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ICICI Bank Bank of  Rajasthan Merger

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8/6/2019 Bank of Rajasthan ICICI Bank

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8/6/2019 Bank of Rajasthan ICICI Bank

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� 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.

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� Incurred net loss of Rs 44.7 crores in third quarterof 2009-2010.

� BoR promoters say they hold a 28.60% stake in

the bank, SEBI has put the promoter shareholdingat 55.01%.� SEBI banned 100 entities allegedly holding BoR shares

on behalf of the promoters from all stock marketactivities.

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

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� ICICI Bank announced merger with Bank of Rajasthanthrough share-swap in a non-cash deal that values theBank of Rajasthan at Rs 3,041 crores.

� Each 118 shares of Bank of Rajasthan will beconverted into 25 shares of ICICI. This is based on aninternal analysis of the strategic value of the proposedamalgamation, average market capitalization per

branch of old private sector banks and relevantprecedent transactions.

� Paid Rs 6.5 crore per branch and that is the averagemarket cap for old private sector banks.

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Basis BoR ICICI BANK

CASA Deposits Rs 4163crores Rs 21000crores

Business per month Rs 47crores Rs 304crores

Return on average

assets

0.7% 1%

Net non-performingassets

1.05% 2.1%

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� It would substantially enhance ICICI Banks branchnetwork, already the largest among Indian privatesector banks.

� The rationale for the merger, according to the ICICIBank management, is that it would have taken thebank three years to build the kind of current accountand 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.

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� Swapped shares of BoR at an 89% premium

to its market price.

� Stock took a beating with ICICI banks sharedipping by 7% and BoRs share rising by

almost 20% on the day of announcement of deal.

� Low employee productivity (Profit peremployee for BoR was Rs 2.89 lacs against Rs

11 lacs for ICICI)

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� Over 4200 employees of Bank of Rajasthan showed protestagainst 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 wagepackages unlike other private sector banks in the industry.iii)Retrenchment of existing employee.

iv) No cultural fit whatsoever between the working of boththe banks.v) If merger is essential it should be with a public sectorbank.

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� After the protest by employees of BoR, ICICI Bank

management clear that their will be noretrenchment of employee.

� Salaries and service condition will be decided

according to bipartite settlement Indian Banks'Association and the United Forum of Bank Unions.

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� Merger of BoR an old private sector bank

with India's 2nd largest private sector bank

definitely helped both the parties as ICICIBank extended its total number of branches

by 25% and BoR also got new direction as italready witness an improved performance

with the share price of BoR in BSE almostdoubling after the merger.

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  THANK YOU