Statement showing entities evaluation under FIN 46(R)

Accounting Literature: Consolidation of Variable interest Entities –an

interpretation of ARB No. 51

This interpretation of Accounting Research Bulletin No 5, Consolidated

Financial Statements, addresses consolidation by business enterprises of
variable interest entities, which have one or more of the following
characteristics:

1. The equity investment at risk is not sufficient to permit the entity to

finance its activities without additional subordinated financial support
from other parties, which is provided through other interests that will
absorb some or all of the expected losses of the entity.

2. The equity investors lack one or more of the following essential

characteristics of a controlling financial interest:

• The direct or indirect ability to make decisions about the entity’s

activities through voting rights or similar rights
• The obligation to absorb the expected losses of the entity if they
occur, which makes it possible for the entity to finance its activities.
• The right to receive the expected residual returns of the entity if
they occur, which is the compensation for the risk of absorbing the
expected losses

3. The equity investors have voting rights that are not proportionate to their
economic interests, and the activities of the entity involve or are conducted
on behalf of an investor with a disproportionately small voting interest.

The following are the exceptions to the scope of this interpretation:

1. Not for profit organizations are not subject to this interpretation unless
they are used by business enterprises in an attempt to circumvent the
provisions of this Interpretation.

2. Employee benefit plans subject to specific accounting requirements in

existing FASB Statements are not subject to this Interpretation.

3. Registered investment companies are not required to consolidate a

variable interest entity unless the variable interest entity is a registered
investment company.
4. Transferors to qualifying special-purpose entities and “grandfathered”
qualifying special-purpose entities subject to the reporting requirements
of FASB statement No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, do not consolidate
those entities.

5. No other enterprise consolidates a qualifying special-purpose entity or a

“grandfathered” qualifying special-purpose entity unless the enterprise
has the unilateral ability to cause the entity to liquidate or to change the
entity in such a way that it no longer meets the requirements to be a
qualifying special purpose entity or “grandfathered” qualifying special-
purpose entity.

6. Separate accounts of life insurance enterprises as described in the AICPA

Auditing and Accounting Guide, Life and Health Insurance Entities, are not
subject to this Interpretation.

7. An entity that is deemed to be a business need not be evaluated by a

reporting enterprise to determine if the entity is a variable interest entity

8. An enterprise shall not consolidate a governmental organization and shall

not consolidate a financing entity established by a governmental
organization.

9. An enterprise with an interest in a variable interest entity or a potential

variable interest entity created before December 31, 2003, is not required
to apply this interpretation to that entity if that enterprise, after making
an exhaustive effort, is unable to obtain the necessary information.

An entity subject to the scope of the interpretation is called a variable

interest entity. The investments or other interests that will absorb portions of
a variable interest entity’s expected losses or receive potions of the entity’s
expected residual returns are called variable interests. An enterprise that
consolidates a variable interest entity is called the primary beneficiary of
that entity. An enterprise shall determine whether it is the primary
beneficiary only at the time when the enterprise becomes involved with the
entity. An entity that previously was not subject to this interpretation shall
not become subject to it simply because of losses in excess of its expected
losses that reduce the equity investment. A troubled debt restructuring is not
an event that required reconsideration of whether the entity involved is a
variable interest entity.

Fin 46R further states that an equity investment at risk of less than 10
percent of the entity’s total assets shall not be considered sufficient to
permit the entity to finance its activities without additional subordinated
financial support in addition to the equity investment unless the equity
investment can be demonstrated to be sufficient. The demonstration that
equity is sufficient may be based on either qualitative or quantitative
analysis or a combination of both.

Process Note: As per the above requirement of FIN 46(R), we have evaluated
ICICI Bank’s cases and prepared our analysis which is presented below. The
analysis includes all cases where the Bank’s exposure is greater than Rs. 500
million (significance level). We have also ignored cases where the exposure is
more than 500 million but belong to large corporate houses, multinational
companies, government institutions, public sector units.

Test for operating companies financed by ICICI Bank:

• The capitalization of the company on the basis of the last audited financial
statement available is ascertained. All outside liabilities including equity
of the company and ICICI Bank’s exposure as a percentage of total
capitalization is ascertained. In case, the Bank’s exposure to VIE is 50% or
less, it is concluded that the entity does not require consolidation under
the provisions of FIN 46(R).

The following companies have been not been evaluated as they are a part of
a large corporate house/Multinational Companies/public sector
unit/government institution:

S. No Company Name Comment

Not required as Home
1 3I INFOTECH FINANCIAL SOFTWARE Company
A E ROTOR HOLDING BV/SUZLON ENERGY/SE DRIVE
2 GMBH Large corporate
3 Abu Dhabi Ltd Multinational company
4 ADANI POWER LIMITED. (ADA Large corporate
5 ADANI TRADE & INVESTMENT LIMITED Large corporate
6 ADANI VENTURES LIMITED Large corporate
7 Adlabs Films Ltd. Large corporate
8 AMTEK AUTO LIMITED Large corporate
9 APPOLLO FIBRES LTD. Large corporate
10 ARVIND LIMITED Large corporate
11 AUROBINDO PHARMA LIMITED Large corporate
12 Axis Bank Banking corporation
13 BALRAMPUR CHINI MILLS LTD. Large corporate
14 BANK MOSCOW BUSINESS WORLD Banking corporation
15 Bharat Aluminium Co Ltd. Large corporate
16 BORSE DUBAI LIMITED Multinational company
17 CAIXA D'ESTALVIS I PENSIONS DE BARCELONA Multinational company
18 CALIPSO INVESTMENT PTE LTD Multinational company
19 CALYON Multinational company
20 Ceat Ltd. Large corporate
21 COLOSSUS HOLDINGS PTE LTD Multinational company
22 DABUR INDIA LIMITED Large corporate
23 Dubai World Group Multinational company
24 E.I.D.PARRY (INDIA) LTD Large corporate
25 EKC INTERNATIONAL FZE Multinational company
26 ENMAS ANDRITZ PRIVATE LIMITED Multinational company
27 ESSAR CONSTRUCTIONS (INDIA) LI Large corporate
28 ESSAR GLOBAL LTD Large corporate
29 ESSAR OIL LTD. Large corporate
30 ESSAR STEEL HOLDINGS LIMITED Large corporate
31 ETA ASCON AND STAR GROUP Multinational company
32 ETA STAR HOLDINGS LIMITED Multinational company
33 EUROASIAN VENTURES FZE Multinational company
34 EVEREST INDUSTRIES LIMITED Large corporate
35 First City Monument Bank Banking corporation
36 GITANJALI EXPORTS CORPORATION Large corporate
37 GITANJALI GEMS LTD. Large corporate
38 GMR ENTERPRISES (MAURITIUS) LIMITED Large corporate
39 GMR PROJECTS PVT. LTD. Large Corporate
40 GODREJ AGROVET LIMITED large corporate
41 GOLDEN STATE AIRCRAFT LLC Multinational company
42 Government of Srilanka Government company
43 GUJARAT STATE FERTILIZERS Government company
44 HARYANA STATE CO-OP SUPPLY AND Government company
Not required as Home
45 ICICI BANK EURASIA L.L.C Company
Not required as Home
46 ICICI HOME FINANCE COMPAN Company
Not required as Home
47 ICICI VENTURE FUNDS MANAG Company
48 INDIA E-SECURE LIMITED Government company
49 INDIABULLS FINANCIAL SERV Large corporate
50 INDIAN OILTANKING LTD Government company
51 JAIPRAKASH ASSOCIATES LTD Large corporate
52 JAYPEE INFRATECH LTD. Large corporate
53 JINDAL IRON & STEEL COMPA Large corporate
54 JSW ALUMINIUM LTD. Large corporate
55 KEC INTERNATIONAL LIMITED Large corporate
56 KESORAM INDUSTRIES LIMITED Large corporate
57 KOUTONS RETAIL INDIA LTD Large corporate
58 LANCO HILLS TECHNOLOGY PARK PVT.LTD. Large corporate
59 LANCO INDUSTRIES LIMITED Large corporate
60 MALAYAN BANKING BERHAD Multinational company
61 MAN GLOBAL FZC Multinational company
62 MEGA INTERNATIONAL COMMERCIAL BANK LTD Banking corporation
63 MERCATOR LINES (SINGAPORE) LTD Multinational company
64 NAGPUR-SEONI EXPRESS WAY LIMIT Government company
65 National Aviation Company of I Government Owned
66 NIIT (USA) INC Large corporate
67 Noble Group Ltd. Multinational company
68 OFFICE (INLAND CHEQUE PURCHASE Not required
69 OJSC BANK PETROCOMMERCE Banking corporation
70 OJSC NOMOS-BANK Banking corporation
71 People's Bank Ltd. Banking corporation
 72 PROMSVYAZ BANK Banking corporation
73 PT MADHUCON INDONESIA Multinational company
74 RAIN CII CARBON (INDIA) LIMITE Multinational company
75 RASHTRIYA ISPAT NIGAM LTD. Government company
76 RELIANCE INFOCOMM LTD. Large corporate
77 RENTWORKS INDIA-AGILITY L Special Purpose entity
78 RENTWORKS-RELIANCE LIFE I Large corporate
79 ROSY BLUE TRADING LLC Multinational company
80 RRI INTERNATIONAL LIMITED Multinational company
81 SE Drive Technik GMBH Multinational company
82 SONA AUTOCOMP GERMANY GMBH Large corporate
83 SONA AUTOCOMP USA LLC Large corporate
84 SONA OKEGAWA PRECISION FO Large corporate
85 STEMCOR MESA DMCC Multinational company
86 STERLITE ENERGY LIMI Large corporate
87 STERLITE INDUSTRIES (INDI Large corporate
88 STERLITE INDUSTRIES(I) LT Large corporate
89 STERLITE OPTICAL TECHNOLOGIES LIMITED Large corporate
90 SUNDEW PROPERTIES Multinational company
91 Suzlon Energy Ltd. Large corporate
92 Tata Motors Ltd.(Telco) Large corporate
93 TAURUS OVERSEAS INC Multinational company
94 THE GREAT EASTERN SHIPPING CO.L-SHIP.DIV Multinational company
95 THE INDIAN SEAMLESS METAL Government company
96 THE MADRAS ALUMINIUM CO LTD Government company
97 THE WEST COAST PAPER MILLS LIMITED Large corporate
98 UNITED BREWERIES LTD. Large corporate
99 UPPCL-MAIN-EXPENDITURE A/C Government company
100 URSA Multinational company
101 VVF INTERVEST LLC Multinational company
102 WEALTHSEA PTE. LTD. Multinational company
103 WOCKHARDT LTD. Large corporate
104 WOCKHARDT USA HOLDINGS (SWISS) Large corporate
105 YANTHAI RAFFLES SHIPYARD LIMITED Multinational company
106 ZEE NEWS LTD Large Corporate
107 HAIER TELECOM(INDIA) PVT.LTD. Multinational company
108 DISH TV INDIA LIMITED Large Corporate
109 REDINGTON GULF FZE Multinational company
110 SHYAM TELELINK LIMITED-II A/C Multinational company
111 SISTEMA JSFC Multinational company
112 VA TECH WABAG (SINGAPORE) PTE LTD Multinational company
113 TEXMACO LIMITED Large Corporate
114 THERMAX LIMITED -BOILER & HEATER GROUP Large Corporate
115 YOKOGAWA INDIA LTD( YOKOGAWA BLUESTAR) Multinational company
116 MAHAVIR SPINNING MILLS LT Large corporate
117 ALSTOM PROJECTS INDIA LIMITED Multinational company
118 BATISTE UNLIMITED Special Purpose entity
119 CONSOLIDATED CONSTRUCTN CONSORTIUM LTD. Large corporate
120 DSC LTD. Large corporate
121 LUSTRE GEMS LTD Special Purpose entity
122 MURTHY 4 YOU INFRA SERVIC Special Purpose entity
123 PIRAMAL GLASS LIMITED Large corporate
 124 ROY M MATHEW Multinational company

The following cases have already been assessed during the last reporting
period:

S. No Name of the Company Group

1 ABAN 7 PTE LTD Multinational company
2 ABAN INTL NORWAY AS Large corporate
3 ABAN SINGAPORE PTE LTD Large corporate
4 ADANI AGRI LOGISTICS LTD. Large corporate
5 ADANI GLOBAL PTE LTD Large corporate
6 AIR INDIA CHARTERS LIMITED Government company
7 ALLANA INTERNATIONAL LIMITED Multinational company
8 ALPHA BANK Multinational company
9 APEEJAY SHIPPING LIMITED Large corporate
10 ARVIND PRODUCTS LTD. Large corporate
11 ASAHI INDIA GLASS LIMITED Large corporate
12 BAJAJ ECO-TEC PRODUCTS LTD Large corporate
13 BANGALORE INTERNATIONAL AIRPORT LIMITED Government company
14 BIOMETRIX MARKETING PVT LTD Large corporate
15 DEEP DRILLING4 PTE LTD Multinational company
16 DLF GLOBAL HOSPITALITY LTD Large corporate
17 EMAMI Biotech Pvt Ltd Large corporate
18 EMAMI PAPER MILLS LIMITED Large corporate
19 ESSAR STEEL HAZIRA LIMITED Large corporate
20 ESSAR STEEL LTD Large corporate
21 EVEREADY INDUSTRIES INDIA Large corporate
22 GUJARAT FLUOROCHEMICALS LTD Government company
23 HALDIA PETROCHEMICALS LTD Large corporate
24 HELIOS TERMINAL CORPN PTE LTD Multinational company
25 HINDUSTAN STEELWORKS CONS Public Sector Unit
26 HITECH INFRA LTD SPV of NAVYUGA
Not required as Home
27 IFMR TRUST. Company
28 INDIAN FARMERS FERTILIZER Public Sector Unit
29 IPCA LABORATORIES LIMITED Large corporate
30 ISPAT INDUSTRIES LTD.(ISP Large corporate
31 JAIPRAKASH POWER VENTURES Large corporate
32 JAYASWALS NECO LTD. Large corporate
33 JAYPEE KARCHAM HYDRO CORP Large corporate
34 JAYPEE VENTURES PVT. LTD. Large corporate
35 Jet Airways (India) Ltd Large corporate
36 JINDAL STAINLESS LIMITED Large corporate
37 JINDAL STEEL AND POWER LT Large corporate
38 JINDAL THERMAL POWER COMP Large corporate
39 JSW STEEL (NETHERLANDS) B.V Large corporate
40 JSW STEEL (USA)INC Large corporate
41 JSW STEEL HOLDINGS (USA)INC Large corporate
42 KINGFISHER AIRLINES LTD. Large corporate
43 KIRLOSKAR OIL ENGINES LIMITED Large corporate
44 LANCO ENERGY PRIVATE LIMI Large Corporate
45 LANCO GREEN POWER PRIVATE Large Corporate
46 Lanka IOC Ltd Public Sector Unit
47 MAYTAS INFRA LTD. Large corporate
48 MCLEOD RUSSEL (INDIA) LTD Large corporate
49 MERCATOR LINES LTD. Multinational company
MOBILE TELECOMMUNICATIONS COMPANY INTERNATIONAL
50 B.V Multinational company
51 MUKAND LTD. Large corporate
52 NAGARJUNA CONTRACTING COMPANY LLC Large corporate
53 NAGARJUNA FERTILISERS & C Large corporate
54 NATIONAL THERMAL POWER CO Government company
55 PATI-BEL JOINT VENTURE Multinational company
56 PHILLIPS CARBON BLACK LIM Large corporate
57 PIPILINE INFRASTRUCTURE I Large corporate
58 PSL Ltd. Large corporate
59 RAIN COMMODITIES (USA) INC Multinational company
60 RELIANCE PETROLEUM LTD Large corporate
61 RELIANCE PORTS AND TERMINALS LTD Large corporate
62 RELIANCE UTILITIES LIMITED Large corporate
63 S.C. Parex Banka Multinational company
64 SAMTEL COLOUR LTD Large corporate
65 SUBHIKSHA TRADING SERVICE Large corporate
66 TATA STEEL NETHERLANDS BV (FINCO) Large corporate
67 TATA TELESERVICES LIMITED Large corporate
68 THE GOVT. TELE-COMM. EMPL Government company
69 TURANALEM FINANCE Multinational company
70 UE DEVELOPMENT INDIA PRIVATE L Multinational company
71 UNITED PHOSPORUS LTD Large corporate
72 UNITED SPIRITS (GREAT BRITAIN) Large corporate
73 UNITED SPIRITS LTD. Large corporate
74 USHA MARTIN LTD. Multinational company
75 UTTAM GALVA STEELS LTD Large corporate
76 VADINAR OIL TERMINAL LTD. Large corporate
77 VEDANTA ALUMINIUM LIMITED Large corporate
78 VIDEOCON APPLIANCES LIMITED Large corporate
79 VIDEOCON INDUSTRIES LIMITED Large corporate
80 VSNL NETHERLANDS B.V Large Corporate
81 WEST ASIA MARITIME LTD. Multinational company
82 WESTERN INDIA SHIPYARD LT Government company
83 WHYTE AND MACKAY Multinational company
84 WOCKHARDT FRANCE (HOLDINGS) S Large Corporate
85 BHUSHAN ENERGY LIMITED Large Corporate
86 BHUSHAN STEEL & STRIPS LI Large Corporate
87 CESC LTD Large Corporate
88 Dunlop Tyres International Pty Ltd Multinational company
89 GLENMARK HOLDING SA Multinational company
90 SPENCER RETAIL LIMITED Large corporate-RPG
91 VARUN SHIPPING COMPANY LT Large Corporate
92 MSTC LIMITED Government Company
93 SHRIRAM TRANSPORT FINANCE
94 SPENTEX INDUSTRIES LTD
95 SREI INFRASTRUCTURE FINANCE LIMITED
96 SUGUNA POULTRY FARM LTD.
97 TRANSMISSION CORPORATION
98 UFLEX LIMITED. (FLEX INDS
99 VENKATESHWARA HATCHERIES
100 ADARSH PRIME PROJECTS PVT LIMITED
101 CMS COMPUTERS LIMITED
102 ABG SHIPYARD LTD.
103 BANSI MALL MANAGAMENT COM
104 DEWANCHAND RAMSARAN INDUS
105 Dharti dredging And Infrastruc
106 ENDURANCE TECHNOLOGIES PL
107 GPICL.
108 MARDIA CHEMICALS LIMITED under liquidation
109 NAVAYUGA ENGINEERING COMP
110 NUZIVEEDU SEEDS LIMITED
111 SHARE MICROFIN LTD.
112 SHIV-VANI OIL & GAS EXPLO
113 SPANDANA SPHOORTY FINANCI
114 Teaco Finance SARL
115 WBS FUNDING COMPANY Multinational company

The cases we need to evaluate from the control sheet are for those cases
where the Bank’s exposure as a percentage of total capitalization is greater
than 50%.

These cases are mentioned below:

1. Dewanchand Ramsaran Industries Private Limited : Not to be

consolidated as
• The Bank does not have any direct or indirect liability to make
decisions about the entity’s activities through voting rights or
similar rights, as the Bank does not have any representative as a
director
• The bank has the fixed charge on all the rigs
• The equity investment (share capital, share premium and
reserves and surplus) at risk is more than 10% of the total
assets.

2. Alkor Petroo Limited: Not to be consolidated as

• The Bank does not have any direct or indirect liability to make
decisions about the entity’s activities through voting rights or
similar rights, as the Bank does not have any representative as a
director
• The loan is secured on the corporate guarantee of IVRCL
infrastructures & Projects Limited.
 • The Bank does not have any obligation to absorb any loss which
is not proportional to the contribution made by ICICI Bank.

3. B.W.Highway: Not to be consolidated as

• The Bank does not have any direct or indirect liability to make
decisions about the entity’s activities through voting rights or
similar rights, as the Bank does not have any representative as a
director
• The bank has first charge on all the movable and immovable
fixed assets
• The Bank does not have any obligation to absorb any loss which
is not proportional to the contribution made the Bank
• The total investment at risk sufficient enough to permit the entity
to finance its own activities without additional subordinated
support
• The loan is given on the corporate guarantee of Kamat Hotels
(India) Ltd, M/s. Unity Infraprojects Ltd., BSEL Infrastructure
Realty Ltd.

4. Batiste Unlimited: Not to be consolidated as

• The entity is a SPV created by Reliance- ADAG group.
• The Bank does not any direct or indirect ability to make decisions
about the entity activities.
• The Bank does not have any obligation to absorb any loss which
is not proportional to the contribution made by the Bank.
• The total investment at risk is sufficient enough to permit the
entity to finance its own activities without additional
subordinated support.
• The Bank does not have its own person as director of the Board.

5. Shresht Mining and Metals Pvt Ltd.: Not to be consolidated as

• The Bank does not have any direct or indirect liability to make
decisions about the entity’s activities through voting rights or
similar rights, as the Bank does not have any representative as a
director.
• The Bank is not under any obligation to absorb any loss which is
not proportional to the contribution made by the Bank.

6. Suraj Estate Developers: Not to be consolidated as

• The Bank does not have any direct or indirect liability to make
decisions about the entity’s activities through voting rights or
similar rights, as the Bank does not have any representative as a
director.
• The Bank have first and exclusive charge on the
movable/immovable assets of the company
 • The Bank does not have any obligation to absorb any loss which
is not proportional to the contribution made by ICICI Bank

Hence as per our evaluation, we conclude that there are no cases to be

consolidated as per Fin 46R on account of loans and advances given by the
Bank.

We also did an analysis of a few enterprises which provide services to ICICI

Bank. The cases are mentioned below:

1. NIIT Institute of Finance, Banking and Insurance:

ICICI Bank has been allotted 9,50,000 shares of Rs 10 each of NIIT Institute of
Finance, Banking and Insurance. The remaining 45,00,000 shares have been
allotted to NIIT Limited which is the holding company. NIIT Limited has also
given a loan of Rs 18.5 million to the institute. The maximum strength of the
board is six out of which 4 directors are from NIIT Limited and 2 directors are
from ICICI Bank. ICICI Bank is not required to consolidate this entity as:
• The total investment at risk is sufficient to permit the entity to finance
its activities without additional subordinated support.
• ICICI Bank does not have any obligation to absorb any loss which is not
proportional to the contribution of ICICI Bank.
• ICICI Bank does not have any authority either through voting rights or
similar rights to take decisions about the entity activities which is not
proportional to the shareholding right.
• The equity investment at risk is more than 10% of the total assets of
the company.

2. I Solutions Provider (India) Limited:

ICICI Bank holds 9,500 shares of the company and the remaining 40,500
shares are held by the promoters of the company. ICICI Bank has not
provided any loan to the company. The maximum strength of the board is six
out of which 4 directors are from the promoter and 2 directors are from ICICI
Bank. ICICI Bank is not required to consolidate this entity as:
• The total investment at risk is sufficient to permit the entity to finance
its activities without additional subordinated support.
• ICICI Bank does not have any obligation to absorb any loss which is not
proportional to the contribution of ICICI Bank.
• ICICI Bank does not have any authority either through voting rights or
similar rights to take decisions about the entity activities which is not
proportional to the shareholding right.

3. I Process Services (India) Private Limited:

ICICI Bank holds 9,500 shares of the company and the remaining 40,500
shares are held by the promoters of the company. ICICI Bank has not
provided any loan to the company. The maximum strength of the board is six
out of which 4 directors are from the promoter end and 2 directors are from
ICICI Bank. ICICI Bank is not required to consolidate this entity as:
• The total investment at risk is sufficient to permit the entity to finance
its activities without additional subordinated support.
• ICICI Bank does not have any obligation to absorb any loss which is not
proportional to the contribution of ICICI Bank.
• ICICI Bank does not have any authority either through voting rights or
similar rights to take decisions about the entity activities which is not
proportional to the shareholding right.

From the above analysis, it is clear that ICICI Bank is not required to
consolidate any of the service providers as it does fall in the definition of a
variable interest entity.

Satish Kabra Samip Kumar Das