A PROJECT REPORT

ON
“MERGER AND CONSOLIDATION OF ICICI LTD.
AND ICICI BANK”

CONTENTS

Chapter no. Title Page no.?

Executive Summary

1 Objective 7

2 General Introduction 8-36

• Introduction to the Topic 8-29

• Company Profile 30-36

3 Merger Detail 37-66

4 Research methodology 67-73

5 Scope and Limitation 74-75

6 Data Analysis & Interpretation 76-86

7 Finding’s 87-88

7 Conclusions 88-89

Annexure:
a) Bibliography 90-91

1
 OBJECTIVE OF THE STUDY

1. To study about merger and consolidation of bank.

2. To know about services provided by the ICICI bank limited after merging.

3. Analysis of impact of merger on ICICI bank.

4. Study about working of the bank after merge.

2
 INTRODUCTION
We have been learning about the companies coming together to from another
company and companies taking over the existing companies to expand their
business. With recession taking toll of many Indian businesses and the feeling of
insecurity surging over our businessmen, it is not surprising when we hear about
the immense numbers of corporate restructurings taking place, especially in the last
couple of years. Several companies have been taken over and several have
undergone internal restructuring, whereas certain companies in the same field of
business have found it beneficial to merge together into one company. In this
context, it would be essential for us to understand what corporate restructuring and
mergers and acquisitions are all about.

All our daily newspapers are filled with cases of mergers, acquisitions, spin- offs,
tender offers, & other forms of corporate restructuring. Thus important issues both
for business decision and public policy formulation have been raised. No firm is
regarded safe from a takeover possibility. On the more positive side Mergers &

3
Acquisition’s may be critical for the healthy expansion and growth of the firm.
Successful entry into new product and geographical markets may require Mergers
& Acquisition’s at some stage in the firm's development. Successful competition in
international markets may depend on capabilities obtained in a timely and efficient
fashion through Mergers & Acquisition's. Many have argued that mergers increase
value and efficiency and move resources to their highest and best uses, thereby
increasing shareholder value. Opt for a merger or not is a complex affair,
especially in terms of the technicalities involved. We have discussed almost all
factors that the management may have to look into Before going for merger.
Considerable amount of brainstorming would be required by the managements to
reach a conclusion. E.g. A due diligence report would clearly identify the status of
the company in respect of the financial position along with the net worth and
pending legal matters and details about various contingent liabilities. Decision has to
be taken after having discussed the pros & cons of the proposed merger & the
impact of the same on the business, administrative costs benefits, addition to
shareholders' value, tax implications including stamp duty and last but not the least
also on the employees of the Transferor or Transferee Company.

4
5
 MERGER & CONSOLIDATION: OVERVIEW

Merger: A contractual and statutory process by which one corporation (the

surviving corporation) acquires all of the assets and liabilities of another
corporation (the merged corporation), causing the merged corporation to
become defunct.

As part of the merger process, the shareholders of the merged corporation

receive

(1) Payment for their shares in the merged corporation and/or

(2) Shares in the surviving corporation.

Consolidation: A contractual and statutory process by which

(1) Two or more corporations join to become a completely new

corporation (the successor corporation),

(2) The original corporations cease to exist and to do business, and

(3) The successor corporation acquires all of the assets and liabilities of
the original (now defunct) corporations.

6
 MERGER & CONSOLIDATION:
PROCEDURE

Any merger or consolidation is governed by the laws of one (or

more) of the states, each of which sets forth its own procedural
requirements. However, in general:

(1) The boards of directors of each (original)

corporation involved in the proposed transaction
must approve the merger or consolidation plan;

(2) The shareholders of each (original) corporation

involved in the proposed transaction must, thereafter,
approve the merger or consolidation plan by vote at a
called or scheduled shareholders’ meeting;

(3) The approved plan must be filed with the appropriate

state officials; and

(4) Once all state-law formalities have been satisfied,

the state will issue, as appropriate, a certificate of
merger to the surviving corporation or a certificate
of consolidation to the successor corporation.

7
Short-Form Merger: A merger between a parent and a
subsidiary (at least 90% owned by the parent) which can be
accomplished without shareholder approval.

MERGER & CONSOLIDATION:

SHAREHOLDERS’ RIGHTS

While the day-to-day operations of a corporation, and even

the policies governing its ongoing operations, are generally
left to the corporation’s officers and directors, any
“extraordinary” matter – such as a merger or consolidation
– must be approved by the corporation’s shareholders.

If the necessary majority of the corporation’s shareholders

approve a merger or consolidation, it will go forward, and
the shareholders will be compensated as previously
discussed. However, no shareholder who votes against the
transaction is required to accept shares in the surviving or
successor corporation. Instead, he or she may exercise
appraisal rights.

8
Appraisal Right: The right, created by state law, of a
dissenting shareholder who objects to an extraordinary
transaction (such as a merger or consolidation):

(1) To have his shares of the pre-merger or pre-

consolidation corporation appraised, and

(2) To be paid the fair market value of his shares

by the pre-merger or pre-consolidation

corporation.

ASSET PURCHASE

When a corporation acquires all or substantially all of the

assets of another corporation, by direct purchase, the
purchasing (or acquiring) corporation simply extends its
ownership and control over the additional assets.

The acquiring corporation does not need shareholder

approval unless the purchase is to be paid for with stock
and the acquiring corporation must issue additional shares
to make the purchase, in which case its shareholders must
approve the additional shares.

9
 Generally, the acquiring corporation only purchases the
assets, not the liabilities, of the other corporation.
However, there are exceptions when:

(1) The acquiring corporation impliedly or

expressly assumes the seller’s liabilities;

(2) The sale is a de facto merger or

consolidation;

(3) The acquiring corporation continues the

seller’s business andretains the same
personnel; or

(4) The sale is fraudulently executed in an effort

to avoid liability.

STOCK PURCHASE

Stock Purchase: The purchase of a sufficient number of voting

shares of a corporation’s stock, enabling the acquiring
corporation to exercise control over the target corporation.

A stock purchase is generally facilitated by a tender offer to the

target corporation’s shareholders. The tender offer is publicly
10
advertised, available to all shareholders, and offers to pay a
higher-than-market price for shares of the target corporation.

Exchange Tender Offer: An offer to give shares in the acquiring

corporation in exchange for shares in the target corporation.

Cash Tender Offer: An offer to pay cash in exchange for shares

of the target corporation.

A tender offer may be conditioned on receiving a specified

number of outstanding shares in the target corporation by a
specified date.

The terms and duration of, and the circumstances underlying, a

tender offer are strictly regulated by federal securities laws. In
addition, most states impose additional regulations on tender
offers.

11
 TAKEOVER DEFENSES

Takeover Defenses include various measures included in a corporation’s

articles and/or by-laws that automatically take effect in the event of a
proxy fight or unfriendly takeover attempt in order to make the
corporation a substantially less attractive target for the purchaser (e.g.,
“golden parachutes,” “poison pills”), as well as conscious efforts of
management in response to a particular situation (e.g., “crown jewels,”
“white knights”).
TERMINATION

 Dissolution: The formal disbanding of a corporation, which may occur

by
(1) Unanimous action by all shareholders,
(2) Shareholder approval of a dissolution proposal submitted by the
directors,
(3) An act by the authorized officer of the state of incorporation,
(4) Expiration of the time period set forth in the certificate of
incorporation, or
(5) Court order.

 Liquidation: The process by which corporate assets are converted into

cash and distributed among creditors and shareholders according to
specific rules of preference.

GGITM,BHOPAL - 12 -
 Purpose of Mergers & Consolidation

The purpose for an offer or company for acquiring another company shall be
reflected in the corporate objectives. It has to decide the specific objectives to
be achieved through acquisition. The basic purpose of merger or business
combination is to achieve faster growth of the corporate business. Faster growth
may be had through product improvement and competitive position.
Other possible purposes for acquisition are short listed below: -
1) Procurement of supplies:

1. To safeguard the source of supplies of raw materials or intermediary

Product;
2. To obtain economies of purchase in the form of discount, savings in
transportation costs, overhead costs in buying department, etc.;
3. To share the benefits of suppliers economies by standardizing the materials

(2) Revamping production facilities:

1. To achieve economies of scale by amalgamating production facilities through

more intensive utilization of plant and resources;
2. To standardize product specifications, improvement of quality of product,
Expanding
3. Market and aiming at consumers’ satisfaction through strengthening after sale
Services;
4. To obtain improved production technology and know-how from the offered
Company
5. To reduce cost, improve quality and produce competitive products to retain
and improve market share.

GGITM,BHOPAL - 13 -
(3) Market expansion and strategy:

1. To eliminate competition and protect existing market;

2. To obtain a new market outlets in possession of the offered;
3. To obtain new product for diversification or substitution of existing products
and to enhance the product range;
4. Strengthening retain outlets and sale the goods to rationalize distribution;
5. To reduce advertising cost and improve public image of the offered company;
6. Strategic control of patents and copyrights

(4) Financial strength:

1. To improve liquidity and have direct access to cash resource;

2. To dispose of surplus and outdated assets for cash out of combined
enterprise;
3. To enhance gearing capacity, borrow on better strength and the greater assets
backing;
4. To avail tax benefits;
5. To improve EPS (Earning per Share)

(5) General gains

1. To improve its own image and attract superior managerial talents to manage
its affairs;
2. To offer better satisfaction to consumers or users of the product.

GGITM,BHOPAL - 14 -
(6) Own developmental plans

The purpose of acquisition is backed by the offered company’s own

developmental plans.
A company thinks in terms of acquiring the other company only when it has
arrived at its own development plan to expand its operation having examined its
own internal strength where it might not have any problem of taxation,
accounting, valuation, etc. But might feel resource constraints with limitations
of funds and lack of skill managerial personnel’s. It has to aim at suitable
combination where it could have opportunities to supplement its funds by
issuance of securities; secure additional financial facilities eliminate
competition and strengthen its market position.

7) Strategic purpose

The Acquirer Company view the merger to achieve strategic objectives through
alternative type of combinations which may be horizontal, vertical, product
expansion, market extensional or other specified unrelated objectives depending
upon the corporate strategies. Thus, various types of combinations distinct with
each other in nature are adopted to pursue this objective like vertical or
horizontal combination.

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8) Corporate friendliness:

Although it is rare but it is true that business houses exhibit degrees of

cooperative spirit despite competitiveness in providing rescues to each other
from hostile takeovers and cultivate situations of collaborations sharing
goodwill of each other to achieve performance heights through business
combinations. The combining corporate aim at circular combinations by
pursuing this objective.

(9) Desired level of integration:

Mergers and acquisition are pursued to obtain the desired level of integration
between the two combining business houses. Such integration could be
operational or financial. This gives birth to conglomerate combinations. The
purpose and the requirements of the offered company go a long way in selecting
a suitable partner for merger or acquisition in business combinations. Other to
achieve performance heights through business combinations. The combining
corporate aim at circular combinations by pursuing this objective.

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 Types of Merger
Merger or acquisition depends upon the purpose of the offeror company it wants
to achieve. Based on the offerors’ objectives profile, combinations could be
vertical, horizontal, circular and conglomeratic as precisely described below
with reference to the purpose in view of the offeror company.

(A) Vertical combination:

A company would like to takeover another company or seek its merger with that
company to expand espousing backward integration to assimilate the resources
of supply and forward integration towards market outlets. The acquiring
company through merger of another unit attempts on reduction of inventories of
raw material and finished goods, implements its production plans as per the
objectives and economizes on working capital investments. In other words, in
vertical combinations, the merging undertaking would be either a supplier or a
buyer using its product as intermediary material for final production.
The following main benefits accrue from the vertical combination to the
acquirer company i.e.
1. It gains a strong position because of imperfect market of the intermediary
products, scarcity of resources and purchased products;
2. Has control over products specifications.

(B) Horizontal combination:

GGITM,BHOPAL - 17 -
It is a merger of two competing firms which are at the same stage of industrial
process. The acquiring firm belongs to the same industry as the target company.
The mail purpose of such mergers is to obtain economies of scale in production
by eliminating duplication of facilities and the operations and broadening the
product line, reduction in investment in working capital, elimination in
competition concentration in product, reduction in advertising costs, increase in
market segments and exercise better control on market.

C) Circular combination:

Companies producing distinct products seek amalgamation to share common

distribution and research facilities to obtain economies by elimination of cost on
duplication and promoting market enlargement. The acquiring company obtains
benefits in the form of economies of resource sharing and diversification
.
(D) Conglomerate combination:

It is amalgamation of two companies engaged in unrelated industries like DCM

and Modi Industries. The basic purpose of such amalgamations remains
utilization of financial resources and enlarges debt capacity through re-
organizing their financial structure so as to service the shareholders by
increased leveraging and EPS, lowering average cost of capital and thereby
raising present worth of the outstanding shares. Merger enhances the overall
stability of the acquirer company and creates balance in the company’s total
portfolio of diverse products and production processes.
Advantages of Mergers

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Mergers and takeovers are permanent form of combinations which vest in
management complete control and provide centralized administration which are
not available in combinations of holding company and its partly owned
subsidiary. Shareholders in the selling company gain from the merger and
takeovers as the premium offered to induce acceptance of the merger or
takeover offers much more price than the book value of shares. Shareholders in
the buying company gain in the long run with the growth of the company not
only due to synergy but also due to “boots trapping earnings”.
Mergers and acquisitions are caused with the support of shareholders,
manager’s ad promoters of the combing companies. The factors, which motivate
the shareholders and managers to lend support to these combinations and the
resultant consequences they have to bear, are briefly noted below based on the
research work by various scholars globally.

(1) From the standpoint of shareholders

Investment made by shareholders in the companies subject to merger should

enhance in value. The sale of shares from one company’s shareholders to
another and holding investment in shares should give rise to greater values i.e.
the opportunity gains in alternative investments. Shareholders may gain from
merger in different ways viz. From the gains and achievements of the company
i.e. through

(a) Realization of monopoly profits;

(b) Economies of scales;
(c) Diversification of product line;
(d) Acquisition of human assets and other resources not available otherwise;

GGITM,BHOPAL - 19 -
(e) Better investment opportunity in combinations. One or more features would
generally be available in each merger where shareholders may have attraction
and favors merger.

(2) From the standpoint of managers

Managers are concerned with improving operations of the company, managing

the affairs of the company effectively for all round gains and growth of the
company which will provide them better deals in raising their status, perks and
fringe benefits. Mergers where

(3) Promoter’s gains

All these things are the guaranteed outcome get support from the managers. At
the same time, where managers have fear of displacement at the hands of new
management in amalgamated company and also resultant depreciation from the
merger then support from them becomes difficult.
Mergers do offer to company promoters the advantage of increasing the size of
their company and the financial structure and strength. They can convert a
closely held and private limited company into a public company without
contributing much wealth and without losing control.

(4) Benefits to general public

Impact of mergers on general public could be viewed as aspect of benefits and
costs to:
(a) Consumer of the product or services;
(b) Workers of the companies under combination;
(c) General public affected in general having not been user or consumer or the
worker in the companies under merger plan.

GGITM,BHOPAL - 20 -
(a) Consumers
The economic gains realized from mergers are passed on to consumers in the
form of lower prices and better quality of the product which directly raise their
standard of living and quality of life. The balance of benefits in favour of
consumers will depend upon the fact whether or not the mergers increase or
decrease competitive economic and productive activity which directly affects
the degree of welfare of the consumers through changes in price level, quality of
products, after sales service, etc.

(b) Workers community

The merger or acquisition of a company by a conglomerate or other acquiring

company may have the effect on both the sides of increasing the welfare in the
form of purchasing power and other miseries of life. Two sides of the impact as
discussed by the researchers and academicians are: fir style, mergers with cash
payment to shareholders provide opportunities for them to invest this money in
other companies which will generate further employment and growth to uplift
of the economy in general. Secondly, any restrictions placed on such mergers
will decrease the growth and investment activity with corresponding decrease in
employment. Both workers and communities will suffer on lessening job
Opportunities, preventing the distribution of benefits resulting from
diversification of production activity.

(c) General public

GGITM,BHOPAL - 21 -
Mergers result into centralized concentration of power. Economic power is to be
understood as the ability to control prices and industries output as monopolists.
Such monopolists affect social and political environment to tilt everything in
their favors to maintain their power ad expand their business empire. These
advances result into economic exploitation. But in a free economy a monopolist
does not stay for a longer period as other companies enter into the field to reap
the benefits of higher prices set in by the monopolist. This enforces competition
in the market as consumers are free to substitute the alternative products.
Therefore, it is difficult to generalize that mergers affect the welfare of general
public adversely or favorably. Every merger of two or more companies has to
be viewed from different angles in the business practices which protects the
interest of the shareholders in the merging company and also serves the national
purpose to add to the welfare of the employees, consumers and does not create
hindrance in administration of the Government polices

PROCEDURE OF MERGER s & CONSOLIDATION

GGITM,BHOPAL - 22 -
To make a public announcement an acquirer shall follow the following
procedure:

1. Appointment of merchant banker:

The acquirer shall appoint a merchant banker registered as category – I with
SEBI to advise him on the acquisition and to make a public announcement of
offer on his behalf.

2. Use of media for announcement:

Public announcement shall be made at least in one national English daily one
Hindi daily and one regional language daily newspaper of that place where the
shares of that company are listed and traded.

3. Timings of announcement:
Public announcement should be made within four days of finalization of
negotiations or entering into any agreement or memorandum of understanding
to acquire the shares or the voting rights.

4. Contents of announcement:

Public announcement of offer is mandatory as required under the SEBI

Regulations.

Procedure of Bank Merger

GGITM,BHOPAL - 23 -
➢ 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

GGITM,BHOPAL - 24 -
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 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 & Consolidation of

Banks

GGITM,BHOPAL - 25 -
➢ 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. 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 aspects and to the interests of depositors as well
as the stability of the financial system while considering such proposals

GGITM,BHOPAL - 26 -
 BANK PROFILE

GGITM,BHOPAL - 27 -
 ICICI BANK

ICICI Bank is India's second-largest bank with total assets of Rs. 3,634.00
billion (US$ 81 billion) at March 31, 2010 and profit after tax Rs. 40.25 billion
(US$ 896 million) for the year ended March 31, 2010. The Bank has a network
of 2,009 branches and about 5,219 ATMs in India and presence in 18 countries.
ICICI Bank offers a wide range of banking products and financial services to
corporate and retail customers through a variety of delivery channels and
through its specialized subsidiaries in the areas of investment banking, life and
non-life insurance, venture capital and asset management. The Bank currently
has subsidiaries in the United Kingdom, Russia and Canada, branches in United
States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai
International Finance Centre and representative offices in United Arab
Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia.
Our UK subsidiary has established branches in Belgium and Germany. ICICI
Bank's equity shares are listed in India on Bombay Stock Exchange and the
National Stock Exchange of India Limited and its American Depositary
Receipts (ADRs) are listed on the New York Stock Exchange (NYSE)

Officers:

Chairman: K. Vaman Kamath

Managing Director and CEO: Chanda D. Kochhar
Executive Director and CFO: N. S. Kannan

GGITM,BHOPAL - 28 -
Competitors:

HDFC Bank

Punjab National Bank

State Bank of India

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

GGITM,BHOPAL - 29 -
Present Scenario
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.
Branches & ATMs

ICICI Bank has a wide network both in Indian and abroad. In India alone, the
bank has 1,420 branches and about 4,644 ATMs. Talking about foreign
countries, ICICI Bank has made its presence felt in 18 countries - United States,
Singapore, Bahrain, and Hong Kong, Sri Lanka, Qatar and Dubai International
Finance Centre and representative offices in United Arab Emirates, China,
South Africa, Bangladesh, Thailand, Malaysia and Indonesia. The Bank proudly
holds its subsidiaries in the United Kingdom, Russia and Canada out of which,
the UK subsidiary has established branches in Belgium and Germany.

Products & Services

Personal Banking

• Deposits
• Loans
• Cards
• Investments
• Insurance
• Demat Services
• Wealth Management

GGITM,BHOPAL - 30 -
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

Head Office

ICICI Bank
9th Floor, South Towers
ICICI Towers
Bandra Kurla Complex
Bandra (E)
Mumbai

GGITM,BHOPAL - 31 -
PRESENT STOCK MARKET POSITION OF ICICI BANK LIMITED

ICICI Bank Limited (the Bank) is an India-based banking company engaged in

providing a range of banking products and services to corporate and retail
customers through a variety of delivery channels. During the fiscal year ended
March 31, 2009 (fiscal 2009), the Bank had total assets of Rs. 4,826.9 billion
($94.9 billion).

GGITM,BHOPAL - 32 -
 OVERALL
Beta: 1.48

Market Cap (Mil.): Rs939,926.12

Shares Outstanding (Mil.): 1,114.84

Annual Dividend: 12.00

Yield (%): 1.43

FINANCIALS
ICBK.BO Industry Sector

P/E (TTM): 28.01 56.66 38.23

EPS (TTM): -- -- --

ROI: -- 0.00 0.64

ROE: -- 2.29 2.66

GGITM,BHOPAL - 33 -
 MERGER OF ICICI BANK WITH
ICICI.LTD

MERGER OF ICICI WITH ICICI BANK

GGITM,BHOPAL - 34 -
ICICI Bank and ICICI, along with other ICICI group companies, were operating
as a “virtual universal bank”, offering a wide range of financial products and
services. The merger of ICICI and two of its subsidiaries with ICICI Bank has
combined two organizations with complementary strengths and products and
similar processes and operating architecture. The merger has combined the large
capital base of ICICI with the strong deposit raising capability of ICICI Bank,
giving ICICI Bank improved ability to increase its market share in banking fees
and commissions, while lowering the overall cost of funding through access to
lower-cost retail deposits. ICICI Bank would now be able to fully leverage the
strong corporate relationships that ICICI has built, seamlessly providing the
whole range of financial products and services to corporate clients. The merger
has also resulted in the integration of the retail finance operations of ICICI, and
its two merging subsidiaries, and ICICI Bank into one entity, creating an
optimal structure for the retail business and allowing the full range of asset and
liability products to be offered to all retail customers.
The share exchange ratio approved for the merger was one fully paid-up equity
share of ICICI Bank for two fully paid-up equity shares of ICICI. This was
determined on the basis of a comprehensive valuation process incorporating
international best practices, carried out by two separate financial advisors and
an independent accounting firm. The equity shares of ICICI Bank held by ICICI
have not been cancelled in the merger. In accordance with the provisions of the
Scheme of Amalgamation, these shares have been transferred to a Trust to be
divested by appropriate placement. The proceeds of such divestment would
accrue to the merged entity. With the merger taking effect, the paid-up share
capital of the Bank has increased to Rs. 6.13 billion, comprising 613 million
shares of Rs.10 each.
The merger process was complex and posed significant challenges. The merger
of a financial institution with a commercial bank to create the country’s first

GGITM,BHOPAL - 35 -
universal bank had significant implications for the entire financial system. It
therefore involved extensive dialogue with the Government and Reserve Bank
of India. The merger also posed the challenge of compliance with regulatory
norms applicable to banks in respect of ICICI’s assets and liabilities,
particularly the reserve requirements. This required resources of about Rs.
210.00 billion to be raised in less than six months for investment in Government
securities and cash reserves, in addition to normal resource mobilization for
ongoing business requirements. We leveraged our strong retail franchise,
including the distribution network acquired in the merger of the erstwhile Bank
of Madura Limited with ICICI Bank in fiscal 2001, to grow our retail deposit
base. We also achieved significant success in securitizing loans and developing
a market for securitized debt in India. We also adopted proactive strategies to
minimize the duration of our Government securities portfolio, in order to
mitigate the interest-rate risk arising from the acquisition of a portfolio of about
Rs. 180.00 billion in five months.
As both ICICI and ICICI Bank were listed in Indian and US markets, effective
communication to a wide range of investors was a critical part of the merger
process. It was equally important to communicate the rationale for the merger to
international and domestic institutional lenders and to rating agencies. The
merger process was required to satisfy legal and regulatory procedures in India
as well as to comply with United States Securities and Exchange Commission
requirements under US securities laws.The merger of India’s largest financial
institution with its largest private sector bank alsoinvolved significant
accounting complexities. In accordance with best practices in accounting, the
merger has been accounted for under the purchase method of accounting under
Indian GAAP. Consequently, ICICI’s assets have been fair-valued for their
incorporation in the books of accounts. The fair value of ICICI’s loan portfolio
was determined by an independent valuer, while ICICI’s equity and related
investment portfolio was fair-valued by determining its markto- market value.

GGITM,BHOPAL - 36 -
The total additional provisions & write-offs required to reflect the fair values of
ICICI’s assets determined at Rs. 37.80 billion have de-risked the loan and
investment portfolio and created a significant cushion in the balance sheet,
while maintaining healthy levels of capital adequacy. The merger was approved
by the shareholders of both companies in January 2002, by the High Court of
Gujarat at Ahmedabad in March 2002, and by the High Court of Judicature at
Mumbai and the Reserve Bank of India (RBI) in April 2002. The challenge of
mobilization of resources for compliance with statutory reserve requirements
applicable to banks, on ICICI’s outstanding liabilities on merger, was met
successfully within the target date of March 30, 2002. While the merger became
effective on May 3, 2002, in accordance with the provisions of the Scheme of
Amalgamation and the terms of approval of RBI, the Appointed Date for the
merger was March 30, 2002.

GGITM,BHOPAL - 37 -
 Boards of ICICI and ICICI Bank Approve Merger.

The Board of Directors of ICICI Limited (NYSE:IC) and the Board of Directors
of ICICI Bank Limited (NYSE:IBN) in separate meetings at Mumbai, approved
the merger of ICICI with ICICI Bank.

The merger of two wholly-owned subsidiaries of ICICI, ICICI Personal

Financial Services Limited and ICICI of two wholly-owned subsidiaries of
ICICI, ICICI Personal Financial Services Limited and ICICI Capital Services
Limited, with ICICI Bank was also approved by the respective Boards. The
proposal has been submitted to the Reserve Bank of India (RBI) for its
consideration and approval, and shall be subject to various other approvals,
including the approval of the shareholders of the respective companies, the High
Courts of Mumbai and Gujarat, and the Government of India as may be
required. Consequently, the Appointed Date of merger is proposed to be March
31, 2002, or the date from which RBI's approval becomes effective, whichever
is later. The Scheme of Amalgamation ("the Scheme") approved by the
respective Boards envisages a share exchange ratio of one domestic equity share
of ICICI Bank for two domestic equity shares of ICICI. As each American
Depositary Share (ADS) of ICICI represents five domestic equity shares while
each ADS of ICICI Bank represents two domestic equity shares, the ADS
holders of ICICI would be issued five ADS of ICICI Bank in exchange for four
ADS of ICICI.

The share exchange ratio approved by the Boards of the two entities was based
on a valuation process incorporating international best practices in respect of a
merger of two affiliate companies. JM Morgan Stanley was appointed by ICICI
to advise it on a fair exchange ratio, while ICICI Bank appointed DSP Merrill

GGITM,BHOPAL - 38 -
Lynch for the same purpose. Thereafter, ICICI and ICICI Bank jointly
appointed the leading accounting firm, Deloitte, Haskins & Sells to recommend
the final share exchange ratio to the Boards of the two entities. The share
exchange ratio has been determined in accordance with best practices in
valuation, using the relative market prices, discounted cash flows and book
values. Davis Polk & Wardwell are the international legal counsel and
Amarchand & Mangaldas & Suresh A. Shroff & Co. are the domestic legal
counsel for the merger.

The Scheme will be filed before the High Courts of Mumbai and Gujarat and
subsequently placed for approval at the meetings of shareholders of the
respective companies. ICICI and ICICI Bank have submitted to RBI the
proposal for the merger and compliance with regulatory norms applicable to
banks, and would adhere to RBI's decision in the matter.

The merged entity would be the second largest bank in India with total assets of
about Rs. 95,000 crore (proforma at September 30, 2001), 396 existing
branches/ extension counters of ICICI Bank, 140 existing retail finance offices
and centres of ICICI, and 8,275 employees. The merged entity would leverage
on its large capital base, comprehensive suite of products and services,
extensive corporate and retail customer relationships, technology-enabled
distribution architecture, strong brand franchise and vast talent pool. The retail
segment will be a key driver of growth for the merged entity, with respect to
both assets and liabilities. The merged entity's competitive edge in the financial
system is reflected in the combined cost-to-income ratio of 27 per cent
(proforma for the half-year ended September 30, 2001), which compares
favourably with that of other Indian banks of comparable size and scale of
operations.

The merger is expected to be beneficial to shareholders of both entities. The

merger would enhance value for shareholders of ICICI through the merged

GGITM,BHOPAL - 39 -
entity's access to low-cost deposits, greater opportunities for earning fee-based
income and the ability to participate in the payments system and provide
transaction-banking services. The merger would enhance value for shareholders
of ICICI Bank through the large capital base and scale of operations, access to
ICICI's strong corporate relationships built up over five decades, entry into new
business segments, higher market share in various business segments,
particularly fee-based services, and access to the vast talent pool of ICICI and
its subsidiaries. The process of integration between ICICI Bank and ICICI is
expected to be smooth due to the strong synergies between the two entities.

Consequent to the merger of ICICI with ICICI Bank, the Board of Directors of
ICICI Bank is proposed to be reconstituted in compliance with the Banking
Regulation Act, 1949 and in accordance with best practices in corporate
governance. It is proposed that the Board of Directors of the merged entity
would be headed by Mr. N. Vaghul as the non-executive Chairman. The
executive management at the Board level would comprise Mr. K. V. Kamath as
Managing Director and Chief Executive Officer, Mr. H. N. Sinor and Mrs.
Lalita D. Gupte as Joint Managing Directors and Mrs. Kalpana Morparia, Mr. S.
Mukherji, Mrs. Chanda D. Kochhar and Dr. Nachiket M. MOR as Executive
Directors. The executive management at the Board level would not constitute
more than one-half of the total strength of the Board.

ICICI currently holds 46% of the paid-up equity share capital of ICICI Bank.
This holding would not be cancelled under the scheme of amalgamation. It is
proposed to be held in trust for the benefit of the merged entity, and divested
through appropriate placement in fiscal 2003. The proceeds from the divestment
will accrue to the merged entity.

At the time of the merger, ICICI Bank would align the Indian GAAP accounting
policies of ICICI to those of ICICI Bank, including a higher general provision
against standard assets. Further, in accordance with international best practices

GGITM,BHOPAL - 40 -
in accounting, ICICI Bank has decided to adopt the "purchase method" of
accounting, which is mandatory under US GAAP, to account for the merger
under Indian GAAP as well. ICICI's assets and liabilities will therefore be fair
valued for the purpose of incorporation in the accounts of ICICI Bank on the
Appointed Date.

Full compliance with the prudential norms applicable to banks on all of ICICI's
existing liabilities is likely to have some adverse impact on the overall
profitability of both entities in fiscal 2002.

In 1998, ICICI had set up the Special Asset Management Group for focus on
recovery and resolution of credit exposures, where the operations of the
borrower companies had been adversely impacted due to systemic or other
factors. This initiative has yielded significant benefits, due to the creation of a
focused team of professionals and development of the specialized skill sets
essential for asset resolution. ICICI is exploring several options for the creation
of an asset reconstruction company, which would own and manage non-
performing loans. ICICI proposes to work actively with the Government of
India, RBI and other institutions and banks to create an enabling framework for
an industry-wide mechanism that would maximize the economic value of
distressed assets in the financial system.

GGITM,BHOPAL - 41 -
 IMPACT OF MERGER OF ICICI BANK WITH ICICI
LIMITED

• Retail Banking

• Wholesale Banking

• Project Finance & Special Assets Management

• International Business

• Corporate Centre

The Project Finance Group comprises our project finance operations for
infrastructure, oil &gas, manufacturing and shipping sectors. The Special Assets
Management Group is responsible for large non-performing loans and accounts
under watch. The International Business Group is responsible for ICICI Bank’s
international operations as well as coordinating the international strategies and
alliances of its subsidiaries and affiliates
The Corporate Centre comprises all shared services and corporate functions,
including finance and secretarial, investor relations, risk management, legal,
human resources and corporate branding and communications.

GGITM,BHOPAL - 42 -
Retail Banking

The retail business is the key driver of ICICI Bank’s growth strategy, with the
objective of diversifying the asset portfolio and building a low-cost stable
resource base. With a complete product suite across both asset and liability
products as well as a wide range of banking services, ICICI Bank is today a
retail financial supermarket with the ability to cross-sell the entire range of
credit and investment products and other banking services to our customers. The
key dimensions of our retail strategy are products, channels and processes,
under a strong customer focus. Changing demographics and the trend towards
upward migration in income levels coupled with existing low retail credit
penetration levels have created a major growth opportunity in retail finance.
ICICI Bank’s retail assets business is capitalizing on this opportunity with a
competitive positioning and strategy comprising innovative products, wide
distribution, strong credit controls and high customer service standards and
rapidly growing volumes in each segment to achieve economies of scale. ICICI
Bank’s retail portfolio (including the portfolio of ICICI Home Finance
Company Limited, its wholly-owned subsidiary) at March 31, 2002 was over
Rs. 76.00 billion, as compared to the combined retail portfolio of ICICI and
ICICI Bank of about Rs. 29.00 billion at March 31, 2001. Our retail asset
products include mortgages, automobile and two-wheeler loans, commercial
vehicles and construction equipment financing, consumer durable loans,
personal loans and credit cards.

In the mortgages business, we expanded our reach to more than 140 locations
across the country. We were the first to introduce adjustable rate home loans,
with interest rates linked to a floating prime lending rate. This product received

GGITM,BHOPAL - 43 -
excellent response from customers cross the country and was a key driver of
growth in the mortgages segment. It also enabled us to price loans competitively
and achieve better asset-liability management. Other products and product
variants introduced this year included loans against existing property as well as
several value-added features – retail property services and home insurance
policies bundled with the loan. During fiscal 2002 we emerged as a leading
player in the mortgages business.
During fiscal 2002 we consolidated our position as clear market leaders in
automobile loans. We expanded our distribution network to 145 cities and
towns across the country. The key drivers of growth were the strength of our
corporate relationships with leading automobile manufacturers, strong
distribution capability and customer service focus. We rapidly increased our
presence in other segments as well. We expanded our two-wheeler business to
over 140 locations. ICICI Bank partners manufacturers in distributing their
products and therefore enjoys preferred status with them. We were able to offer
competitive products to our customers by leveraging economies of scale
resulting from the rapid growth in operations. In the credit cards business we
expanded our distribution to 36 locations. The total number of cards in force
increased by 450,000 to about 650,000 at the end of fiscal 2002. During the year
we launched two co-branded cards, with Hindustan Petroleum Corporation
Limited (HPCL) and BPL Mobile respectively. We also entered the merchant
acquiring business during the year. ICICI Bank is the largest incremental issuer
of cards (including both debit and credit cards) in India. ICICI Bank’s “Ncash”
debit card is a deposit access product that allows cash withdrawals through
ATMs and also enables purchases at merchant establishments with point-of-sale
terminals. The card is valid internationally and earns loyalty points on usage.
Wealso introduced a domestic debit card variant primarily for our payroll
customers. As at March, 31, 2002, ICICI Bank had issued about 600,000 debit

GGITM,BHOPAL - 44 -
cards. During fiscal 2002, ICICI Bank also implemented two smart card
projects, at a corporate worksite and an educational institution.
In order to reduce our funding cost and create a stable funding base, we
continued our focus on retail deposits in fiscal 2002. The number of customer
accounts increased from 3.2 millionto over 5 million. ICICI Bank’s life stage
segmentation strategy offering differentiated liability products to various
categories of customers (kid-e-bank for children, bank@campus for students,
Power Pay for salaried employees, ICICI Select for high net worth individuals
and Business Multiplier for businessmen) contributed significantly to the rapid
growth in the retail ability base. They have developed a successful third party
distribution model with a growing market share in distribution of mutual funds,
Reserve Bank of India relief bonds and insurance products
.
This allows us to meet all customer needs through products that are
complementary to those that we offer directly, while leveraging our distribution
capability to earn fee income from third parties. They also provide online
trading facilities through www.ICICIdirect.com. ICICI direct provides complete
end-to-end integration for seamless electronic trading on the stock exchanges
and has been rated “TxA1” by CRISIL, indicating highest ability to service
broking transactions. ICICI direct has also launched India’s first Digitally
Signed Contract Notes (DSCN), which allows a customer to view and print their
contract notes online. ICICI Bank has pioneered a multi-channel distribution
strategy in India, giving our customers24x7 access to banking services. The
enhanced convenience that this offers the customer has supported our customer
acquisition efforts and migration of customer transactions from branches to
lower-cost technology-enabled channels. During the year, ICICI Bank
continued to expand its non-branch channels aggressively and successfully
migrated customer transaction volumes to these channels. Only 35% of
customer induced transactions now take place at branches. ICICI Bank set up

GGITM,BHOPAL - 45 -
over 500 new ATMs during fiscal 2002, taking the ATM network to over 1,000
ATMs. Master, Cirrus and Maestro cards can now be used on all our ATMs.
Other new initiatives on ATMs include multilingual screens, bill payments and
prepaid mobile card recharge facility.

ICICI Bank now has over one million retail Internet banking accounts. Retail
Internet banking customers can view their bank accounts, transfer funds
between their own accounts and to any other ICICI Bank account. ICICI Bank
also offers the facility of transferring funds to accounts in any branch of any
bank, in eight cities through Cheques, India’s first Internet based inter-bank
fund transfer facility. Customers can also open a fixed or recurring deposit,
make a stop-cheque request and inquire into the status of a cheque online.
Customers can write to the account manager through the secure channel and
subscribe to account statement by e-mail. ICICI Bank offers its customers the
facility of paying utility bills online in over 120cities in India. All major online
shopping services are linked to ICICI Bank’s online payments facility. ICICI
Bank has also focused on the call centre as a key channel. ICICI Bank’s call
centre can now be accessed by customers in 100 cities, and is India’s largest
domestic call centre. The call centre is a single point of contact for customers
across all products. It provides various self-service options and also
personalized communication with customer service officers for a full range of
transactions and account and product related queries. The call centre is now
evolving into a complete relationship management channel not only for
complaint resolution but also for cross-selling on inbound calls. The call centre
uses state-of-the-art voice-over Internet-protocol technology and cutting-edge
desktop applications to provide a single view of the customer’s relationship.
ICICI Bank’s mobile banking services provide the latest information on account
balances previous transactions, credit card outstanding and payment status and
allow customers to request a chequebook or account statement.

GGITM,BHOPAL - 46 -
Corporate Banking

ICICI Bank’s corporate banking strategy is based on providing customized

financial solutions to clients, tailored to meet their specific requirements. The
corporate banking strategy focuses on careful management of credit risk and
adequate return on risk capital through risk-based pricing and proactive
portfolio management, rapid growth in fee-based services and extensive use of
technology to deliver high levels of customer satisfaction in a cost effective
manner. Our focus in fiscal 2002 was on expanding the range and depth of our
corporate relationships, acquiring new clients and cross-selling all our corporate
banking products and services to the existing client base. We continued to focus
on working capital finance for highly-rated clients ,structured transactions and
channel financing. In longer-term loans, in the absence of traditional capital
expenditure financing opportunities and limited corporate-credit growth, ICICI
Bank has taken advantage of emerging opportunities in the public sector
disinvestment process, through structuring and advisory services. We focused
strongly on transaction banking services such as cash management and non-
fund-based facilities such as letters of credit and bank guarantees to increase our
market share in banking fees and commissions. We have already achieved
significant success in cash management services, with total volumes of Rs.
1.72trillion for fiscal 2002. We also targeted high value current accounts to
reduce our cost of funding. We implemented a customer-level profitability-
based pricing model. As the pioneers of securitization in India, we were
successful in creating a market for securitized corporate debt, which would help
to expand and deepen the debt markets .During the year we enhanced our
technology-based delivery platforms and expanded the scope of our web-based
services. ICICI Bank provides Internet banking services to its wholesale
banking clients through ICICImarkets.com, a finance portal that is the single
point web-based interface for all our corporate clients. The Corporate Internet

GGITM,BHOPAL - 47 -
Banking (CIB) platform of ICICI markets allows clients to conduct banking
business online in a secure environment. Clients can view accounts online,
transfer funds between their own accounts or to other accounts, and avail of
other such services. ICICI Bank offers forex trading through the Internet on FX
Online and Government of India securities trading through Debt Online. The
corporate banking business is organized into special relationship groups for the
Government and public sector, large corporate, emerging corporate and agri-
business. ICICI Bank has strong linkages with several large public sector
companies, and is leveraging

CORPORATE STRATEGY

These relationships to expand the range of services that it offers to them. ICICI
Bank has also established relationships with several state governments, having
financed state-level enterprises. Besides, ICICI Bank has been empanelled in
eight states for collection of sales tax. ICICI Bank is also involved with several
other state government initiatives. In the corporate client segment, ICICI Bank
is focusing on increasing its share of banking business with its corporate clients.
In the emerging corporate segment, ICICI Bank’s focus is on establishing
structured financing arrangements and implementing a liability-led business
strategy, providing sophisticated banking services to its clients. ICICI Bank has
also developed several innovative structures for agri-business, including dairy
farming. ICICI Bank is working with state governments and agri-based
corporate to evolve viable and sustainable systems for financing agriculture.
ICICI Bank’s dedicated Structured Products & Portfolio Management Group,
with access to expertise in financial structuring and related legal, accounting
and tax issues, actively supports the business groups in designing financial
products and solutions. This Group is also responsible for managing the asset

GGITM,BHOPAL - 48 -
portfolio by structuring portfolio buyouts and sell-downs. The enhanced capital
base consequent to the merger will significantly increase ICICI Bank’s ability to
leverage its strong corporate relationships and provide non-fund-based facilities
and trade finance services to its corporate clients. ICICI Bank is leveraging
technology to set up centralized processing facilities to process large transaction
volumes, thereby benefiting from economies of scale. A dedicated Corporate
Operations & Technology Group has been set up for developing and managing
back-office processing and delivery capabilities.

Treasury

The principal responsibilities of the Treasury include management of liquidity

and exposure to market risks, mobilization of resources from domestic and
international financial institutions and banks, and proprietary trading.
Additionally, the Treasury is leveraging its strong relationships with financial
sector players to provide a wide range of banking services in addition to its
liability products. The Treasury is also responsible for ICICI Bank’s capital
markets and custodial services operations.

During fiscal 2002, the focus was on the challenge of meeting regulatory
reserve requirements on ICICI’s liabilities prior to the merger for meeting the
reserve requirements and managing the interest-rate risk arising from the
acquisition of Government securities aggregating about Rs. 180.00 billion in an
environment of low interest rates. Yields on Government securities reached
historic lows during 2001-2002 as a consequence of the easy liquidity
environment and RBI’s soft-interest-rate policy. To minimize the risk of
adverse mark-to-market impact on any rise in interest rates, ICICI Bank adopted

GGITM,BHOPAL - 49 -
a strategy of acquiring securities of lower duration. A significant portion of the
requirement of Government securities was acquired through active participation
in primary auctions of floating-rate bonds and short-maturity Treasury bills.
\Prior to the merger, in addition to its resource mobilization from the wholesale
segment, ICICI had raised a foreign currency loan of USD 75 million at LIBOR
+ 70 basis points, setting a new benchmark for a five-year borrowing by an
Indian entity in the international markets after the Asian currency crisis. ICICI
had also borrowed USD 50 million from Kreditanstalt fur Wiederaufbau (KfW),
a German financial institution, for twelve-and-a-half years.
This was the first borrowing by ICICI from KfW without a Government of
India guarantee. ICICI also entered into an agreement with Asian Development
Bank (ADB) for availing a 25-year USD 80 million loan for housing finance,
and with DEG, Germany for an 8-year USD 25 million loan. The focus of
trading operations was active, broad-based market-making in key markets
including corporate bonds, Government securities and interest-rate swap
markets. Substantial reduction in interest rates provided an opportunity to
capture gains in the fixed-income market by active churning of the trading
portfolio.

Project Finance and Special Assets

ICICI BANK project finance activities include financing new projects as well as
capacity additions in the manufacturing sector and structured finance to the
infrastructure and oil, gas and petrochemicals sectors. Over the years, we have
developed considerable expertise in financing complex project finance
transactions and effectively allocating the associated risks. Our presence has
been viewed by most sponsors as critical to the success of their projects, on
account of our proficiency in developing enforceable contract models,

GGITM,BHOPAL - 50 -
syndicating requisite funds and working out complex issues related to
Government regulations. Our project finance business is focused on structuring
and syndication of financing for large projects by leveraging our expertise in
project financing, and churning our project finance portfolio to prevent portfolio
concentration and to manage portfolio risk. We view our role not only as
providers of project finance but as arrangers and facilitators, creating
appropriate financing structures that may serve as financing and investment
vehicles for a wider range of market participants.

Infrastructure Sector

The infrastructure sector has not witnessed the anticipated growth, mainly due
to policy-levelis sues and delay in closure of various projects. While there were
few opportunities in the power sector, the telecom and road sectors witnessed
considerable activity. Guarantees to Department of Telecommunications on
behalf of various telecom companies for basic, cellular and national and
international long-distance licenses presented a significant non-fund based
business opportunity. We have also capitalized on opportunities in the road
sector, in both annuity and toll-based projects, including lead arranger mandates
for four road projects of National Highway Authority of India (NHAI). The
pace of growth in the road sector is expected to increase both due to NHAI’s
National Highway Development Programme and the larger state-level projects.
Going forward, we expect ports and urban infrastructure sectors, in addition to
telecom and roads, to provide significant business opportunities.
Corporatization has already been initiated for five out of twelve major ports.
Ports would also require significant expansion and modernization of facilities.
We were appointed lead arrangers for a chemical port terminal project. The
power sector is also expected to pick up with opportunities in the privatization

GGITM,BHOPAL - 51 -
of distribution, financial closure of select private projects with competitive
tariffs, capacity additions in the public sector and its own reform and
restructuring. We provided advisory services to the Ministry of Power,
developing a comprehensive blueprint for private sector participation in
hydropower. The Managing Director & CEO was a member of the Distribution
Policy committee which submitted a report improving efficiency in power
distribution in the country.

Manufacturing Sector

Fiscal 2002 saw few new projects in the manufacturing sector on account of
lower economic growth and existing over-capacities in several commodities.
Our focus in this sector is on projects sponsored by entities that have proven
ability to commit the required financial resources and implement projects
successfully within planned time-frames. We are also implementing tighter
security measures, such as security interests in project contracts and escrow
accounts to capture cash flows. We also believe that there is significant scope
for consolidation in several segments in the manufacturing sector, which
presents opportunities for structuring and syndicating acquisition financing.

Special Assets Management

Liberalization and integration with the global economy have posed major
competitive challenges for Indian industry. Cyclical downturns in commodity
demand and prices have adversely affected the performance of several sectors.
This has impacted asset quality in the financial system. ICICI Bank’s efforts at
asset resolution are driven by the Special Assets Management Group (SAMG),
set up to manage large non-performing loans and large accounts under watch

GGITM,BHOPAL - 52 -
that require close monitoring. In case of exposures to essentially viable
companies. SAMG’s approach includes operational and financial restructuring,
completion of projects under implementation, sale of unproductive assets and
catalyzing consolidation. In respect of exposures to unviable and essentially
uneconomical projects, we adopt an aggressive approach aimed at out-of-court
settlements, enforcing collateral and driving consolidation. The accent is on
time-value of recovery and a pragmatic approach towards settlements. During
fiscal 2002, SAMG was strengthened by the induction of some of our highest-
rated performers into the group.

International Business

ICICI BANK have already established a presence in the international markets,

primarily in the areas of information technology, investment banking and
banking products and services for the This posed the dual challenge of raising
resources for meeting the reserve requirements and managing the interest-rate
risk arising from the acquisition of Government securities aggregating about Rs.
180.00 billion in an environment of low interest rates. Yields on Government
securities reached historic lows during 2001-2002 as a consequence of the easy
liquidity environment and RBI’s soft-interest-rate policy. To minimize the risk
of adverse mark-to-market impact on any rise in interest rates, ICICI Bank
adopted a strategy of acquiring securities of lower duration. A significant
portion of the requirement of Government securities was acquired through
active participation in primary auctions of floating-rate bonds and short-
maturity Treasury bills. Prior to the merger, in addition to its resource
mobilization from the wholesale segment, ICICI had raised a foreign currency
loan of USD 75 million at LIBOR + 70 basis points, setting a new benchmark
for a five-year borrowing by an Indian entity in the international markets after

GGITM,BHOPAL - 53 -
the Asian currency crisis. ICICI had also borrowed USD 50 million from
Kreditanstalt fur Wiederaufbau (KfW), a German financial institution, for
twelve-and-a-half years. This was the first borrowing by ICICI from KfW
without a Government of India guarantee. ICICI also entered into an agreement
with Asian Development Bank (ADB) for availing a 25-year USD 80 million
loan for housing finance, and with DEG, Germany for an 8-year USD 25
million loan. The focus of trading operations was active, broad-based market-
making in key markets including corporate bonds, Government securities and
interest-rate swap markets. Substantial reduction in interest rates provided an
opportunity to capture gains in the fixed income market by active churning of
the trading portfolio.

CREDIT RATING

During the year, ICICI became the first Indian company to be rated higher than
the sovereign rating for India by Moody’s Investor Service, when its senior and
subordinated long term foreign currency debt was rated Ba1 i.e. one notch
above the sovereign rating for India. The same rating has been assigned to
ICICI Bank post-merger. ICICI Bank’s credit ratings as per various credit rating
agencies (including ratings assigned to debt instruments issued by ICICI now
transferred to ICICI Bank on merger) are given below:
Agency Rating
– Foreign currency debt Ba1
– Foreign currency deposits Ba3
Standard & Poor’s (S&P) BB
Credit Analysis & Research Limited (CARE) CARE AAA
Investment Information and Credit Rating Agency (ICRA) LAAA

HUMAN RESOURCES

GGITM,BHOPAL - 54 -
ICICI Bank views its human capital as a key source of competitive advantage.
Consequently the development and management of human capital is an essential
element of our strategy and a key management activity .Human resources
management in fiscal 2002 focused on smooth integration of the employee sand
human resource management systems in the context of the merger, as well as on
continuous improvement of recruitment, training and performance management
processes. The process of integration involved defining the organizational
structure of the merged entity people placement in various positions across the
business and corporate groups, and integration of the grade and remuneration
structure for the employees of the four entities. The organizational structure was
announced in February 2002 and became effective on May 3, 2002. The people
placement process was based on appropriate competency profiling tools and
matching employee profiles to job specifications. The grade integration process
has also been success fully completed, using job evaluation techniques. While
ICICI Bank is India’s second-largest bank, it had just over 7,700 employees at
March 31, 2002, demonstrating our unique technology-driven, productivity-
focused business model.
The recruitment process has been streamlined and a uniform recruitment policy
and process implemented across the merged organization. Robust ability-testing
and competency -profiling tools are being used to strengthen the campus
recruitment process and match the profiles of employees to the needs of the
organization. ICICI Bank continues to be a preferred employer at leading
business schools and higher education institutions across the country, offering a
wide range of career opportunities across the entire spectrum of financial
services. In addition to campus recruitment, ICICI Bank also undertakes lateral
recruitment to bring new skills, competencies and experience into the
organization and meet the requirements of rapidly growing businesses. A Six
Sigma initiative has been undertaken for the lateral recruitment process to

GGITM,BHOPAL - 55 -
improve capabilities in this area. ICICI Bank encourages cross-functional
movement, enriching employees’ knowledge and experience and giving them a
holistic view of the organization while ensuring that the bank leverages its
human capital optimally. The rapidly changing business environment and the
constant challenges it poses to organizations and businesses make it imperative
to continuously enhance knowledge and skill sets across the organization. ICICI
Bank believes that building a learning organization is critical for being
competitive in products and services and meeting customer expectations. ICICI
Bank has built strong capabilities in training and development to build
competencies. Training on products and operations is imparted through web-
based training modules. Special programmes on functional training and
leadership development to build knowledge as well as management ability are
conducted at a dedicated training facility. ICICI Bank also draws from the best
available training programmes and faculty, both international and domestic; to
meet its training and development needs and build globally benchmarked skills
and capabilities.

ICICI Bank seeks to build in all its employees a total commitment towards
exceptional standards of performance and productivity, adaptability to changing
organizational needs and the demands of the business environment and a
willingness to learn and acquire new capabilities. ICICI Bank believes in
defining clear performance parameters for employees and empowering them to
achieve their goals. This has helped to create a culture of high performance
across the organization. ICICI Bank also has a structured process of identifying
and developing leadership potential the focus on human resources management
as a key organizational activity has resulted in the creation of an exceptional
pool of talent, a performance-oriented organizational culture and has imparted
agility and flexibility to the organization, enabling it to capitalize on
opportunities and deliver value to its stakeholders.

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ORGANIZATIONAL EXCELLENCE

ICICI Bank recognizes the importance of organizational excellence in its

business. Developing and deploying world-class skills in a variety of areas such
as technology, financial engineering, transaction processing and portfolio
management, credit evaluation, customer segmentation and product design, and
building and maintaining deep and enduring relationships of trust with our retail
and wholesale customers are essential elements of our strategy. Different
businesses across the ICICI group have over the past few months used
successfully the Six Sigma methodology to focus on customer satisfaction and
enhanced efficiency in operations. Application of Six Sigma techniques in
regional processing centres, branch layout and design, and the home finance and
demat services businesses have reduced turnaround time and significantly
improved operational efficiency. In recognition of the critical importance of
excellence in internal processes and delivery to customers, we have set up an
Organizational Excellence Group headed by a Senior General Manager
reporting to the Managing Director & CEO. This group will be responsible for
institutionalization of quality initiatives, including Six Sigma, and for building
the skills necessary for implementing and accelerating quality initiatives,
reporting to the management the progress and value generated from these
initiatives and replicating the successes across ICICI Bank as well as group
companies.

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 HIHGLIGHT OF MERGER

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 Strong complementary organizations

Having similar operating architecture, people and processes. This merged entity
is consequently well-positioned to harness synergistic advantages and thereby
provide benefits to both ICICI and ICICI Bank

Benefits of merger
• Forward leap” in the hierarchy of Indian banks

• A discontinuous jump in size and scale

• Achieve size and scale of operations

GGITM,BHOPAL - 59 -
 • Leverage ICICI’s capital and client base to increase fee income

• Higher profitability by leveraging on technology and low cost

structure

• Offer a complete product suite with immense cross-selling

opportunities

• ICICI’s presence in retail finance, insurance, investment

banking and venture capital

• Access to the ICICI group’s talent pool improved ability to

further diversify asset portfolio and business revenues Lower
funding costs

• Ability to accept/ offer checking accounts

• Availability of float money due to active participation in the

payments system

• Diversified fund raising due to access to retail funds Increased

fee income opportunities

• Ability to offer all banking products

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 Competitive advantages of the merged
entity

After the merger, the combined entity would be the second-largest bank in
India, with an asset base of over Rs. 1 trillion

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Merger process of ICICI BANK AND ICICI LIMITED -
highlights

1. Valuation

 Independently appointed investment bankers

 ICICI - JM Morgan Stanley

 ICICI Bank - DSP Merrill Lynch

 Jointly appointed independent accountant to recommend the final

exchange ratio

 Deloitte, Haskins & Sells appointed

 Recommended one share of ICICI Bank for two shares of

ICICI, which was approved by the respective Boards

2. Transfer of ICICI’s shareholding in ICICI Bank to an

SPV prior to the merger

 Divestment in FY2003 by way of appropriate placement

3. Consolidation of retail operations

 Merger of ICICI PFS and ICICI Capital Services with ICICI Bank

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 Merger process - regulatory issues

 Merger effective on

 March 31, 2002 or the date of RBI approval, whichever is later

 Shareholders’ approval

 High court approval

 Accounting for the merger in line with international best practices

 Purchase method, mandatory under US GAAP, to be adopted under Indian

GAAP as well

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 RESERCH METHODOLOGY

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 RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem.

Research methodology constitutes of research methods, selection criterion of
research methods, used in context of research study and explanation of using of
a particular method or technique so that research results are capable of being
evaluated either by researcher himself or by others. Why a research study has
been undertaken, how the research problem has been formulated, why data have
been collected and what particular technique of analyzing data has been used
and a best of similar other question are usually answered when we talk of
Research methodology concerning a research problem or study. The main aim
of research is to find out the truth which is hidden and which has not been
discovered as yet
The research methodology that I undertook for the purpose of this study is
enumerated below-

RESEARCH DESIGN: DESCRIPTIVE

Descriptive studies are well structured, they tend to be rigid and its approach
can not be changed every now and then. Descriptive study can be divided in two
categories:

(A) Cross sectional

(B) Longitudinal
Descriptive study is undertaken in many circumstances:

1. When the researcher is interested in knowing the characteristics of certain

groups such as age, profession.

GGITM,BHOPAL - 65 -
 2. When the researcher is interested in knowing the proportion of people in

given population who have behaved in a particular manner, making

projection of certain things.
I have taken descriptive because my research includes the knowing the
merger and consolidation of icici bank and icici limited.

GGITM,BHOPAL - 66 -
 SCOPE OF THE STUDY
Each and every project study along with its certain objectives also has scope for
future. And this scope in future gives to new researches a new need to research
a new project with a new scope. Scope of the study not only consist one or two
future business plan but sometime it also gives idea about a new business which
becomes much more profitable for the researches then the older one.
Scope of the study could give the projected scenario merger and consolidation
of ICICI bank and ICICI limited.
Whatever scope I observed in my project are not exactly having all the features
of the scope which I described above but also not lacking all the features.

We highlight the major themes to emerge from the study. We looked the key
findings from the areas of production, survey of executive opinion in global
organizations, within which we examined major operation, including staffing,
performance management, rewards, development, and career management and
knowledge and learning.

- Factors which I observed while doing project study are following-

Working management
Quality of services provided by the bank.
Satisfaction of the bank customer.
Strategy of bank after merging.

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TOOLS AND TECHNIQUES
As no study could be successfully completed without proper tools and
techniques, same with my project. For the better presentation and right
explanation I used tools of statistics and computer very frequently. And I am
very thankful to all those tools for helping me a lot. Basic tools which I used for
project from statistics are-
- Bar Charts
- Pie charts
- Tables
Bar charts and pie charts are really useful tools for every research to show the
result in a well clear, ease and simple way. Because I used bar charts and pie
charts in project for showing data in a systematic way, so it need not necessary
for any observer to read all the theoretical detail, simple on seeing the charts
any body could know that what is being said.
Technological Tools
Ms-Word
Ms-excel
Internet

Above application software of Microsoft helped me a lot in making project

more interactive and productive. Microsoft-Excel had a great role in my project,
it created for me a situation of “you sit and get”. I provided it simply all the
detail of data and in return it given me all the relevant information..
Microsoft-Access did the performance of my personal assistant who organizes
my all the details of document without disturbing them even a single time in all
the project duration.
And in last Microsoft-Word did help me for the documentation of the project in
a presentable form.

GGITM,BHOPAL - 68 -
Applied Principles and Concepts
While I started to do the project the main thing which was the matter of concern
was that around what principles I have to revolve my project. Because with out
having any hypothesis and objective we can not determine that what output or
result we are expecting form the project.
And second thing is that having only tools and techniques for the purpose of
project is not relevant until unless we have the principals for which we have to
use those tools and techniques.
Mathematical Averages
Standard Deviation
Correlation
Sources of Primary and Secondary data:
For the purpose of project data is very much required which works as a food for
process which will ultimately give output in the form of information. So before
mentioning the source of data for the project I would like to mention that what
type of data I have collected for the purpose of project and what it is exactly.

PRIMARY RESEARCH:
This consisted questionnaire and interaction from various people. Including the
employee of the icici bank limited (M.P.NAGAR, NEW MARKET).BHOPAL
A focus group study has conducted to design the customer survey questionnaire
with a sample size of 100 respondents. The survey was conducted in Bhopal.

GGITM,BHOPAL - 69 -
SECONDARY RESEARCH:

1 Internet,
2 Books
3 Journals,
4 Newspaper,
5 Annual report,
6 Database available in the library,
7 Catalogues and presentations.

SAMPLING TECHNIQUE

For my survey I used Cluster Sampling technique. I selected a sample of 100

employees around the area and interviewed them according to the questionnaire.
In the survey I tried to find out their performance of the bank after merge. I also
tried to find out that are they satisfaction of customer with the quality of
services which provided by the ICICI BANK LIMITED. after merging

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 LIMITATION OF THE STUDY

GGITM,BHOPAL - 71 -
 LIMITATIONS OF THE STUDY
Following limitations were faced during the study:

1. While designing the questionnaire it was kept in mind to gather more and
more information from each target person. For the neither present nor
descriptive questions could have served the purpose. Therefore the
questionnaire contained in the open-ended questions.

2. The study was conducted in BHOPAL. The sample size was of 100 so

that accuracy of data so collected could absurd covered by circulation of

questionnaire.

3. The accuracy of indications given by the respondents may not be consider

adequate as whether the language used in the questionnaire is understood
by the respondent cannot be taken for granted.

4. The study is based on the information gathered from the employee in

bank Therefore in such case it is possible that the information supplied

might be biased because the company might have shown partiality
towards their information

5. It is rather difficult to give a precise conclusion of merger but I have tried

to the best of my capability to give the conclusion on a comprehensive

manner

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 DATA ANALYSIS & INTERPRETATION

GGITM,BHOPAL - 73 -
Q1. Do you think that the merger of icici bank and icici limited is better then
other bank merger?

Opinions No. of Respondents Percentage (%)

Excellent 43 43
good 44 44
Poor 13 13

13%

43%

44%

excellent good poor

INTERPRETATION: Out of 100 respondent only 43 % respondent were told

that merger of icici bank and icici limited is excellent then other company 44%
told good while13% told poor.

GGITM,BHOPAL - 74 -
 Q2. Do you think that after merger performance of icici bank limited is
better?

Opinions No. of Respondents Percentage (%)

Yes 86 86
No 14 14
Total 100 100

14

86

INTERPRETATION
Out of 100 respondent only 86% respondent were told that after merger
performance of icici bank limited is better while 14% told no.

Q3 Do you think that services provided by icici bank limited after merger is
effective then other bank?

GGITM,BHOPAL - 75 -
Opinions No. of Respondents Percentage (%)
Yes 72 72
No 28 28
Total 100 100

28

Yes
zz
No

72

INTERPRETATION
Out of 100 respondents only 72% think that services provided by icici bank
limited after merger is effective then other while 28% don’t think that.

Q4. Do you think that merger icici limited beneficial for icici bank?

Opinions No. of Respondents Percentage (%)

GGITM,BHOPAL - 76 -
Yes 86 86
No 14 14
Total 100 100

14

Yes
No

86

INTERPRETATION

Out of 100 respondents only 14 % respondent were not satisfied while 86%
think that merger with icici limited is beneficial for icici bank.

Q5 Are you satisfied with the statement merger can provide a multitude of ways
to increase efficiency merged bank?

Opinions No. of Respondents Percentage (%)

Satisfied 67 67
Unsatisfied 33 33

GGITM,BHOPAL - 77 -
 Total 100 100

33

satisfied
unsatisfied
67

INTERPRETATION

Out of 100 respondent only 67 % respondent were not satisfied while 33%were
not satisfied with the statement merger can provide a multitude of ways to
increase efficiency merged bank.
.

Q6 Are you satisfied with the statement after merging with icici limited, icici
bank provide the services as per your expectations?

Opinions No. of Respondents Percentage (%)

Satisfied 79 79%
Unsatisfied 21 21%
Total 100 100

GGITM,BHOPAL - 78 -
 21

unsatisfied
satisfied

79

INTERPRETATION
<<

Out of 100 respondent only 79 % respondent were not satisfied while 21%were
not satisfied with the statement after merging with icici limited, icici bank
provide the services as per your expectation

Q7 Do you think this merger will successfully derived in competition of

others banks?

Opinions No. of Respondents Percentage (%)

Yes 55 55
No 45 45
Total 100 100

GGITM,BHOPAL - 79 -
 45
no
yes
55

INTERPRETATION

Out of 100 respondent only 45 % respondent told no while 55%were told

yes for merger will successfully derived in competition of others bank’s .
Q8. Do you think that merger of icici limited with icici bank is a reason to
increase the value of share of icici bank in year 2002?

Opinions No. of Respondents Percentage (%)

Yes 83 83
No 17 17
Total 100 100

GGITM,BHOPAL - 80 -
 17

no
yes

83

INTERPRETATION

Out of 100 respondents only 17 % respondent told no while 83%were told

yes for the statement that merger of icici limited with icici bank is a reason
for increase the value of share of icici bank in year 2002.

Q9 Do you think after merging icici bank limited play a very important role
in Indian economy for its growth?

Opinions No. of Respondents Percentage (%)

Yes 74 74
No 26 26
Total 100 100

GGITM,BHOPAL - 81 -
 26

no
yes

74

INTERPRETATION

Out of 100 respondent only 24 % respondent told no while 76%were told

yes after merging icici bank limited play a very important role in Indian
economy for it’s growth

Q10 Are you satisfied by the new schemes launched by the icici bank limited
after merging in year 2002?

Opinions No. of Respondents Percentage (%)

Satisfied 67 67
Unsatisfied 33 33
Total 100 100

GGITM,BHOPAL - 82 -
 33

satisfied
unsatisfied
67

INTERPRETATION

Out of 100 respondent only 67 % respondent were not satisfied while 33%were
not satisfied with the statement the new schemes launched by the icici bank
limited after merging in year 2002.

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 FINDING’S

GGITM,BHOPAL - 84 -
 FINDING

a) Performance of ICICI BANK. After merger with ICICI LTD being

effective in comparison of other bank. It increases their

performance.
b) Most the customer is satisfied by the services provided by the ICICI

BANK after merger. It increase the value of the bank in their customer
c) Merger of ICICI BANK & ICICI .LTD are provide a multitude of ways
to increase efficiency ICICI BANK.LTD
d) ICICI BANK .LTD provides the facility as per the expectations of

their customer. In this way they become successful to achieve their

goal.
e) This merger successfully faces the competition of other bank.

f) Merger of ICICI BANK with ICICI.LTD increase the share value of

ICICI BANK.LTD
g) Most of the customers are attracted by new scheme of ICICI

BANK.LTD after merging. This schemes for attract the customer

and it also help to make a distinct image of ICICI BANK.LTD in the
competition of present scenario.
h) Merger of ICICI BANK with ICICI.LTD help full for growth of Indian
economy.

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 CONCLUSION

GGITM,BHOPAL - 86 -
 CONCLUSION

Merger and acquisition is nothing new in the Indian banking industry. But there
has been a change in impetus. Earlier, with the banks firmly under the control of
RBI, mergers were forced upon to save weak banks from collapsing. The
gradual privatisation and globalisation of the banking industry has now forced
banks themselves to go in for merger. Increase in profitability, synergies in
operation, global scale and other such reasons have replaced the social and
political motives of yesteryears. Successful mergers can lead to prosperity both
for the shareholders of the merged company and for the economy as a whole.
The true catalyst of a successful merger is the top executive whose pragmatic
and dynamic leadership and a clear foresight can help a merger click. The trick
is to neutralise the expected pitfalls while bringing the best out of operational
synergies. The making of ICICI Bank into a ‘Universal bank’ has shown the
way. This reverse merger has thus opened up a challenge to the banks and
financial institutions in India to merge and become ‘financial conglomerate(s)’
by exploiting the present favourable business environment and also to de-risk
their operating environment

GGITM,BHOPAL - 87 -
 BIBLOGRAPHY

GGITM,BHOPAL - 88 -
 BIBLIOGRAPHY

Periodical: Business World

Economics time
ICICI BANK Annual Report 2002

Research Methodology: C.R.Kothari, 2nd edition.

S.N Murty and U Bhojanna

Website Address:
www.icici.org.com
www.icici bank.com
www.economic time.com
www.googlesearch.com

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