Analysts See Icici, Bank Arm Swap At 1.5:1

The merger ratio of ICICI and ICICI Bank is expected to be around 1.5:1, that is for every one share of ICICI Bank shareholders will get 1.5 to 1.6 shares of ICICI, the parent company, analysts said.

According to analysts, the expectation arises from the current share prices of both the companies. "The share price of ICICI Bank is ruling around Rs 75, while the share price of ICICI is around Rs 45. This suggests that ideally the ratio should be 1.8:1 but given the book values of the shares, the ratio may turn out to be slightly lower at 1.5:1," a banking analyst said.

 

ICICI Bank's share price is higher because it is a commercial bank as against the status of a financial institution of the parent and this itself lends a superior business model in case of the bank, analysts said.

However, the book value in case of both the companies is different. While the adjusted book value at the close of March 2002 is expected to be around Rs 78 for ICICI, the book-value of ICICI Bank is expected to be around Rs 69, analysts said.

The merger when happens can bring significant operational benefits to the merged entity as it would get the status of universal bank. Post-merger, ICICI Bank will emerge as the second largest bank in the country at 7 per cent market share after State Bank of India (which has 26 per cent market share).

As part of its efforts to transform itself into a universal bank, ICICI is considering various corporate structuring alternatives, including the possibility of the merger between ICICI and ICICI Bank and reorganisation of its holdings in its subsidiaries. ICICI had initiated a dialogue with the government and the regulatory agencies including the Reserve Bank of India.

However, any corporate action is subject to approval of board of directors and shareholders apart from statutory and regulatory approvals. If the two merge, the businesses currently being conducted by ICICI would become subject to banking regulations for the first time.