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ICICI Bank Bank of Rajasthan Merger

Works as a banking and financial service Organization in India. It is the 4th largest bank in India and the largest private sector bank in India by market capitalization. The bank also has a network of 2009 branches and about 5,219 ATMs in India and presence in 18 countries. Head quarter situated in Mumbai, India. Mainly deals with products likes Investment Banking, Commercial Banking, Retail Banking, Private Banking, Assets Management, Mortgages, Credit Card. MD & CEO of ICICI Bank is Chanda Kochhar.

It was set up at Udaipur in 1943 with an initial capital of Rs.10.00 lacs. It is one of the Oldest Private Sector Bank in India. Mainly controlled by Tayal Business Group, they had more than 50% stake in BoR. It has 463 branches and 111 ATMs. Head quarter situated in Udaipur, Rajasthan, India. Mainly deals with products like Loans, Savings, Investment vehicles, etc. MD & CEO of BoR is G Padmanabhan.

Incurred net loss of Rs 44.7 crores in third quarter of 2009-2010. BoR promoters say they hold a 28.60% stake in the bank, SEBI has put the promoter shareholding at 55.01%.
SEBI banned 100 entities allegedly holding BoR shares on behalf of the promoters from all stock market activities.

RBI appointed Mr G Padmanabhan as MD & CEO. Penalty of Rs 25 lacs for violating RBI norms.

ICICI Bank announced merger with Bank of Rajasthan through share-swap in a non-cash deal that values the Bank of Rajasthan at Rs 3,041 crores. Each 118 shares of Bank of Rajasthan will be converted into 25 shares of ICICI. This is based on an internal analysis of the strategic value of the proposed amalgamation, average market capitalization per branch of old private sector banks and relevant precedent transactions. Paid Rs 6.5 crore per branch and that is the average market cap for old private sector banks.

Basis CASA Deposits

BoR Rs 4163crores

ICICI BANK Rs 21000crores Rs 304crores 1% 2.1%

Business per month Rs 47crores Return on average assets 0.7%

Net non-performing 1.05% assets

It would substantially enhance ICICI Bank s branch network, already the largest among Indian private sector banks. The rationale for the merger, according to the ICICI Bank management, is that it would have taken the bank three years to build the kind of current account and savings account (CASA) deposits that BoR has. Adds 25% to their branch network. Increased penetration in Northern and Western India. It will be better prepared to face HDFC Bank and resurging Axis Bank.

Swapped shares of BoR at an 89% premium to its market price. Stock took a beating with ICICI bank s share dipping by 7% and BoR s share rising by almost 20% on the day of announcement of deal. Low employee productivity (Profit per employee for BoR was Rs 2.89 lacs against Rs 11 lacs for ICICI)

Over 4200 employees of Bank of Rajasthan showed protest against the merger. Issues: i) The main issue of Indian Banks Association with bank staff unions is negotiation of their wages. ii) BoR employees' wages are governed by the industry wage packages unlike other private sector banks in the industry. iii)Retrenchment of existing employee. iv) No cultural fit whatsoever between the working of both the banks. v) If merger is essential it should be with a public sector bank.

After the protest by employees of BoR, ICICI Bank management clear that their will be no retrenchment of employee. Salaries and service condition will be decided according to bipartite settlement Indian Banks' Association and the United Forum of Bank Unions.

Merger of BoR an old private sector bank with India's 2nd largest private sector bank definitely helped both the parties as ICICI Bank extended its total number of branches by 25% and BoR also got new direction as it already witness an improved performance with the share price of BoR in BSE almost doubling after the merger.

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