is formed. canonical information of icici bank (Industrial creed and Investment Corporation of India patois)ICICI depository financial institution was established by the Industrial Credit and Investment Corporation of India, an Indian financial institution, as a wholly owned subsidiary in 1994. The parent company was formed in 1955 as a joint-venture of the World intrust, Indias public-sector banks and public-sector insurance companies to provide roam financing to Indian industry. 1011 The bank was initially known as theIndustrial Credit and Investment Corporation of India Bank, to begin with it changed its name to the abbreviated ICICI Bank. The parent company was later merged with the bank.Curre nt information Based on 2013 information, it is the second largest bank in India by assets and third largest by market capitalisation. It offers a wide stove of banking products and financial services to corporate and retail customer through a variety of delivery conduct and through its specialised subsidiaries in the areas of investment banking. life and non-life insurance, venture capital and asset management. The Bank has a vane of 3,350 branches and 10,486 ATMs in India, and has a front man in 19 countries.ICICI Bank is one of the big tetrad banks of India, along with SBI,PNB,CANARA BANKBANK OF RAJASTHAN It was set up at Udaipur in 1943 with an initial capital of Rs.10.00 lacs. An lofty Industrialist Late Seth Shri Govind Ram Seksaria was the founder chairman. It was classified as the Scheduled Bank in 1948. The Bank excessively established a rural (Gramin) bank Mewar Anchlik Gramin Bankin Udaipur District in Rajasthan on 26 January 1983.The banks central office is located at Jaipur, although its registered office is in Udaipur. Presently the bank has 463 branches, in 24 states, with 294 of the branches being in Rajasthan. 1. Merger of ICICI and BoR Submitted 2. About BoR and Merger private sector lender Bank of Rajasthan on 18 may 2010 agreed to merge with ICICI Bank, Indias second largest private sector lender Bank of Rajasthan has a market value of $296 million The acquisition of Bank of Rajasthan by ICICI bank is the first consolidation of countrys crowded banking sector since 2008.ICICI Bank and Bank of Rajasthan (BoR) boards on Sunday cleared their merger through an all-share deal, wanted at about 30.41 one million million million rupees. 3. ICICI offered to BoR ICICI offered to pay 188.42 rupees per share, in an all-share deal, for Bank of Rajasthan, a premium of 89 portion to the small lenders closing price on Tuesday, valuing the business at $668 million .ICICI is offering the smaller banks lordly shareholders 25 shares in ICICI for 118 shares of Bank of Rajasthan. 4. The Big Deal The deal, which will give ICICI a sizeable presence in the northwestern desert state of Rajasthan, values the small bank at about 2.9 measure its book value, compared with an Indian banking sector average of 1.84.Bank of Rajasthan has a network of 463 branches and a loan book of 77.81 trillion rupees ($1.7 billion). 5. Why MergerIn March, the Reserve Bank of India appointed consulting firms to conduct a special audit of the books and accounts of Bank of Rajasthan .The goernment has called for consolidation in the banking sector in order to make lenders more competitive but in that respect has been little activity.RBI had imposed a penalty of Rs 25 lakh on Bank of Rajasthan for various violations. 6. Totals of BoR F or the nine-month cease December09, the bank had net loss of Rs 9 crore with total income of Rs 1,086 crore. For the twelvemonth ended March09, Bank of Rajasthan had net profit of Rs 117 crore with total income of Rs 1,507 crore .Operating income fell 11% to Rs 373.78 crore in Q3 December 2009 over Q3 December 2008. 7. Advantage for ICICI and BoR ICICI Bank will gain allowance accountally from the merger as Bank of Rajasthan has a reasonable penetration in its home state. As of March09, it had 463 branches across the country. The deal will also help ICICI tackle increasing competition by HDFC Bank. the deal values BoR at about 2.9 time its book value, compared with an Indian banking sector average of 1.84. 8. Comparison OF ICICI and BoRICICI bank added CASA deposits totaling over 210 billion rupees in the year ended March 2010, compared with 41.63 billion rupees of BoR .ICICI recorded a business per branch of 3 billion rupees compared with 47 million rupees of BoR for fiscal 2009.For the quarter ended Dec 09, BoR recorded 1.05 percent of advances as NPAs, which is far offend than 2.1 percent recorded by ICICI Bank. 9. Why is RBI allowing the merger of this bank? This is very intriguing element wh en RBI claims that there is corporate governance. Finance Minister Pranab Mukherjee claims that there is corporate governance prevailing in SEBI, RBI and Finance Ministry. 10. Hurdles To protest the Bank of Rajasthans management plan to merge with the ICICI Bank, more than 4200 employees of Bank of Rajasthan went on a two-day countrywide strike .SEBI maintains that Tayals hold 55% in the bank and that would make them owners of just about 1.87 crore ICICI Bank shares from new dilution by ICICI Bank, amounting to around 1.75% stake in the bank .ICICI Bank found it scotch as always to invest in this deal on a 100% stock flip basis. 11. Impact of the Deal The deal is very expensive The proposed amalgamation would substantially enhance branch network and presence innorthern and western India for ICICIBank of Rajasthan has a network of 463 branches and a loan book of 77.81 billion rupees ($1.7 billion).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. 12. ICICI After merger PE ratio22.97 10/06/10EPS (Rs)36.10 Mar, 10Sales (Rs crore)5,826.98 Mar, 10Face Value (Rs)10 Net profit margin (%)9.74 Mar, 09Last dividend (%)120 26/04/10Return on average equity7.58 Mar, 091 millions = 10 lakhs1 billions = 100 crores1 trillions = 100,000 crores