BoM to merge with ICICI Bank

ICICI Bank, promoted by ICICI, has total assets of Rs 12,063 crore with deposits of Rs 9,728 crore as on September 30, 2000. The bank’s capital adequacy stood at 17.59 per cent. Its branch network and extension counters stand at 106. At end-September 2000, ICICI Bank’s capital base stood at Rs 196.82 crore and networth stood at Rs 1,219 crore. EPS stood at Rs 7.7 with book value at Rs 233.

A senior ICICI Bank official said that valuation of BoM will primarily take into account its networth, small capital base and shareholding of 1.2 crore equity shares as compared to the wider numbers on this account for ICICI Bank.

BoM offers a comprehensive range of financial services including foreign exchange, merchant banking and investment management services. An authorised dealer in foreign exchange since 1974, it is also a category-I merchant banker. The bank’s growth in loans surged as it started concentrating on big corporate clients, particularly in export financing, apart from its core customers, small traders and businessmen. It came out with a rights-cum-bonus issue in 1996. BoM has a wholly-owned subsidiary — Bank of Madura Securities Ltd which was incorporated on February 9, 1999, to function as a satellite dealer.

The merger will create an entity that will have over 16,000 crore in assets and over Rs 13,000 crore in deposits. It will pitchfork ICICI Bank to the league of Corporation Bank, and can easily rival HDFC Bank after its merger with Times Bank some time back.

Said ICICI senior general manager, Kalpana Morparia: "This merger will increase the pace of consolidation in the banking sector." The merged entity will have 2.6 million customer accounts and a 375-strong branch network. It will employ 4,000 out which 2,800 is accounted for by ICICI Bank and 180 or so by Bank of Madura. It will also give ICICI Bank a huge presence in South India, which is an important market given the higher rate of economic development, and activity.

There is also another interesting factor in the ICICI Bank-Bank of Madura merger. The latter was advised by DSP Merrill Lynch. And Kotak Mahindra holds a 13 per cent stake in Bank of Madura! Incidentally, Bank of Madura was rumoured to have been a target of a takeover bid by the Kotak Mahindra group a couple of years ago.

The ICICI Bank-Bank of Madura merger is the first between an old generation private sector bank and a new generation private sector bank. Another takeover attempt was aborted by the Reserve Bank of India: the Essar group’s takeover bid on the Tamilnad Mercantile Bank. There was also a move on the part of the Bangkok-based Chawalas to take over the the Thrissur-based Catholic Syrian Bank, and recently rumours were rife about the Satara-based United Western Bank.

Banking sector analysts pointed out that this merger will lead to further consolidation among private sector bank players. "Thus far, the focus of all merger talks was among the new private-sector banks and merger between them… but it is clear now that there is value to be unlocked in several of the older private sector banks, especially the better run ones," an analyst with a foreign broking house said.

In recent times, many new generation private-sector banks have been the subject of takeover and merger speculation. These include the entire lot: Centurion Bank, UTI Bank, IndusInd Bank and Global Trust Bank. Various suitors have been bandied about. The ICICI Bank-Bank of Madura merger clearly spells out the fact that it is crunch time on the consolidation side of the banking industry.

Rise in share prices raises eyebrows

MUMBAI:The 68.71 per cent rise in Bank of Madura stocks and 37.58 per cent increase in ICICI Bank share in a month’s time has raised doubts that a section of the market was aware of the merger developments. The BoM scrip had been rising sharply since last month following rumours that the promoter’s stake is being offloaded. BoM which was quoting at Rs 78 on the BSE in the first week of November shot up to Rs 112.90 on December 6 and today closed at 131.60 against the previous close of Rs 121.90 while at the NSE it closed at Rs 132.25 (Rs 122.45).

ICICI Bank price shot up from Rs 123.45 to Rs 169.85 in a month, showing a rise of 37.58%. "Other banks have not appreciated to such an extent. This shows that some investors who were aware of the merger took advantage of the situation. SEBI needs to investigate the share price rise in BoM and ICICI Bank," said an analyst.