A PROJECT REPORT ON

MERGER AND CONSOLIDATION OF ICICI LTD. AND ICICI BANK

CONTENTS Chapter no. 1 2 Title Executive Summary Objective General Introduction Introduction to the Topic Company Profile 3 4 5 6 7 7 Merger Detail Research methodology Scope and Limitation Data Analysis & Interpretation Findings Conclusions
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Page no.? 7 8-36 8-29 30-36 37-66 67-73 74-75 76-86 87-88 88-89

Annexure: a) Bibliography 90-91

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.

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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
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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 & Acquisitions may be critical for the healthy expansion and growth of the firm. Successful entry into new product and geographical markets may require Mergers & Acquisitions 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
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shareholders' value, tax implications including stamp duty and last but not the least also on the employees of the Transferor or Transferee Company.

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

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
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(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.

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 corporations officers and directors, any extraordinary matter such as a merger or consolidation must be approved by the corporations shareholders. If the necessary majority of the corporations shareholders approve a merger or consolidation, it will go forward, and
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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. 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. 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 sellers liabilities; (2) The sale is a de facto merger or

consolidation; (3) The acquiring corporation continues the sellers business andretains the same personnel; or

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(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 corporations 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 corporations shareholders. The tender offer is publicly 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.

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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.

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TAKEOVER DEFENSES
Takeover Defenses include various measures included in a corporations 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) (2) (3) (4) (5) Unanimous action by all shareholders, Shareholder approval of a dissolution proposal submitted by the directors, An act by the authorized officer of the state of incorporation, Expiration of the time period set forth in the certificate of incorporation, or 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.

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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.
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(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.

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(6) Own developmental plans

The purpose of acquisition is backed by the offered companys 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 personnels. 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:

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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 reorganizing 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 companys 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, managers 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 companys 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;

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(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) Promoters 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.

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(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

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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

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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

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 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

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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

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 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

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BANK PROFILE

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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

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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

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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

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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

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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).

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OVERALL Beta: Market Cap (Mil.): Shares Outstanding (Mil.): Annual Dividend: Yield (%): FINANCIALS
ICBK.BO Industry Sector

1.48 Rs939,926.12 1,114.84 12.00 1.43

P/E (TTM): EPS (TTM): ROI: ROE:

28.01 ----

56.66 -0.00 2.29

38.23 -0.64 2.66

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MERGER OF ICICI BANK WITH ICICI.LTD

MERGER OF ICICI WITH ICICI BANK

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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 countrys first
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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 ICICIs 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 Indias 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, ICICIs assets have been fair-valued for their incorporation in the books of accounts. The fair value of ICICIs loan portfolio was determined by an independent valuer, while ICICIs equity and related investment portfolio was fair-valued by determining its markto- market value.
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The total additional provisions & write-offs required to reflect the fair values of ICICIs 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 ICICIs 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.

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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

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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
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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
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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 nonperforming 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.

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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 Banks 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.

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Retail Banking
The retail business is the key driver of ICICI Banks 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 Banks 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 Banks 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

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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 Banks 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

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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 Banks 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 Indias 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
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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, Indias 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 Banks online payments facility. ICICI Bank has also focused on the call centre as a key channel. ICICI Banks call centre can now be accessed by customers in 100 cities, and is Indias 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 customers relationship. ICICI Banks 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.
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Corporate Banking ICICI Banks 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 nonfund-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 profitabilitybased 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
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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 agribusiness. 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 Banks 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 Banks 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

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portfolio by structuring portfolio buyouts and sell-downs. The enhanced capital base consequent to the merger will significantly increase ICICI Banks 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 Banks capital markets and custodial services operations. During fiscal 2002, the focus was on the challenge of meeting regulatory reserve requirements on ICICIs 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 RBIs soft-interest-rate policy. To minimize the risk of adverse mark-to-market impact on any rise in interest rates, ICICI Bank adopted

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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,

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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 NHAIs 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

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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 Banks 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

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that require close monitoring. In case of exposures to essentially viable companies. SAMGs 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 highestrated 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 RBIs 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 shortmaturity 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

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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 marketmaking 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 Moodys 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 Banks 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 Foreign currency deposits Standard & Poors (S&P) Credit Analysis & Research Limited (CARE) Investment Information and Credit Rating Agency (ICRA)
Ba1 Ba3 BB CARE AAA LAAA

HUMAN RESOURCES
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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 Indias second-largest bank, it had just over 7,700 employees at March 31, 2002, demonstrating our unique technology-driven, productivityfocused 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
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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 webbased 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

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 Leverage ICICIs 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 ICICIs presence in retail finance, insurance, investment banking and venture capital

Access to the ICICI groups 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 ICICIs 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.

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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.

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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 followingWorking 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.
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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.

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SECONDARY RESEARCH: 1 2 3 4 5 6 7 Internet, Books Journals, Newspaper, Annual report, Database available in the library, 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

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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

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Q1. Do you think that the merger of icici bank and icici limited is better then other bank merger? Opinions Excellent good Poor No. of Respondents 43 44 13 Percentage (%) 43 44 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.

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Q2. Do you think that after merger performance of icici bank limited is better?

Opinions Yes No Total

No. of Respondents 86 14 100

Percentage (%) 86 14 100

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?

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Opinions Yes No Total

No. of Respondents 72 28 100

Percentage (%) 72 28 100

28 Yes No 72

zz

z INTERPRETATION Out of 100 respondents only 72% think that services provided by icici bank limited after merger is effective then other while 28% dont think that.

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

Opinions
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No. of Respondents
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Percentage (%)

Yes No Total

86 14 100

86 14 100

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 Satisfied Unsatisfied
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No. of Respondents 67 33
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Percentage (%) 67 33

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 Satisfied Unsatisfied Total No. of Respondents 79 21 100 Percentage (%) 79% 21% 100

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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 Yes No Total

No. of Respondents 55 45 100

Percentage (%) 55 45 100

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45 no 55 yes

INTERPRETATION Out of 100 respondent only 45 % respondent told no while 55%were told yes for merger will successfully derived in competition of others banks . 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 Yes No Total No. of Respondents 83 17 100 Percentage (%) 83 17 100

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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 Yes No Total No. of Respondents 74 26 100 Percentage (%) 74 26 100

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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 its growth

Q10 Are you satisfied by the new schemes launched by the icici bank limited after merging in year 2002? Opinions Satisfied Unsatisfied Total No. of Respondents 67 33 100 Percentage (%) 67 33 100

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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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FINDINGS

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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

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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

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BIBLOGRAPHY

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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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