Bank of Madura to enter ICICI Bank's locker
No proviso to check sly takeover of PSU banks
Boards to come under pressure
NIIT tieup for auto solutions
Novartis stirs growth tonic
Eight ITDC hotels up for outright sale
Bihar Caustic stake shuffle
Acordis ups Century Enka stake
Foreign Exchange, Bullion, Stock Indices

 
 
BANK OF MADURA TO ENTER ICICI BANK'S LOCKER 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Dec 8: 
The aggressive ICICI Bank and the ultra-conservative south-based Bank of Madura today announced that they were planning a merger to create a financial powerhouse with combined assets of Rs 16,000 crore.

In a late evening communication to the premier stock bourses, the two banks said their boards would meet on December 11 to consider a merger of Bank of Madura with ICICI Bank Limited.

The deal was brokered by DSP Merrill Lynch, which is representing Bank of Madura, and Kotak Mahindra which is advising ICICI Bank.

The merged entity will be about the size of Corporation Bank, a nationalised bank, and will knock HDFC Bank off its perch as the largest new private sector bank in the country.

After the two-step nationalisation of banks in 1969 and 1974, private banks were allowed to set up shop once again in the mid-nineties.

Explaining the decision to pick the staid Bank of Madura as its somewhat unlikely partner, ICICI Bank sources said the 57-year-old bank was one of the best managed private sector banks in the country. “It has over 263 branches. Further, it has low-cost deposits and is well run. It, therefore, makes a lot of synergistic sense to merge it with ICICI Bank,’’ they added.

For the year ended March 31, 2000, Bank of Madura had reported a total income of Rs 468.93 crore and ratcheted up its post-tax profit by 51 per cent at Rs 45.58 crore. It had reserves (excluding revaluation reserves) of Rs 203.93 crore. Its deposits rose 21 per cent to Rs 3631.04 crore and advances were up 20 per cent at Rs 1665.42 crore.

The merger plan will have to be cleared by the boards of the two banks and later by the Reserve Bank of India. Other statutory approvals may also be required.

In case the proposal is approved by the two boards, the Bank of Madura shareholders will get ICICI Bank shares at a mutually agreed ratio, said an ICICI spokesperson.

Last year, leading private sector bank HDFC Bank had acquired

Times Bank starting the trend in consolidation in the bank

sector.

The stock markets had an inkling that something was afoot which is why the Bank of Madura scrip was scaling new highs over the past few days. However, nobody imagined that ICICI Bank would be the suitor. Industry circles say Kotak Mahindra had been touted as a potential suitor in view of the 12 per cent stake it holds in the south-based bank.

KM Thiagarajan, chairman cum managing director of Bank of Madura, holds a 32 per cent stake.

ICICI Ltd, the financial institution, holds a 62.2 per cent stake in the five-year-old ICICI Bank.

The shares of ICICI Bank today vaulted by Rs 18.55 to Rs 169.95 from Rs 151.40.

Bank of Madura leapt to Rs 131.60 from the previous day’s close of Rs 121.90, a gain of over 8 per cent. That is an awesome 68.7 per cent rise since November 1 when the stock was quoted at Rs 78. ICICI Bank officials said Bank of Madura alone would add Rs 4000 crore in terms of assets to the balance sheet.

ICICI Bank’s recent issue of American depositary shares (ADS) of $175 million has helped it meet its capital requirement enabling it to improve its capital adequacy ratio. With the removal of capital constraints, industry mavens had then said the bank would be able to grow efficiently and expand swiftly.

ICICI Bank has an NPA ratio — proportion of bad loans to total advances — of 1.3 per cent which compares well with the other private sector banks.

The grapevine had earlier indicated that ING Bank of the Netherlands was a prospective bidder for Bank of Madura. Rumour mongers added grist to the mill with talk that a Dubai-based bank was wooing the south-based bank.

   

 
 
NO PROVISO TO CHECK SLY TAKEOVER OF PSU BANKS 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, Dec 8: 
The hotly-debated banking amendment Bill, which seeks to bring down government stake in public sector banks to 33 per cent, will have no safeguard clause to prevent private individuals from having higher equity stake than the government holding.

In a bid to pacify the agitating bank unions, top government officials had promised such a lolly to them. It now seems that the promise was made only to be broken.

The absence of such a safeguard clause is likely to make the passage of the Bill in Parliament even more difficult as both the Congress and the Left parties have made retention of the state-run character of public sector banks their main plank in opposing the move.

“There are too many loopholes...We will oppose even the introduction of the Bill,” said an obviously angry Roop Chand Pal, a CPM MP and member of the standing committee on finance.

The proposed Act, entitled the Banking Companies (acquisition and transfer of undertakings) and financial Institutions Laws (amendment) Bill 2000, will however, allow the government to suspend the board of directors of a PSU bank and replace it with a financial reconstruction authority on the recommendations of the Reserve Bank India.

It also allows “free transferability of shares held by the central government” in order to “facilitate acquisition, merger and financial restructuring” of banks on “a case to case basis”.

The Bill also removes existing restrictions on reduction of capital to below 25 per cent in nationalised banks to help clean up balance sheets laden with bad debts.

Once the Bill is passed, the number of full time directors in state-run banks can go up from two to four. The Bill also provides for omitting current provisions on mandatory nomination of directors by the RBI, financial institutions and chartered accountant bodies.

The Bill will also allow banks to “transfer all dividend, unclaimed for more than seven years to the Investor Education and Protection Fund.”

Banks will also have to annex balance sheets, profit and loss accounts and auditors reports for their subsidiaries in their main annual report to shareholders.

Though it is known that the Bill is likely to raise hackles both inside and outside of Parliament, the government its part says it is essential as banks need to inject fresh capital to meet new capital adequacy norms which stipulate that their capital should be at least 8 per cent of their risk weighted assets. “The government, which owns these banks, does not have sufficient spare funds to refinance them so we have to let them go to the market and this legislation is the only way,” finance ministry officials said.