ACQUISITION

OF BANK OF RAJASTHAN BY ICICI BANK

ICICI BANK
ICICI bank is the India's second largest bank with
total asset of Rs.3,634.00 billion at march 31
st

2010, and profit after tax of Rs. 40.25 billion for the
year ended march 31
st
2010
The bank has network of 2,035 branches and about
5,518 ATMs in India and presence in 18 countries,
ICICI bank offers a wide range of services to
corporate and retail customers through a variety of
delivery channels and through its specialized
subsidiaries in the area of Investments, Banking,
Life & Non-Life insurance, Venture capitalist and
Asset management.
BANK OF RAJASTHAN
Bank of Rajasthan, with its strong hold in the state
of Rajasthan has a nationwide presence serving its
customers with a mission of Together we prosper,
Engaging actively in commercial banking, Merchant
banking, auxiliary services, customer banking, trust
& custodian services, international banking.
At march 31
st
2009 BOR had 463 branch and 111
ATMs, total asset of Rs. 172.24 billion, deposit of
Rs. 77.81 billion, it made a net profit of 1.18 billion
in the year ended march 31,2009 and at a net loss
of 0.10 billion in the nine month ended December
31,2009
WHY BANK OF RAJASTHAN
ICICI bank Ltd, Indias largest private sector bank , said it
agreed to acquire smaller rival Bank of Rajasthan Ltd to
strengthen its presence in northern and western India .
Deal would substantially enhance its branch network and it
would combine Bank of Rajasthan branch franchise with its
strong capital base .
The deal , which will give ICICI a sizeable presence in the
northwestern desert state of Rajasthan , values the small
bank at about 2.9 times its book value, compared with an
Indian Banking sector average of 1.84 .
ICICI Bank may be killing a two birds with one stone through
its proposed merger of the Bank of Rajasthan. Besides getting
468 branches, Indias largest private sector bank will also get
control of 58 branches of a regional rural bank by BOR
NEGATIVES
The negatives for the ICICI Bank are the potential risk
arising from BoR non-performing loans and the BoR is
trading at expensive valuations.


As on FY-10 the net worth of BOR was approximately Rs
760 crore and that of ICICI Bank of Rs 5,17,000. for the
December 2009 quarter, BOR reported a loss of Rs 44
crore on an income of Rs 373 crore.
DEAL VALUATION
ICICI BOR
Latest Markt Cap 99,125 1,471
Branches 2,035 4,63
ATM 5,518 111
No-of Employee 34,596 4,075
CAR 19.4% 11.3%
SWAP Ratio 25 share of ICICI bank for 118 share of BOR
Branch network of ICICI bank to cross 2500
BOR Mkt cap currently 1.55% of ICICI bank
Third Acquisition for ICICI bank after Sangli bank & Madura bank.

INFORMATION
The boards of both banks, have agreed in principle
approval for the acquisition in may 2010.
The productivity of ICICI bank is high compared to
Bank of Rajasthan. ICICI recorded a business per
branch of 3 billion rupee compared with 47 million
rupees of BOR for fiscal 2009
But the non-performing assets (NPA) record for
BOR is better than ICICI bank. For the quarter
ended Dec 2009, BOR recorded 1.05 % of
advances as NPAs which is better than 2.1%
recorded by ICIC bank.
TYPE OF ACQUISITION
This is a Horizontal Acquisition in related functional
area in same industry (banking) in order to acquire
assets of a non performing company and turn it
around by better management achieving inorganic
growth for self by access to 3 million customers of
BOR and 463 branches
ACQUISITION MOTIVE-INORGANIC GROWTH
Since 1997, ICICI Bank has acquired smaller banks
to increase its branch
1997-Acuired ITC classic finance
1998-Acuired Anagram finance
2000-Acuired the Bank of Madura
2005-Acuired Russias investitsionnokreditny Bank
2007-Acuired sangli Bank
PROCESS OF ACQUISITION
Haribhakti & Co was appointed jointly by
both the banks to access the valuation
SWAP ratio of 25:118 (25 shares of ICICI for
118 shares of bank of Rajasthan) i.e. one
ICICI bank share for 4.72 BOR shares
Post-Acquisition, ICICI Banks branch
network would go up to 2,463 from 2000.
PROCESS OF ACQUISITION
The NPA recorded for BOR is better than ICICI
bank. For the quarter ended Dec 09, BOR recorded
1.05% of advances as NPAs, which is far better
than 2.1 % recorded by ICICI bank.
The deal, entered into after the due diligence by
Deloitte, was found satisfactory in maintenance of
accounts and no carry of bad loans.
LEGAL PROBLEM- EGM-KOLKATA CIVIL
COURT
Extraordinary general meeting that was called to
approve the merger was first cancelled after a
Kolkata civil court restrained the management from
holding the EGM, This was based on a complaint
filed by a shareholder who was against the merger.

LEGAL PROBLEM-UNION STRIKE
Three major employee unions of BOR-All India
Bank of Rajasthan Employees Federation. All India
bank of Rajasthan Officers Association and Akhil
Bhartiya Bank of Rajasthan Karmachari Sangh, had
called the strike demanding the immediate
termination of the ICICI-BOR merger proposal
The United Forum of Bank of Rajasthan Unions had
opposed the merger of BOR with ICICI Bank, citing
cultural compatibility issues.
LEGAL ISSUE
The Rajasthan High court issued notices to the
reserve bank of India, Bank of Rajasthan (BOR),
ICICI bank and others on a petition filed by an
employees union of the Udaipur-based BOR
against its proposed merger with ICICI bank.
The petition claims that BOR board on 18 May-
2010 to merge with ICICI Bank was illegal as the
securities and exchange board of India had found
out that the Toyals had acquired 55.1% equity in
the bank in violation of its regulation.
POST MERGER
HR ISSUES
RISK OF DETERIORATION OF QUALITY OF
ASSET
LEVERAGE AND SYNERGY
revenue enhancement
economies of scale
technological leverage
forward and backward integration.
KEY RATIO
POST-MERGER
Total asset increased 11.8% from 3,634 31
st
Mar
2010 to 4,062 31
st
Mar 2011.
CASA increased from 842 billion to 1016.47 billion





Increase in NPA is due to from Acquisition of BOR
which contributes 4.11 billion
Year Ended Gross NPA
Mar 31, 2009 98.03
Mar 31,2010 96.27
Mar 31,2011 101.14