United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 under
the Securities Exchange Act of 1934
For the month of December 2001
ICICI Bank Limited
(Translation of registrant's name into English)
4th floor, South Tower
ICICI Towers,
Bandra-Kurla Complex
Mumbai, India 400 051
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
--- ---
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g 3-2(b) under the
Securities Exchange Act of 1934.
Yes No X
--- ---
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g 3-2(b).
Not applicable.
INDEX TO EXHIBITS
Item
----
1. Notice and Explanation of Statement by ICICI Bank Limited.
2. Information Statement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: December 27, 2001
ICICI Bank Limited
By /s/ Bhashyam Seshan
-------------------------
Name: Bhashyam Seshan
Title: Company Secretary
Item 1
ICICI BANK
ICICI BANK LIMITED
Registered Office : Landmark, Race Course Circle, Vadodara 390 007
MEETING OF THE EQUITY SHAREHOLDERS CONTENTS
Date : January 25, 2002 A Pages
Time : 3.00 p.m. Notice Convening Meeting of the
Equity Shareholders of ICICI
Venue : Central Gujarat Chamber BANK LIMITED...................... 2
of Commerce Auditorium,
Second Floor, Vanijya Explanatory Statement under
Bhavan Race Course Circle, Section 393 of the Companies
Vadodara 390 007 Act, 1956......................... 3
Scheme of Amalgamation under
Sections 391 to 394 of the
Companies Act, 1956, of ICICI
Limited, ICICI Capital Services
Limited and ICICI Personal
Financial Services Limited with
ICICI Bank Limited............... 15
Form of Proxy.................... 31
B
Information Statement............ 1-59
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
ORDINARY ORIGINAL JURISDICTION
COMPANY APPLICATION NO. 360 OF 2001
In the matter of the Companies Act, 1956;
-And-
In the matter of Sections 391 to 394 of the Companies Act, 1956;
-And-
In the matter of ICICI Bank Limited, a company incorporated
under the Companies Act, 1956 and having its Registered Office
at Landmark, Race Course Circle, Vadodara 390 007, Gujarat;
-And-
In the matter of Scheme of Amalgamation of ICICI Limited, ICICI
Capital Services Limited and ICICI Personal Financial Services
Limited with ICICI Bank Limited.
ICICI Bank Limited, a company incorporated )
under the Companies Act, 1956 and having ) .....Applicant Company.
its Registered Office at Landmark, Race Course )
Circle, Vadodara 390 007, Gujarat. )
NOTICE CONVENING MEETING OF THE EQUITY SHAREHOLDERS OF THE APPLICANT COMPANY
To,
The Equity Shareholders of the Applicant Company
TAKE NOTICE that by an Order made on the 19th day of December, 2001 in the
above Company Application, the High Court of Gujarat at Ahmedabad has directed
that a meeting of the Equity Shareholders of the Applicant Company be held at
Central Gujarat Chamber of Commerce Auditorium, Second Floor, Vanijya Bhavan,
Race Course Circle, Vadodara 390 007 on Friday, the 25th day of January, 2002
at 3.00 p.m. (1500 hours) for the purpose of considering, and if thought fit,
approving with or without modification, the arrangement embodied in the Scheme
of Amalgamation of ICICI Limited, ICICI Capital Services Limited and ICICI
Personal Financial Services Limited with the Applicant Company (the "Scheme").
TAKE FURTHER NOTICE that in pursuance of the said Order and as directed
therein, a meeting of the Equity Shareholders of the Applicant Company will be
held at Central Gujarat Chamber of Commerce Auditorium, Second Floor, Vanijya
Bhavan, Race Course Circle, Vadodara 390 007 on Friday, the 25th day of
January, 2002 at 3.00 p.m. (1500 hours), when you are requested to attend.
TAKE FURTHER NOTICE that you may attend and vote at the said meeting in person
or by Proxy, provided that a Proxy in the prescribed form, duly signed by you
or by your authorised representative, is deposited at the Registered Office of
the Applicant Company at Landmark, Race Course Circle, Vadodara 390 007,
Gujarat not later than 48 hours before the meeting.
The Court has appointed Shri Bhupendranath Vidyanath Bhargava, the Director of
the Applicant Company, in his absence Shri Raghunathan Rajamani, the Director
of the Applicant Company, and in his absence Shri Uday Madhav Chitale, the
Director of the Applicant Company, to be the Chairman of the said meeting.
A copy each of the Scheme, the statement under Section 393 of the Companies
Act, 1956 and a Form of Proxy are enclosed.
/s/ Bhupendranath Vidyanath Bhargava
Bhupendranath Vidyanath Bhargava
Chairman appointed for the meeting
Dated this 21st day of December 2001.
Registered Office:
Landmark, Race Course Circle
Vadodara 390 007, Gujarat.
Note 1: All alterations made in the Form of Proxy should be initialled.
Note 2: Only registered shareholders of the Applicant Company or their
proxy(ies) may attend and vote at the shareholders' meeting. The
holders of the American Depositary Receipts (the "ADRs") of the
Applicant Company shall not be entitled to attend and vote at the
shareholders' meeting and the Depositary holding the equity shares of
the Applicant Company underlying the ADRs of the Applicant Company
shall, in accordance with the terms of the issue of such ADRs and the
Depositary Agreement, vote in accordance with the direction of the
Board of Directors of the Applicant Company.
Enclosed: as above.
2
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
ORDINARY ORIGINAL JURISDICTION
COMPANY APPLICATION NO. 360 OF 2001
In the matter of the Companies Act, 1956;
-And-
In the matter of Sections 391 to 394 of the Companies Act, 1956;
-And-
In the matter of ICICI Bank Limited, a company incorporated
under the Companies Act, 1956 and having its Registered Office
at Landmark, Race Course Circle, Vadodara 390 007, Gujarat;
-And-
In the matter of Scheme of Amalgamation of ICICI Limited, ICICI
Capital Services Limited and ICICI Personal Financial Services
Limited with ICICI Bank Limited.
ICICI Bank Limited, a company incorporated )
under the Companies Act, 1956 and having ) .....Applicant Company.
its Registered Office at Landmark, Race Course )
Circle, Vadodara 390 007, Gujarat. )
EXPLANATORY STATEMENT UNDER SECTION 393 OF THE COMPANIES ACT, 1956
------------------------------------------------------------------
1. Pursuant to the Order dated the 19th day of December, 2001, passed by the
High Court of Gujarat at Ahmedabad in the Company Application referred to
hereinabove, the meeting of the Equity Shareholders of the Applicant
Company to be held on Friday, the 25th day of January, 2002 at 3.00 p.m.
(1500 hours) is being convened for the purpose of considering, and if
thought fit, approving with or without modification, the arrangement
embodied in the Scheme of Amalgamation of ICICI Limited, ICICI Capital
Services Limited and ICICI Personal Financial Services Limited with the
Applicant Company (the "Scheme").
2. In this statement, the Applicant Company is also referred to as the
"Transferee Company" or "ICICI Bank", ICICI Limited is referred to as
"ICICI", ICICI Capital Services Limited is referred to as "ICICI Capital"
and ICICI Personal Financial Services Limited is referred to as "ICICI
PFS". ICICI, ICICI Capital and ICICI PFS are collectively referred to as
the "Transferor Companies". Where the context so requires, the Transferor
Companies and the Transferee Company are together referred to as the
"Companies".
3. A copy of the Scheme, setting out the terms and conditions of the
amalgamation of the Transferor Companies with the Transferee Company,
which has been approved by the Board of Directors of each of ICICI, ICICI
Capital, ICICI PFS and ICICI Bank at their respective meetings held on
October 25, 2001, is enclosed.
4. The Registered Office of ICICI Bank is situated at Landmark, Race Course
Circle, Vadodara 390 007 and its Corporate Office at ICICI Towers,
Bandra-Kurla Complex, Mumbai 400 051.
5. The Registered Office of ICICI is situated at ICICI Towers, Bandra-Kurla
Complex, Mumbai 400 051.
6. The Registered Office of ICICI Capital is situated at ICICI Towers,
Bandra-Kurla Complex, Mumbai 400 051.
7. The Registered Office of ICICI PFS is situated at ICICI Towers,
Bandra-Kurla Complex, Mumbai 400 051.
8. The share capital of ICICI Bank, ICICI, ICICI Capital and ICICI PFS are
set out in Clauses 3(d), 3(a), 3(b) and 3(c) of the Scheme, respectively.
9. The objects for which ICICI Bank has been incorporated are set out in its
Memorandum of Association. The primary objects are, inter alia, to
establish and carry on the business of banking in any part of India or
outside India, to carry on the business of accepting, for the purpose of
lending or investment, deposits of money repayable on demand or otherwise
and withdrawable by cheque, draft, order or otherwise and to borrow, raise
or take up money, lend or advance money with or without interest either
upon or without security.
3
10. The objects for which ICICI has been incorporated are set out in its
Memorandum of Association. The primary objects are, inter alia, to carry
on the business of assisting industrial enterprises within the private
sector of industry in India in general by assisting in the creation,
expansion and modernisation of such enterprises, encouraging and promoting
the participation of private capital, both internal and external in such
enterprises and encouraging and promoting private ownership of industrial
investments and the expansion of investment markets.
11. The objects for which ICICI Capital has been incorporated are set out in
its Memorandum of Association. The primary objects are, inter alia, to
carry on business as shares and stock brokers, under-writers, agents and
brokers for subscribing to and for the sale and purchase of securities,
stocks, shares, bonds, units or certificates of mutual funds, government
securities or other financial instruments or obligations of any body
corporate, authority whether central, state or local, undertaking whether
public or private and provisional documents relating thereto and to act as
managers to the issue of any of the securities aforesaid and to promote
the formation and mobilization of capital.
12. The objects for which ICICI PFS has been incorporated are set out in its
Memorandum of Association. The primary objects are, inter alia, to carry
on the activities of marketing and to provide financial assistance by
means of leasing, giving on hire or hire purchase, lending, selling,
reselling or otherwise disposing of all forms of immoveable and moveable
properties and assets and to carry on the business of granting loans or
advances or providing financial assistance in any other form whatsoever to
industrial and other enterprises.
Background of the Amalgamation
13. The ICICI group, which comprises ICICI, its subsidiaries and other
affiliate companies, is a diversified financial services group. ICICI was
formed in 1955 at the initiative of the World Bank, the Government of
India and representatives of Indian industry. The principal objective was
to create a development financial institution for providing medium-term
and long-term project financing to Indian businesses. Until the late
1980s, ICICI primarily focused its activities on project finance,
providing long-term funds to a variety of industrial projects. With the
liberalization of the financial sector in India in the 1990s, ICICI
transformed its business from a development financial institution offering
only project finance to a diversified financial services provider that,
along with its subsidiaries and affiliates, offers a wide variety of
products and services. As India's economy became more market-oriented and
integrated with the world economy, ICICI capitalized on the new
opportunities to provide a wider range of financial products and services
to a broader spectrum of clients. ICICI set up independent operations
through the incorporation of subsidiaries and affiliates in the areas of
venture capital funding (1988), asset management (1993), investment
banking (1993), commercial banking (1994), brokering and marketing (1994),
personal finance (1997), Internet stock trading (1999), home finance
(1999) and insurance (2000). ICICI operates as an autonomous and
independent commercial enterprise making decisions and pursuing strategies
that are designed to maximize shareholder value.
14. ICICI Capital is a wholly-owned subsidiary of ICICI, and is one of the
largest distributors of financial and investment products in India. It
also provides front-office services to the retail and semi-retail
investors of ICICI, and undertakes the management of the various ICICI
centres, which are low-cost stand-alone offices acting as marketing and
service centers, set up by ICICI.
15. ICICI PFS is also a wholly-owned subsidiary of ICICI, and is engaged in
the distribution and servicing of various retail credit products and other
services offered by ICICI and ICICI Bank.
16. ICICI Bank is a private sector commercial bank organized under the laws of
India in 1994. ICICI Bank offers a wide range of banking products to
corporate and retail customers through a variety of delivery channels.
ICICI Bank is an affiliate company of ICICI. ICICI Bank offers products
and services which largely complement the products and services offered by
ICICI and other ICICI group companies. ICICI Bank seeks to take advantage
of the customer relationships of the ICICI group. These relationships have
been particularly effective in helping ICICI Bank gain access to the
larger corporations, as ICICI Bank's balance sheet on a stand-alone basis
would not have permitted it to take the large exposures that may be
undertaken by ICICI given its large balance sheet capabilities. ICICI Bank
also seeks to benefit from ICICI's corporate relationships in growing its
retail business. ICICI Bank sells retail products to the employees of
ICICI group's corporate customers, including offering corporate customers
its payroll deposit scheme for their employees. ICICI's retail bondholders
also present ICICI Bank with an opportunity for cross-selling a variety of
products, including bank accounts, credit cards, depositary share accounts
and, to a limited extent, retail loans.
17. In May 1994, when ICICI Bank was incorporated as a subsidiary of ICICI and
granted a banking licence, ICICI held 75% of the equity share capital of
ICICI Bank and the balance 25% of the equity share capital of ICICI Bank
was held by the erstwhile SCICI Limited. Following the amalgamation of the
erstwhile SCICI Limited with ICICI, ICICI Bank became a wholly-owned
subsidiary of ICICI. The Reserve Bank of India imposed a condition that
ICICI reduce its shareholding in ICICI Bank in stages, first to not more
than 75.0% of its equity share capital and ultimately to not more than
40.0% of its equity share capital. In fiscal 1998, ICICI reduced its
shareholding in ICICI Bank to just below 75.0% of its equity share capital
as required, through a public offering of shares in India. In March 2000,
ICICI Bank completed an equity offering in the form of ADRs listed on the
New York Stock Exchange for an amount of US$ 175 million. After this
offering, ICICI's shareholding in ICICI Bank was approximately 62.2% of
its equity share capital. Effective March 10, 2001, ICICI Bank acquired
Bank of Madura Limited, an old private sector Indian bank, in an all-stock
amalgamation, and ICICI's shareholding in ICICI Bank reduced to
approximately 55.6% after the amalgamation. ICICI had been in discussions
with the Reserve
4
Bank of India to determine whether and to what extent it might still be
required to sell or reduce its interest in ICICI Bank. During fiscal 2001,
the Reserve Bank of India reiterated its requirement of a reduction of
ICICI's holding in ICICI Bank and advised ICICI to draw up a firm plan for
dilution of its stake. In line with the Reserve Bank of India's directive,
ICICI reduced its shareholding in ICICI Bank to approximately 46.4% of its
equity share capital through the sale of equity shares of ICICI Bank in
the Indian secondary markets to institutional investors in March 2001. As
a result of the foregoing, ICICI Bank ceased to be a subsidiary of ICICI
as of March 22, 2001 and was accounted for under the equity method of
accounting from April 1, 2000. Further, during the first five months
(April to August) of fiscal 2002, ICICI sold another 0.4% of the equity
share capital of ICICI Bank in the Indian secondary markets to
institutional investors. On September 30, 2001, ICICI held 46.0% of the
equity share capital of ICICI Bank.
18. The issue of universal banking, which in the Indian context means
conversion of long-term development financial institutions into commercial
banks, has been discussed at length over the past few years. The Reserve
Bank of India in its Mid-Term Review of Monetary and Credit Policy for
fiscal 2000 and its circular on Approach to Universal Banking issued on
April 28, 2001, announced that it would consider proposals from
development financial institutions (like ICICI) wishing to transform
themselves into banks on a case-by-case basis. In its Mid-Term Review of
Monetary and Credit Policy for fiscal 2002, the Reserve Bank of India
encouraged financial institutions to submit proposals for their
transformation into banks.
19. As a bank, ICICI would have the ability to accept low-cost demand deposits
and offer a wider range of products and services, and greater
opportunities for earning non-fund based income in the form of banking
fees and commissions. In view of the benefits of transformation into a
bank and the Reserve Bank of India's pronouncements on universal banking,
ICICI explored various corporate structuring alternatives for its
transformation into a universal bank. ICICI also held discussions with the
Reserve Bank of India on an appropriate transition path and compliance
with regulatory requirements. ICICI Bank also considered various strategic
alternatives, in the context of the emerging competitive scenario in the
Indian banking industry, and the move towards universal banking. ICICI
Bank identified a large capital base and size and scale of operations as
key success factors in the Indian banking industry. The strategic
alternatives examined by ICICI and ICICI Bank included an amalgamation of
the two entities, in view of ICICI's significant shareholding in ICICI
Bank, and the existing strong business synergies between the two entities.
ICICI also considered the reorganisation of its subsidiary companies.
20. Following this strategising on the various alternatives including an
amalgamation of ICICI and ICICI Bank, the senior managements of ICICI and
ICICI Bank commenced a programme of in-depth confidential discussions on
the various strategic alternatives in July 2001. These discussions were
held on various dates during July-August 2001. Based on these discussions,
the managements of ICICI and ICICI Bank formed the view that the
amalgamation of ICICI with ICICI Bank would be the optimal strategic
alternative for both entities, and would create the optimal legal
structure for ICICI group's universal banking strategy. The managements of
ICICI and ICICI Bank accordingly decided to prepare, for submission to
their respective Boards of Directors, a proposal for the amalgamation of
ICICI and two of its wholly-owned subsidiaries, viz. ICICI Capital and
ICICI PFS, with ICICI Bank. The rationale for the amalgamation considered
by the management and the Board of Directors of the two companies is
discussed in detail below in "Rationale for the Amalgamation".
21. The managements of ICICI and ICICI Bank decided to appoint external
financial advisors to advise them on the valuation of shares of both
entities and to recommend, to the respective Boards of Directors, a range
of share exchange ratios. ICICI appointed JM Morgan Stanley Private
Limited ("JM Morgan Stanley") and ICICI Bank appointed DSP Merrill Lynch
Limited ("DSP Merrill Lynch") as their advisors, respectively, on October
1, 2001. Subsequently, in addition to these advisors appointed by ICICI
and ICICI Bank respectively, ICICI and ICICI Bank jointly appointed the
accounting firm Deloitte Haskins & Sells, to undertake a valuation of
shares of both companies and recommend a share exchange ratio to the Board
of Directors of each company.
22. On October 17, 2001, ICICI Bank informed the Indian stock exchanges and
the New York Stock Exchange, where its equity shares and ADRs are listed,
that its Board of Directors would meet on October 25, 2001, to consider
its audited half-yearly results for the six months ended September 30,
2001. Separately, on October 18, 2001, ICICI informed the Indian stock
exchanges and the New York Stock Exchange, where its equity shares and
ADRs are listed, that its Board of Directors would meet on October 25,
2001, to consider its audited half-yearly results for the six months ended
September 30, 2001. Subsequently, on October 22, 2001, the Reserve Bank of
India announced its Mid- Term Review of Monetary and Credit Policy for
fiscal 2002, in which it encouraged financial institutions to submit
proposals for their transformation into banks. In view of the above
announcement by the Reserve Bank of India and the completion of the
valuation process by JM Morgan Stanley, DSP Merrill Lynch and Deloitte
Haskins & Sells, the managements of ICICI and ICICI Bank decided to place
the amalgamation proposal before their respective Boards of Directors at
their meetings scheduled for October 25, 2001. On October 24, 2001, each
company separately informed the Indian stock exchanges and the New York
Stock Exchange that their respective Boards of Directors would also
consider the amalgamation proposal at their meetings on October 25, 2001.
Rationale for the Amalgamation
23. The amalgamation is expected to be beneficial to both ICICI and ICICI Bank
shareholders. The management and the Board of Directors of ICICI believe
that the amalgamation would enhance value for ICICI shareholders through
the merged
5
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 management and the Board of
Directors of ICICI Bank believe that the amalgamation would enhance value
for ICICI Bank shareholders through a large capital base and scale of
operations, seamless 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.
24. The merged entity would be the second largest among all banks in India,
ranked on the basis of their total assets. 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 merged entity would have improved capability to
offer a wider range of products and services, ranging from project finance
to retail finance, with a diversified resource base, improved portfolio
risk management capability and deeper client relationships.
25. The amalgamation of ICICI Capital and ICICI PFS (which are wholly-owned
subsidiaries of ICICI) with ICICI Bank would consolidate and integrate the
retail business, which will be a key driver of growth for the merged
entity, with respect to both assets and liabilities. Both ICICI Bank's and
the ICICI group's retail strategy is based on the offering of multiple
products through multiple delivery channels to provide choice and
convenience to customers. The channels are currently owned by different
ICICI group companies. Offering the entire range of products and services
through multiple channels also results in greater economies of scale.
26. The process of integration of operations of ICICI, ICICI Capital and ICICI
PFS with ICICI Bank is expected to be smooth in view of the existing
strong synergies amongst them.
Salient Features of the Scheme
27. The salient features of the Scheme are as follows:
(a) The "Appointed Date" for the Scheme shall be the later of (i) March
30, 2002 and (ii) the date on which the approval of the Reserve Bank
of India for the Scheme becomes effective.
(b) The "Effective Date" for the Scheme shall be the last of the dates on
which all conditions, matters and filings referred to in Clause 26 of
the Scheme have been fulfilled and necessary orders, approvals and
consents referred to therein have been obtained.
(c) The Assets or Undertaking (as defined in the Scheme) of the
Transferor Companies comprises of all the undertakings, the entire
businesses, all the properties (whether moveable or immoveable,
tangible or intangible), assets, deposits, investments of all kinds
(including shares, scrips, stocks, bonds, debentures, debenture
stock, units or pass through certificates), all cash balances with
the Reserve Bank of India and other banks, money at call and short
notice, loans, advances, contingent rights or benefits, lease and
hire purchase contracts and assets, securitised assets, receivables,
benefit of assets or properties or other interest held in trust,
benefit of any security arrangements, authorities, allotments,
approvals, reversions, buildings and structures, offices, residential
and other premises, tenancies, leases, licenses, fixed and other
assets, powers, consents, authorities, registrations, agreements,
contracts, engagements, arrangements of all kinds, rights, titles,
interests, benefits and advantages of whatsoever nature and
wheresoever situate belonging to or in the ownership, power or
possession or in the control of or vested in or granted in favour of
or held for the benefit of or enjoyed by the Transferor Companies or
to which the Transferor Companies may be entitled and include but
without being limited to trade and service names and marks and other
intellectual property rights of any nature whatsoever, permits,
approvals, authorisations, rights to use and avail of telephones,
telexes, facsimile, email, internet, leased line connections and
installations, utilities, electricity and other services, reserves,
provisions, funds, benefits of all agreements, all records, files,
papers, computer programmes, manuals, data, catalogues, sales and
advertising materials, lists and other details of present and former
customers and suppliers, customers credit information, customer and
supplier pricing information and other records in connection with or
relating to the Transferor Companies and all other interests of
whatsoever nature belonging to or in the ownership, power, possession
or the control of or vested in or granted in favour of or held for
the benefit of or enjoyed by the Transferor Companies, whether in
India or abroad.
(d) The Scheme envisages that upon the coming into effect of the Scheme
and with effect from the Appointed Date and subject to the provisions
of the Scheme:
(i) The Undertaking of the Transferor Companies shall, pursuant to
the provisions of Section 394(2) of the Companies Act, 1956 (the
"Act") without any further act, instrument or deed, be and stand
transferred to and vested in or be deemed to have been
transferred to and vested in the Transferee Company as a going
concern so as to become as and from the Appointed Date, the
estate, assets, rights, title, interest and authorities of the
Transferee Company.
(ii) Without prejudice to sub-clause (i) above, in respect of such of
the assets of the Undertaking as are moveable in nature or are
otherwise capable of transfer by manual delivery or by
endorsement and/or delivery, the same may be so transferred by
the Transferor Companies, and shall, upon such transfer, become
the property, estates, assets, rights, title, interest and
authorities of the Transferee Company.
6
(iii) All the licenses, permits, quotas, approvals, incentives,
subsidies, rights, claims, leases, tenancy rights, liberties,
rehabilitation schemes, special status and other benefits or
privileges enjoyed or conferred upon or held or availed of by
and all rights and benefits that have accrued to the Transferor
Companies shall, pursuant to the provisions of Section 394(2) of
the Act, without any further act, instrument or deed, be and
stand transferred to and vest in or be deemed to be transferred
to and vested in and be available to the Transferee Company so
as to become as and from the Appointed Date the estates, assets,
rights, title, interests and authorities of the Transferee
Company and shall remain valid, effective and enforceable on the
same terms and conditions to the extent permissible under law.
(iv) All assets, estate, rights, title, interest, licenses and
authorities acquired by or quotas, approvals, incentives,
subsidies, rights, claims, leases, tenancy rights, liberties,
rehabilitation schemes, special status and other benefits or
privileges enjoyed or conferred upon or held or availed of by
and/or all rights and benefits that have accrued to the
Transferor Companies after the Appointed Date and prior to the
Effective Date in connection or in relation to the operation of
the Undertaking shall, pursuant to the provisions of Section
394(2) of the Act, without any further act, instrument or deed,
be and stand transferred to and vested or deemed to be
transferred to and vested in the Transferee Company.
(v) Such of the shares which have been pledged in favour of one or
more of the Transferor Companies (the "Pledged Shares"), whether
in their own name or as an agent or trustee, by third parties by
way of security under the terms of the relevant agreements,
documents and/or arrangements (collectively the "Pledge
Documents"), shall, without any further act, instrument or deed
be and stand transferred to ICICI Trusteeship Services Limited,
a company incorporated under the Companies Act, 1956 and having
its Registered Office at ICICI Towers, Bandra-Kurla Complex,
Mumbai 400 051, who shall hold the Pledged Shares on trust as a
trustee exclusively for the benefit of the persons for whose
benefit the pledge has been created (ICICI Trusteeship Services
Limited is hereinafter referred to as the "Security Trustee"),
and all the rights, benefits and obligations of such Transferor
Company as pledgee, agent or trustee under the Pledge Documents
shall be and stand transferred to and vested in the Security
Trustee, and the Pledge Documents shall continue to be in full
force and effect and may be enforced as fully and effectually as
if, instead of such Transferor Company, the Security Trustee had
been a party thereto. The Security Trustee shall hold the
Pledged Shares in trust for the benefit of the persons for whose
benefit the pledge has been created and exercise all powers,
trusts, authorities, duties and discretions as are specifically
vested in the Security Trustee under the Pledge Documents and
such other rights, powers and discretions as are reasonably
incidental thereto, on and subject to the instructions and
directions issued by the person for whose benefit the pledge has
been created, from time to time.
(e) The Scheme provides that upon the coming into effect of the Scheme
and with effect from the Appointed Date:
(i) All debts, including rupee and foreign currency loans, term
deposits, time and demand liabilities, borrowings, bills
payable, interest accrued and all other duties, liabilities,
undertakings and obligations of the Transferor Companies (the
"Liabilities") shall, pursuant to the provisions of Section
394(2) of the Act, without any further act, instrument or deed
be and stand transferred to and vested in or be deemed to stand
transferred to and vested in, the Transferee Company so as to
become the Liabilities of the Transferee Company, and further
that it shall not be necessary to obtain the consent of any
person who is a party to any contract or arrangement by virtue
of which such Liabilities have arisen in order to give effect to
the provisions of this Clause.
(ii) In case of such of the Liabilities or the documents governing
such of the Liabilities where there is an obligation on one or
more of the Transferor Companies to maintain any privilege or
status specifically conferred by any statute or regulation, such
obligation and related consequences thereof shall cease to be
operative against the Transferee Company, and the relevant terms
of the documents governing such Liabilities shall, without any
further act, instrument or deed, stand modified accordingly.
(iii) All public deposits, debentures or bonds of the Transferor
Companies shall be kept distinctly identified in the records of
the Transferee Company for all intents and purposes including
taxation and accounting and shall not be combined with any
existing outstanding deposit scheme or series of debentures or
bonds of the Transferee Company.
(f) (i) All debentures, bonds, notes or other securities of the
Transferor Companies, whether convertible into equity or
otherwise, (the "Transferor Companies' Securities"), shall,
pursuant to the provisions of Section 394(2) of the Act, without
any further act, instrument or deed become securities of the
Transferee Company and all rights, powers, duties and
obligations in relation thereto shall be and stand transferred
to and vested in or deemed to be transferred to and vested in
and shall be exercised by or against the Transferee Company as
if it were the Transferor Company in respect of the Transferor
Companies' Securities so transferred. If the Transferor
Companies' Securities are listed on any stock exchange, the same
shall, subject to applicable regulations, be listed and/or
admitted to trading on the relevant stock exchange/s whether in
India or abroad, where the Transferor Companies' Securities were
listed and/or admitted to trading on the same terms and
conditions unless otherwise modified in accordance with the
provisions of the Scheme.
7
(ii) Loans and other obligations (including any guarantees, letters
of credit, letters of comfort or any other instrument or
arrangement which may give rise to a contingent liability in
whatever form), if any, due or which may at any time in future
become due between or amongst the Transferor Companies and the
Transferee Company shall stand discharged and there shall be no
liability in that behalf on either party. Provided however,
security over any moveable and/or immoveable properties and
security in any other form (both present and future), if any,
created by any person in favour of any one or more of the
Transferor Companies for securing the obligation of the persons
for and on whose behalf a guarantee, letter of credit, letter of
comfort or other similar instrument has been executed or
arrangements entered into by the Transferor Companies in favour
of the Transferee Company shall, pursuant to the provisions of
Section 394(2) of the Act, without any further act, instrument
or deed stand vested in and be deemed to be in favour of the
Transferee Company and the benefit of such security shall be
available to the Transferee Company as if such security was ab
initio created in favour of the Transferee Company.
(iii) Any securities, debentures or notes, if any, issued by any one
or more of the Transferor Companies, and held by the Transferee
Company, and vice versa shall, unless sold or transferred by
such Transferor Company or the Transferee Company, as the case
may be, at any time prior to the Appointed Date or the Effective
Date (whichever is later), stand cancelled as on the Effective
Date, and shall be of no effect and such Transferor Company or
the Transferee Company, as the case may be, shall have no
further obligation outstanding in that behalf.
(iv) Without prejudice to the provisions of clause (f) (ii) above,
the guarantees, letters of credit, letters of comfort and other
similar arrangements, if any, given or executed or made by ICICI
in favour of, for the benefit of and on behalf of, ICICI Capital
and/or ICICI PFS in favour of any person shall stand discharged.
(g) If the Effective Date occurs after the Appointed Date:
(i) each of the Transferor Companies with effect from the Appointed
Date and up to and including the Effective Date:
(aa) shall carry on and shall be deemed to have carried on all
the business and activities as hitherto and shall hold and
stand possessed of and shall be deemed to have held and
stood possessed of the Undertaking on account of, and in
trust for, the Transferee Company; and
(bb) all the profits or incomes accruing or arising to the
Transferor Companies, or expenditure or losses arising or
incurred (including the effect of taxes, if any, thereon)
by the Transferor Companies shall, for all purposes, be
treated and be deemed to be and accrue as the profits or
incomes or expenditure or losses or taxes of the Transferee
Company, as the case may be.
(ii) each of the Transferor Companies with effect from the Appointed
Date and up to and including the Effective Date shall carry on
its business and activities with reasonable diligence and
business prudence and shall not undertake financial commitments
either for itself or on behalf of its subsidiaries or group
companies or any third party, or sell, transfer, alienate,
charge, mortgage or encumber the Undertaking or any part
thereof, save and except in each case in the following
circumstances:
(aa) if the same is in its ordinary course of business as
carried on by it as on the date of filing of the Scheme
with the High Court of Judicature at Bombay and the High
Court of Gujarat at Ahmedabad; or
(bb) if the same is expressly permitted by the Scheme; or
(cc) if prior written consent of the Transferee Company has been
obtained.
(iii) the Transferee Company with effect from the Appointed Date and
up to and including the Effective Date shall carry on its
business and activities with reasonable diligence and business
prudence and shall not undertake financial commitments either
for itself or on behalf of its subsidiaries or group companies
or any third party, or sell, transfer, alienate, charge,
mortgage or encumber its undertaking or any part thereof, save
and except in each case in the following circumstances:
(aa) if the same is in its ordinary course of business as
carried on by it as on the date of filing this Scheme with
the High Court of Judicature at Bombay and the High Court
of Gujarat at Ahmedabad; or
(bb) if the same is expressly permitted by the Scheme; or
(cc) if prior written consent of each of the Transferor
Companies has been obtained.
(h) (i) The Board of Directors of ICICI and the Transferee Company have
jointly constituted a committee in the manner described in
sub-clause (ii) below (the "Joint Committee") to perform the
functions specified in subclause (iii) below from the date of
filing of the Scheme with the High Court of Judicature at Bombay
and the High Court of Gujarat at Ahmedabad until the Effective
Date.
(ii) The Joint Committee shall consist of Shri K. V. Kamath (Managing
Director and Chief Executive Officer, ICICI),
8
as the Chairman of the Joint Committee, Shri H. N. Sinor
(Managing Director and Chief Executive Officer, ICICI Bank), as
a member of the Joint Committee. Shri K. V. Kamath shall have
the power and authority to appoint such additional members of
the Joint Committee, as may be necessary, from amongst the whole
time Directors and/or employees of ICICI. Shri H. N. Sinor shall
have the power and authority to appoint such additional members
of the Joint Committee, as may be necessary, from amongst the
whole time Directors and/or employees of ICICI Bank.
(iii) From the date of filing of the Scheme with the High Court of
Judicature at Bombay and the High Court of Gujarat at Ahmedabad
and until the Effective Date, the Joint Committee shall perform
the following functions:
(aa) in case of any ambiguity or any question as to whether any
matter is within or outside the ordinary course of business
of the Transferor Companies and/or the Transferee Company,
it shall determine the same on the basis of evidence that
it may deem relevant for the purpose (including the books
and records of the Transferor Companies and/or the
Transferee Company);
(bb) to consider for approval the matters pertaining to the
share capital of the Transferor Companies and/or the
Transferee Company as specified in Clause 9 of the Scheme;
(cc) to deal with the matters, if any, in relation to change in
the employees' compensation structure of the Transferor
Companies and the Transferee Company and matters incidental
or consequential or related thereto; and
(dd) to perform such other functions specifically provided
elsewhere in the Scheme or as may be specifically conferred
on it by the Boards of Directors of ICICI and the
Transferee Company respectively.
(iv) The Scheme contains broad procedures relating to holding of
meetings of and taking of decisions by the Joint Committee.
(i) ICICI may, on the Appointed Date, transfer all the shares of the
Transferee Company held by it on such date (the "ICICI Bank Shares")
to an individual trustee or a board of trustees (including the
survivors or survivor of any of the trustees comprising such board of
trustees) or a corporate trustee (hereinafter referred to as the
"Trustees") to have and to hold the ICICI Bank Shares in trust
together with all additions or accretions thereto upon trust
exclusively for the benefit of ICICI and its successor subject to the
powers, provisions, discretions, rights and agreements contained in
the instrument (the "Trust Deed") establishing the aforesaid trust
(the "Trust"). The Trustees shall not exercise any voting rights with
respect to ICICI Bank Shares. It is proposed that the Trustees shall,
within a period of 24 months from the Effective Date, subject however
to the prevailing market conditions (in which case, the said period
may be suitably extended in the discretion of the Trustees), sell,
transfer or dispose of the ICICI Bank Shares at such time or times
and in such manner as may be proper in accordance with provisions of
the Trust Deed and shall remit the proceeds thereof to ICICI or its
successor and consequent thereto all obligations of the Trustees
under the Trust Deed shall stand discharged and the Trust shall stand
terminated.
(j) From the date of filing of the Scheme with the High Court of
Judicature at Bombay and the High Court of Gujarat at Ahmedabad and
up to and including the Effective Date, none of the Transferor
Companies and/or the Transferee Company shall make any change in its
capital structure in any manner either by any increase (including by
way of issue of equity and/or preference shares on a rights basis or
by way of a public issue, bonus shares and/or convertible debentures
or otherwise), decrease, reduction, reclassification, sub-division,
consolidation, re- organisation, or in any other manner which may, in
any way, affect the Share Exchange Ratio (as defined in clause (n)
(i) below), except with the prior approval of the Joint Committee
provided that nothing contained in this sub-clause shall be deemed to
affect any pre-existing obligations of any of the Transferor
Companies and/or the Transferee Company, including in respect of the
issue of further employees' stock options, vesting of stock options
or exercise of vested options under any existing scheme or conversion
of any loan or convertible security into equity shares in accordance
with the terms of any loan obtained or convertible security issued by
any of the Transferor Companies and/or the Transferee Company.
(k) Upon the coming into effect of the Scheme all suits, actions and
legal and other proceedings by or against the Transferor Companies
pending and/or arising on or before the Appointed Date or the
Effective Date (whichever is later) shall be transferred in the name
of the Transferee Company and shall be continued and be enforced by
or against the Transferee Company as effectually and in the same
manner and to the same extent as if the same had been pending and/or
arisen by or against the Transferee Company.
(l) Upon the coming into effect of the Scheme, and subject to the
provisions of the Scheme, all contracts, deeds, bonds, agreements,
arrangements and other instruments (including all tenancies, leases,
licenses and other assurances in favour of any of the Transferor
Companies or powers or authorities granted by or to any of them) of
whatsoever nature to which any of the Transferor Companies is a party
or to the benefit of which any of the Transferor Companies may be
eligible, and which are subsisting or having effect immediately
before the Appointed Date or the Effective Date (whichever is later),
shall, without any further act, instrument or deed, be in full force
and
9
effect in favour of or against the Transferee Company, as the case
may be, and may be enforced as fully and effectually as if, instead
of such Transferor Company, the Transferee Company had been a party
or beneficiary or obligee thereto.
(m) Upon the coming into effect of the Scheme:
(i) the employees of the Transferor Companies who are in service on
the Appointed Date or the Effective Date (whichever is later),
shall become the employees solely of the Transferee Company on
such date without any break or interruption in service and on
terms and conditions as to remuneration not less favourable than
those subsisting with reference to the respective Transferor
Companies on the said date.
(ii) the existing provident fund, gratuity fund, and pension and/or
superannuation fund or trusts created by the Transferor
Companies or any other special funds created or existing for the
benefit of the employees of the Transferor Companies shall be
transferred to the relevant funds of the Transferee Company. In
the event that the Transferee Company does not have its own fund
with respect to any such matters, the Transferee Company shall
create its own funds to which the contributions pertaining to
the employees of Transferor Companies shall be transferred.
(n) (i) Upon the coming into effect of the Scheme, and in consideration
of the transfer of and vesting of the Undertaking and the
Liabilities of the Transferor Companies in the Transferee
Company in terms of the Scheme, the Transferee Company shall
without any further application, act, instrument or deed, issue
and allot to the equity shareholders of ICICI whose names are
recorded in the Register of Members of ICICI (the "Members"), on
a date (hereinafter referred to as the "Record Date") to be
fixed by the Board of Directors of the Transferee Company or a
committee of such Board of Directors, equity shares of the face
value of Rs. 10/- (Rupees ten only) each, credited as fully paid
up, in the ratio of 1 (one) equity share of the face value of
Rs. 10/- (Rupees ten only) each in the Transferee Company for
every 2 (two) equity shares of the face value of Rs. 10/-
(Rupees ten only) each held in ICICI.
(the above ratio in which the shares of the Transferee Company
are to be allotted to the shareholders of ICICI by the
Transferee Company is hereinafter referred to as the "Share
Exchange Ratio").
The Share Exchange Ratio was arrived at based on a valuation
process undertaken by reputed external valuers. JM Morgan
Stanley and DSP Merrill Lynch were appointed by ICICI and ICICI
Bank respectively to advise them on a fair share exchange ratio.
In addition, both ICICI and ICICI Bank had jointly appointed the
accounting firm Deloitte Haskins & Sells to recommend the final
share exchange ratio to each of the Board of Directors of ICICI
and ICICI Bank. The Share Exchange Ratio has been determined in
accordance with accepted valuation methodologies, using the
relative market prices, dividend discount approach and net asset
values.
(ii) The share certificates in relation to the shares held by the
said Members in ICICI (and the ADRs, as defined in Clause 2 of
the Scheme) that have been issued representing the underlying
shares in ICICI) shall be deemed to have been automatically
cancelled and be of no effect on and from such Record Date,
without any further act, instrument or deed. In so far as the
issue of shares pursuant to sub-clause (i) above is concerned,
each of the said Members of ICICI, shall have the option,
exercisable by notice in writing by the said Members to the
Transferee Company on or before such date as may be determined
by the Board of Directors of the Transferee Company or a
committee of such Board of Directors, to receive either in
certificate form or in dematerialised form, the shares of the
Transferee Company in lieu thereof and in terms of the Scheme.
In the event that such notice has not been received by the
Transferee Company in respect of any of the said Members, the
shares of the Transferee Company shall be issued to such Members
in certificate form. Those of the said Members exercising the
option to receive the shares in dematerialised form shall be
required to have an account with a depositary participant and
shall provide details thereof and such other confirmations as
may be required. It is only thereupon that the Transferee
Company shall issue and directly credit the demat/
dematerialised securities account of such Member with the shares
of the Transferee Company.
(iii) No shares shall be issued by the Transferee Company pursuant to
the amalgamation of ICICI Capital and ICICI PFS, both of which
are wholly owned subsidiaries of ICICI.
(iv) In respect of equity shares of ICICI where calls are in arrears,
without prejudice to any remedies that ICICI or the Transferee
Company, as the case may be, shall have in this behalf, the
Transferee Company shall not be bound to issue any shares of the
Transferee Company (whether partly paid or otherwise) nor to
confirm any entitlement to such holder until such time as the
calls-in-arrears are paid.
(v) Upon the coming into effect of the Scheme, the Transferee
Company shall issue to the holders of 0.001% preference shares
of Rs. 1,00,00,000/- each fully paid-up (the "Preference
Shares") of ICICI one 0.001% preference share of Rs.
1,00,00,000/- fully paid in lieu of every Preference Share on
the same terms and conditions, subject to the approval of the
Reserve Bank of India and issue of notification and/or grant of
permission for issuance of such preference shares, and/or
amendment of the Banking Regulation Act, 1949. Provided however,
in case such approval and/or grant of permission and/or
amendment is not forthcoming,
10
ICICI will make alternate arrangements for accounting for the
Preference Shares. The Preference Shares of ICICI shall stand
cancelled upon the issuance of the preference shares by the
Transferee Company as aforesaid. Nothing contained in this
Clause shall affect the redemption on maturity of any of the
Preference Shares of ICICI prior to the Effective Date.
(o) No fractional certificates shall be issued by the Transferee Company
in respect of fractional entitlements, if any, to any Member. The
Board of Directors of the Transferee Company shall, instead
consolidate all such fractional entitlements and thereupon issue and
allot equity shares in lieu thereof to the Trust or a director or an
officer of the Transferee Company or such other person as the
Transferee Company shall appoint in this behalf who shall hold the
shares in trust on behalf of the Members with the express
understanding that such Trust, director(s) or officer(s) or person
entitled to fractional entitlements shall sell the same in the market
at such time or times and at such price or prices in the market and
to such person or persons, as it/he/they deem fit, and pay to the
Transferee Company, the net sale proceeds thereof, whereupon the
Transferee Company shall distribute such net sale proceeds to the
Members of ICICI in proportion to their respective fractional
entitlements.
(p) Equity shares issued and allotted by the Transferee Company in
accordance with the Share Exchange Ratio shall be subject to the
provisions of the Articles of Association of the Transferee Company
and shall rank pari passu in all respects with the then existing
equity shares of the Transferee Company, including in respect of
dividends, if any, that may be declared by the Transferee Company, on
or after the Appointed Date.
(q) Equity shares of the Transferee Company issued in terms of the Share
Exchange Ratio above, shall, subject to applicable regulations, be
listed or admitted to trading on the relevant stock exchange(s),
whether in India or abroad, where the equity shares of the Transferee
Company are presently listed or admitted to trading.
(r) (i) Upon the coming into effect of the Scheme and the issue of
shares in accordance with the Share Exchange Ratio, the
Transferee Company shall instruct its depositary (the
"Depositary") to issue ADRs of the Transferee Company to the
existing investors in ADRs of ICICI in an appropriate manner in
accordance with the terms of the Deposit Agreement entered into
amongst the Transferee Company, Bankers Trust Company and all
registered holders and beneficial owners from time to time of
the ADRs of the Transferee Company (the "Deposit Agreement").
The Transferee Company and the Depositary shall enter into such
further documents as may be necessary and appropriate in this
behalf.
(ii) The Transferee Company shall take necessary steps for the issue
of ADRs pursuant to sub-Clause (i) above and for listing the
ADRs on the New York Stock Exchange, including without
limitation the filing of a supplemental listing application with
the New York Stock Exchange and any required amendment of the
Form F-6 under the US Securities Act of 1933, as amended (the
"Securities Act").
(iii) The ADRs issued to the existing investors in the ADRs of ICICI
pursuant to sub-Clause (i) above shall be similar in all
material respects with the then existing ADRs of the Transferee
Company.
(iv) The equity shares underlying the ADRs issued to the existing
investors in the ADRs of ICICI shall not be registered under the
Securities Act in reliance upon the exemption from registration
contained in Section 3(a)(10) of the Securities Act, and upon a
no-action letter issued by the staff of the US Securities and
Exchange Commission. To obtain this exemption, the Transferee
Company will rely on the approval of the Scheme by the High
Court of Judicature at Bombay and the High Court of Gujarat at
Ahmedabad following the hearing by each court.
(v) If, on account of the Share Exchange Ratio, fractional ADRs of
the Transferee Company have to be issued, then, in accordance
with Section 4.03 of the Deposit Agreement, in lieu of
delivering receipts for fractional ADRs the Depositary may, in
its discretion, sell the shares represented by the aggregate of
such fractions, at public or private sale, at such place or
places and at such price or prices as it may deem proper, and
distribute the net proceeds of any such sale in accordance with
the terms of the Deposit Agreement.
(s) The Scheme is conditional upon and subject to:
(i) the Scheme being agreed to by the requisite majorities of the
Members of the Transferor Companies and the Transferee Company
as required under the Act and the requisite orders of the High
Court of Judicature at Bombay and the High Court of Gujarat at
Ahmedabad being obtained;
(ii) the approval of the Reserve Bank of India being obtained;
(iii) such other sanctions and approvals including from any
governmental authority or contracting party, if any, as may be
required by law or contract in respect of the Scheme being
obtained; and
(iv) the certified copies of the court orders referred to in the
Scheme being filed with the Registrar of Companies, Maharashtra
and the Registrar of Companies, Gujarat.
The Members are requested to read the entire text of the Scheme to get
better acquainted with the provisions thereof as stated above. The
aforesaid are only the main clauses thereof.
28. The Transferor Companies are not subsidiaries of the Transferee Company in
any manner whatsoever as provided in Section 4 of the Companies Act, 1956.
11
29. The merged entity would be the second-largest amongst all banks in India
ranked on the basis of their total assets with considerable competitive
advantages in terms of technology, processes and human resources. The
amalgamation would combine the large capital base of ICICI with the strong
deposit raising capacity of the Applicant Company, enabling the merged
entity to diversify its sources of funding and giving it greater
flexibility to develop profitable business lines. The merged entity's
focus on raising resources through retail deposits, which is recognised as
a stable source of funding for banks, will impart greater stability to the
liability base. Further, the merged entity will maintain large cash
reserves and liquid investments in Government securities, in compliance
with statutory norms applicable to banks, which will ensure adequate
liquidity at all times.
30. The domestic credit rating agencies have continued to maintain their "AAA"
credit ratings, indicating it would have highest safety, for ICICI after
the announcement of the proposed merger. The international credit rating
agencies, Moody's Investors Services and Standard and Poor's, have also
maintained their credit ratings for ICICI after announcement of the
proposed merger. Moody's Investors Services has also expressed the view
that the proposed merger of ICICI with the Applicant Company would create
a financially stronger entity and would have positive implications for the
debt obligations of ICICI.
31. There is no likelihood that any creditor of the Applicant Company would
lose or be prejudiced as a result of the Scheme being passed. The latest
audited accounts of the Transferor Companies and the Transferee Company
indicates that the Transferor Companies and the Transferee Company are in
a solvent position and the merged entity would emerge stronger and thus be
able to meet the liabilities as they arise in the course of business.
Hence, the Scheme will not adversely affect the interests of any of the
creditors.
32. The Scheme provides that in the event the Scheme fails to take effect by
June 30, 2002 or by such later date as may be agreed to by the respective
Boards of Directors of each of the Transferor Companies and the Transferee
Company, the Scheme would become null and void and in that event no rights
and liabilities whatsoever would accrue to or be incurred inter se by the
parties or their shareholders or creditors or employees or any other
person. In such case each of the Companies shall bear its own costs or as
may be mutually agreed amongst themselves.
33. The Directors of each of the Transferor Companies and the Transferee
Company may be deemed to be concerned and/ or interested in the Scheme to
the extent of their shareholding in the Companies or to the extent the
said Directors are the partners, directors, members of the companies,
firms and/or institutions that hold shares in any of the Companies.
34. The Directors and executive officers of ICICI Bank and their shareholding
and stock options granted in ICICI Bank and ICICI on October 31, 2001 were
as follows:
ICICI Bank ICICI
Name Age Position Share- Stock Share- Stock
holding options holding options
Mr. K.V. Kamath 53 Director 1,000 75,000 35,000 360,000
Ms. Lalita D. Gupte 52 Director 1,000 52,500 10,085 330,000
Mr. B. V. Bhargava 65 Director 4,600 -- 16,564 --
Mr. Uday M. Chitale 52 Director -- -- -- --
Mr. Somesh R. Sathe 56 Director -- -- -- --
Mr. R. Rajamani 65 Director -- -- -- --
Dr. Satish C. Jha 67 Director -- -- -- --
Mr. H. N. Sinor 56 Managing Director 1,100 131,250 -- 90,000
and Chief Executive
Officer
Ms. Chanda D. Kochhar(1) 39 Executive Director 1,000 15,000 4,965 120,000
Dr. Nachiket Mor(1) 37 Executive Director -- 12,000 -- 120,000
Mr. M. N. Gopinath 52 Senior Executive Vice 200 56,250 -- 8,000
President
Mr. Ashok Alladi 50 Senior Executive Vice -- 43,750 -- 6,000
President
Mr. G. Venkatakrishnan 50 Senior Executive Vice -- 50,000 500 5,000
President and Chief
Financial Officer
Mr. M. N. Shenoi 43 Senior Executive Vice 1,000 40,000 -- 5,000
President
Mr. R. B. Nirantar 46 Senior Executive Vice 100 43,750 -- 7,500
President
Mr. A. Hari Prasad 46 Senior Executive Vice -- 43,750 -- 5,000
President
Mr. V. Nachiappan 47 Senior Executive Vice 4,746 -- -- --
President
Mr. Bhashyam Seshan 45 Company Secretary 1,200 17,500 -- --
(1) Joined ICICI Bank in fiscal 2002.
12
35. The Directors and executive officers of ICICI and their shareholding and
stock options granted in ICICI and ICICI Bank on October 31, 2001 were as
follows:
ICICI ICICI Bank
Name Age Position Share- Stock Share- Stock
holding options holding options
Mr. N. Vaghul 65 Director 50,586 -- 2,250 --
Mr. B. K. Jhawar 66 Director -- -- -- --
Mr. R. Seshasayee 53 Director -- -- -- --
Dr. Rakesh Khurana 53 Director -- -- -- --
Dr. Ashok Ganguly 66 Director -- -- -- --
Mr. D. Sengupta 59 Director -- -- -- --
Mr. N. R. Narayana Murthy 55 Director -- -- -- --
Prof. Marti G. Subrahmanyam 55 Director 2,598 -- -- --
Mr. Lakshmi N. Mittal 51 Director -- -- -- --
Mr. S. K. Purkayastha 57 Director -- -- -- --
Mr. G. N. Bajpai 59 Director -- -- -- --
Mr. Anupam Puri 56 Director -- -- -- --
Mr. K. V. Kamath 53 Managing Director 35,000 360,000 1,000 75,000
and Chief
Executive Officer
Ms. Lalita D. Gupte 52 Joint Managing 10,085 330,000 1,000 52,500
Director and Chief
Operating Officer -
International
Business
Ms. Kalpana Morparia 52 Executive Director 30,383 180,000 1,000 20,000
Mr. Subrata Mukherji 48 Executive Director 3,009 180,000 1,000 18,000
Mr. Sanjiv Kerkar 50 Senior General 6,182 180,000 1,200 18,000
Manager
Mr. P. H. Ravikumar(1) 50 Senior General -- 12,000 1,000 54,700
Manager
Ms. Ramni Nirula 49 Senior General 4,133 120,000 -- 12,000
Manager
Mr. Devdatt Shah 46 Senior General -- 120,000 -- --
Manager
Ms. Shikha Sarma 42 Senior General 1,833 180,000 1,000 18,000
Manager
Mr. Balaji Swaminathan(1) 36 Senior General -- 60,000 -- --
Manager and Chief
Financial Officer
Mr. Jyotin Mehta 43 General Manager and -- 20,000 -- --
Company Secretary
(1) Joined ICICI in fiscal 2002.
36. The Directors and executive officers of ICICI Capital and their
shareholding and stock options granted in ICICI and ICICI Bank on October
31, 2001 were as follows:
ICICI ICICI Bank
Name Age Position Share- Stock Share- Stock
holding options holding options
Ms. Lalita D. Gupte 52 Chairperson 10,085 330,000 1,000 52,500
Ms. Kalpana Morparia 52 Director 30,383 180,000 1,000 20,000
Mr. Subrata Mukherji 48 Director 3,009 180,000 1,000 18,000
Mr. V. Srinivasan 45 Director 5,916 120,000 1,000 12,000
Ms. Madhabi Puri Buch 35 Director 2,283 90,000 1,200 7,500
Mr. M. N. Gopinath 52 Director -- -- 200 56,250
Mr. Amitabh Chaturvedi 33 Executive Director -- 40,000 -- 2,500
Mr. R. K. Saxena 45 Company Secretary -- 10,000 500 --
13
37. The Directors and executive officers of ICICI PFS and their shareholding
and stock options granted in ICICI and ICICI Bank on October 31, 2001 were
as follows:
ICICI ICICI Bank
Name Age Position Share- Stock Share- Stock
holding options holding options
Mr. K. V. Kamath 53 Chairman 35,000 360,000 1,000 75,000
Ms. Lalita D. Gupte 52 Director 10,085 330,000 1,000 52,500
Ms. Kalpana Morparia 52 Director 30,383 180,000 1,000 20,000
Mr. Subrata Mukherji 48 Director 3,009 180,000 1,000 18,000
Mr. Sanjiv Kerkar 50 Director 6,182 180,000 1,200 18,000
Mr. Nagesh Pinge 43 Director 2,026 90,000 -- --
Ms. Madhabi Puri Buch 35 Director 2,283 90,000 1,200 7,500
Mr. V. Vaidyanathan 33 Managing Director -- 65,000 -- --
Mr. Rajesh Chawathe 31 Company Secretary 150 -- 800 --
38. This Scheme will have no effect on the interests of each of the Directors
of the Companies except in their capacity as shareholders of the
Companies. Particulars of the interests of such Directors are available
for inspection at the respective Registered Offices of the Transferee
Company and each of the Transferor Companies.
39. No investigation proceedings have been instituted or are pending under
Sections 235 to 251 of the Companies Act, 1956 against the Transferor
Companies and the Transferee Company.
40. Inspection of the following documents may be had at the Registered Office
of the Applicant Company on any working day (except Saturday) prior to the
date of the meeting, during office hours.
(i) the Order dated the 19th day of December, 2001, of the High Court of
Gujarat at Ahmedabad directing the convening of the meeting of the
Equity Shareholders of the Applicant Company.
(ii) the Scheme.
(iii) the Memorandum and Articles of Association of the Transferor
Companies and the Transferee Company.
(iv) the Annual Report of the Transferor Companies and the Transferee
Company for the year ended March 31, 2001.
(v) the Valuation Report of Deloitte Haskins & Sells.
(vi) the Annual Reports on Form 20-F of the Applicant Company and ICICI
filed with the Securities and Exchange Commission for the year ended
March 31, 2001.
This statement may be treated as the statement under Section 173 and also
Section 393 of the Companies Act, 1956. A copy of the Scheme and this
statement may be obtained from the Registered Office of the Applicant
Company.
/s/ Bhupendranath Vidyanath Bhargava
Dated this 21st day of December 2001. Bhupendranath Vidyanath Bhargava
Chairman appointed for the meeting
Registered Office:
Landmark, Race Course Circle
Vadodara 390 007, Gujarat
14
SCHEME OF AMALGAMATION
of
ICICI LIMITED )
ICICI CAPITAL SERVICES LIMITED ) collectively the Transferor Companies
ICICI PERSONAL FINANCIAL SERVICES LIMITED)
with
ICICI BANK LIMITED ....................... the Transferee Company
PART I - GENERAL
1. This Scheme of Amalgamation (hereinafter referred to as the "Scheme")
provides for the amalgamation of ICICI Limited, ICICI Capital Services
Limited and ICICI Personal Financial Services Limited (both ICICI Capital
Services Limited and ICICI Personal Financial Services Limited, are
wholly-owned subsidiaries of ICICI Limited) with ICICI Bank Limited
pursuant to Sections 391 to 394 and other relevant provisions of the Act.
2. In this Scheme, unless repugnant to the meaning or context thereof, the
following expressions shall have the following meanings:
"Act" means the Companies Act, 1956 or any amendment or re-enactment
thereof.
"ADRs" means American depositary receipts issued pursuant to the Issue of
Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary
Receipt Mechanism) Scheme, 1993 together with any modification thereto and
other applicable laws, and where relevant shall include the underlying
equity shares relating thereto.
"Appointed Date" means the later of (i) March 30, 2002 and (ii) the date
on which the approval of the Reserve Bank of India for the Scheme becomes
effective.
"Assets" or "Undertaking" means all the undertakings, the entire
businesses, all the properties (whether movable or immovable, tangible or
intangible), assets, deposits, investments of all kinds (including shares,
scrips, stocks, bonds, debentures, debenture stock, units or pass through
certificates), all cash balances with the Reserve Bank of India and other
banks, money at call and short notice, loans, advances, contingent rights
or benefits, lease and hire purchase contracts and assets, securitised
assets, receivables, benefit of assets or properties or other interest
held in trust, benefit of any security arrangements, authorities,
allotments, approvals, reversions, buildings and structures, office,
residential and other premises, tenancies, leases, licenses, fixed and
other assets, powers, consents, authorities, registrations, agreements,
contracts, engagements, arrangements of all kinds, rights, titles,
interests, benefits and advantages of whatsoever nature and wheresoever
situate belonging to or in the ownership, power or possession or in the
control of or vested in or granted in favour of or held for the benefit of
or enjoyed by the Transferor Companies or to which the Transferor
Companies may be entitled and include but without being limited to trade
and service names and marks and other intellectual property rights of any
nature whatsoever, permits, approvals, authorisations, rights to use and
avail of telephones, telexes, facsimile, email, internet, leased line
connections and installations, utilities, electricity and other services,
reserves, provisions, funds, benefits of all agreements, all records,
files, papers, computer programmes, manuals, data, catalogues, sales and
advertising materials, lists and other details of present and former
customers and suppliers, customers credit information, customer and
supplier pricing information and other records in connection with or
relating to the Transferor Companies and all other interests of whatsoever
nature belonging to or in the ownership, power, possession or the control
of or vested in or granted in favour of or held for the benefit of or
enjoyed by the Transferor Companies, whether in India or abroad.
"Deposit Agreement" shall have the meaning ascribed to it in Clause 17(a).
"Depositary" shall have the meaning ascribed to it in Clause 17(a).
"Effective Date" means the last of the dates on which all conditions,
matters and filings referred to in Clause 26 hereof have been fulfilled
and necessary orders, approvals and consents referred to therein have been
obtained.
15
References in this Scheme to the date of "coming into effect of this
Scheme" or "effectiveness of this Scheme" shall mean the Effective Date.
"ICICI" means ICICI Limited, a company incorporated under the Indian
Companies Act, 1913 and having its registered office at ICICI Towers,
Bandra-Kurla Complex, Mumbai 400 051, Maharashtra.
"ICICI Bank" or the "Transferee Company" means ICICI Bank Limited, a
company incorporated under the Companies Act, 1956 and licensed by the
Reserve Bank of India under the Banking Regulation Act, 1949 and having
its registered office at Landmark, Race Course Circle, Vadodara 390 007,
Gujarat.
"ICICI Bank Shares" shall have the meaning ascribed to it in Clause 8.
"ICICI Capital" means ICICI Capital Services Limited, a company
incorporated under the Companies Act, 1956, and having its registered
office at ICICI Towers, Bandra-Kurla Complex, Mumbai 400 051, Maharashtra.
"ICICI PFS" means ICICI Personal Financial Services Limited, a company
incorporated under the Companies Act, 1956, and having its registered
office at ICICI Towers, Bandra-Kurla Complex, Mumbai 400 051, Maharashtra.
"ICICI Stock Options" shall have the meaning ascribed to it in Clause 9
(b) (i).
"Joint Committee" shall have the meaning ascribed to it in Clause 7(a).
"Members" shall have the meaning ascribed to it in Clause 13(a).
"Liabilities" shall have the meaning ascribed to it in Clause 5(a).
"Pledged Documents" shall have the meaning ascribed to it in Clause 4(e).
"Pledged Shares" shall have the meaning ascribed to it in Clause 4(e).
"Preference Shares" shall have the meaning ascribed to it in Clause 13(e).
"Record Date" shall have the meaning ascribed to it in Clause 13(a).
"Securities Act" shall have the meaning ascribed to it in Clause 17(b).
"Security Trustee" shall have the meaning ascribed to it in Clause 4(e).
"Share Exchange Ratio" shall have the meaning ascribed to it in Clause
13(a).
"Transferor Companies" means collectively ICICI, ICICI Capital and ICICI
PFS and "Transferor Company" means individually each of them.
"Transferor Companies' Securities" shall have the meaning ascribed to it
in Clause 5(d).
"Trust" shall have the meaning ascribed to it in Clause 8.
"Trust Deed" shall have the meaning ascribed to it in Clause 8.
"Trustees" shall have the meaning ascribed to it in Clause 8.
PART II - SHARE CAPITAL
3. (a) The share capital of ICICI as of September 30, 2001 is as under :
AUTHORIZED (IN RUPEES)
1,600,000,000 Equity Shares of Rs. 10/- each 1600,00,00,000
5,000,000,000 Preference Shares of Rs. 10/- each 5000,00,00,000
350 Preference Shares of Rs. 10,000,000/- each 350,00,00,000
--------------
6950,00,00,000
--------------
ISSUED, SUBSCRIBED AND PAID-UP
785,345,448 Equity Shares of Rs. 10/- each fully paid-up 785,34,54,480
Less: Calls in arrears 48,29,648.19
----------------
784,86,24,831.81
----------------
350 0.001% Preference Shares of Rs. 1,00,00,000/- each
fully paid-up redeemable at par on April 20, 2018 350,00,00,000
16
Of the above -
(i) 6,750,000 Equity Shares are allotted as fully paid-up by way of
bonus shares by capitalization of General Reserve;
(ii) 222,534,943 Equity Shares are allotted as fully paid-up by
conversion of Debentures/Loans into Equity Shares (including
9,798,327 Equity Shares on conversion of loans of erstwhile
SCICI Ltd.)
(iii) 69,184,024 Equity Shares are allotted as fully paid-up towards
consideration for amalgamation of erstwhile SCICI Ltd. with
ICICI.
(iv) 2,395,205 Equity Shares are allotted as fully paid-up towards
consideration for amalgamation of erstwhile ITC Classic Finance
Limited with ICICI.
(v) 1,657,061 Equity Shares are allotted as fully paid-up towards
consideration for amalgamation of erstwhile Anagram Finance
Limited with ICICI.
(vi) 256,414,285 (including 96,700,000 Equity Shares represented by
Global Depositary Receipts which were converted into American
Depositary Shares) Equity Shares are allotted as fully paid-up
represented by American Depositary Shares through an
international offering in US Dollars.
(b) The share capital of ICICI Capital as of September 30, 2001 is as
under:
AUTHORIZED (IN RUPEES)
5,000,000 Equity Shares of Rs. 10/- each 5,00,00,000
ISSUED, SUBSCRIBED AND PAID-UP
5,000,000 Equity Shares of Rs. 10/- each fully paid-up 5,00,00,000
(c) The share capital of ICICI PFS as of September 30, 2001 is as under:
AUTHORIZED (IN RUPEES)
150,000,000 Equity Shares of Rs. 10/- each 150,00,00,000
ISSUED, SUBSCRIBED AND PAID-UP
5,000,000 Equity Shares of Rs. 10/- each 5,00,00,000
(d) The share capital of the Transferee Company as of September 30, 2001
is as under:
AUTHORIZED (IN RUPEES)
300,000,000 Equity Shares of Rs. 10/- each 300,00,00,000
ISSUED, SUBSCRIBED AND PAID-UP
220,358,680 Equity Shares of Rs. 10/- each fully paid-up 220,35,86,800
Of the above -
23,539,800 Equity Shares are allotted as fully paid-up
towards consideration for amalgamation of erstwhile Bank
of Madura Limited with the Bank.
PART III - TRANSFER AND VESTING
4. Upon the coming into effect of this Scheme and with effect from the
Appointed Date and subject to the provisions of this Scheme:
(a) The Undertaking of the Transferor Companies shall, pursuant to the
provisions of Section 394(2) of the Act, without any further act,
instrument or deed, be and stand transferred to and vested in or be
deemed to have been transferred to and vested in the Transferee
Company as a going concern so as to become as and from the Appointed
Date, the estate, assets, rights, title, interest and authorities of
the Transferee Company.
(b) Without prejudice to sub-clause (a) above, in respect of such of the
assets of the Undertaking as are movable in nature or are otherwise
capable of transfer by manual delivery or by endorsement and/or
delivery, the same may be so transferred by the Transferor Companies,
and shall, upon such transfer, become the property, estate, assets,
rights, title, interest and authorities of the Transferee Company.
17
(c) All the licenses, permits, quotas, approvals, incentives, subsidies,
rights, claims, leases, tenancy rights, liberties, rehabilitation
schemes, special status and other benefits or privileges enjoyed or
conferred upon or held or availed of by and all rights and benefits
that have accrued to the Transferor Companies shall, pursuant to the
provisions of Section 394(2) of the Act, without any further act,
instrument or deed, be and stand transferred to and vest in or be
deemed to be transferred to and vested in and be available to the
Transferee Company so as to become as and from the Appointed Date the
estates, assets, rights, title, interests and authorities of the
Transferee Company and shall remain valid, effective and enforceable
on the same terms and conditions to the extent permissible under law.
(d) All assets, estate, rights, title, interest, licenses and authorities
acquired by or quotas, approvals, incentives, subsidies, rights,
claims, leases, tenancy rights, liberties, rehabilitation schemes,
special status and other benefits or privileges enjoyed or conferred
upon or held or availed of by and/or all rights and benefits that
have accrued to the Transferor Companies after the Appointed Date and
prior to the Effective Date in connection or in relation to the
operation of the Undertaking shall, pursuant to the provisions of
Section 394(2) of the Act, without any further act, instrument or
deed, be and stand transferred to and vested or deemed to be
transferred to and vested in the Transferee Company.
(e) Such of the shares which have been pledged in favour of one or more
of the Transferor Companies (the "Pledged Shares"), whether in their
own name or as an agent or trustee, by third parties by way of
security under the terms of the relevant agreements, documents and/or
arrangements (collectively the "Pledge Documents"), shall, without
any further act, instrument or deed be and stand transferred to ICICI
Trusteeship Services Limited, a company incorporated under the
Companies Act, 1956 and having its registered office at ICICI Towers,
Bandra-Kurla Complex, Mumbai 400 051, Maharashtra, who shall hold the
Pledged Shares on trust as a trustee exclusively for the benefit of
the persons for whose benefit the pledge has been created (ICICI
Trusteeship Services Limited is hereinafter referred to as the
"Security Trustee"), and all the rights, benefits and obligations of
such Transferor Company as pledgee, agent or trustee under the Pledge
Documents shall be and stand transferred to and vested in the
Security Trustee, and the Pledge Documents shall continue to be in
full force and effect and may be enforced as fully and effectually as
if, instead of such Transferor Company, the Security Trustee had been
a party thereto. The Security Trustee shall hold the Pledged Shares
in trust for the benefit of the persons for whose benefit the pledge
has been created and exercise all powers, trusts, authorities, duties
and discretions as are specifically vested in the Security Trustee
under the Pledge Documents and such other rights, powers and
discretions as are reasonably incidental thereto, on and subject to
the instructions and directions issued by the person for whose
benefit the pledge has been created, from time to time.
5. Upon the coming into effect of this Scheme and with effect from the
Appointed Date:
(a) All debts, including rupee and foreign currency loans, term deposits,
time and demand liabilities, borrowings, bills payable, interest
accrued and all other duties, liabilities, undertakings and
obligations of the Transferor Companies (the "Liabilities") shall,
pursuant to the provisions of Section 394(2) of the Act, without any
further act, instrument or deed be and stand transferred to and
vested in or be deemed to stand transferred to and vested in, the
Transferee Company so as to become the Liabilities of the Transferee
Company, and further that it shall not be necessary to obtain the
consent of any person who is a party to any contract or arrangement
by virtue of which such Liabilities have arisen in order to give
effect to the provisions of this Clause.
(b) In case of such of the Liabilities or the documents governing such of
the Liabilities where there is an obligation on one or more of the
Transferor Companies to maintain any privilege or status specifically
conferred by any statute or regulation, such obligation and related
consequences thereof shall cease to be operative against the
Transferee Company, and the relevant terms of the documents governing
such Liabilities shall, without any further act, instrument or deed,
stand modified accordingly.
(c) All public deposits, debentures or bonds of the Transferor Companies
shall be kept distinctly identified in the records of the Transferee
Company for all intents and purposes including taxation and
accounting and shall not be combined with any existing outstanding
deposit scheme or series of debentures or bonds of the Transferee
Company.
(d) (i) All debentures, bonds, notes or other securities of the
Transferor Companies, whether convertible into equity or
otherwise, (the "Transferor Companies' Securities"), shall,
pursuant to the provisions of Section 394(2) of the Act, without
any further act, instrument or deed become securities of the
Transferee Company and all rights, powers, duties and
obligations in relation thereto shall be and stand transferred
to and vested in or deemed to be transferred to and vested in
and shall be exercised by or against the
18
Transferee Company as if it were the Transferor Company in
respect of the Transferor Companies' Securities so transferred.
If the Transferor Companies' Securities are listed on any stock
exchange, the same shall, subject to applicable regulations, be
listed and/or admitted to trading on the relevant stock
exchange/s whether in India or abroad, where the Transferor
Companies' Securities were listed and/or admitted to trading on
the same terms and conditions unless otherwise modified in
accordance with the provisions hereof.
(ii) Loans and other obligations (including any guarantees, letters
of credit, letters of comfort or any other instrument or
arrangement which may give rise to a contingent liability in
whatever form), if any, due or which may at any time in future
become due between or amongst the Transferor Companies and the
Transferee Company shall stand discharged and there shall be no
liability in that behalf on either party. Provided however,
security over any moveable and/or immoveable properties and
security in any other form (both present and future), if any,
created by any person in favour of any one or more of the
Transferor Companies for securing the obligation of the persons
for and on whose behalf a guarantee, letter of credit, letter of
comfort or other similar instrument has been executed or
arrangements entered into by the Transferor Companies in favour
of the Transferee Company shall, pursuant to the provisions of
Section 394(2) of the Act, without any further act, instrument
or deed stand vested in and be deemed to be in favour of the
Transferee Company and the benefit of such security shall be
available to the Transferee Company as if such security was ab
initio created in favour of the Transferee Company.
(iii) Any securities, debentures or notes, if any, issued by any one
or more of the Transferor Companies, and held by the Transferee
Company, and vice versa shall, unless sold or transferred by
such Transferor Company or the Transferee Company, as the case
may be, at any time prior to the Appointed Date or the Effective
Date (whichever is later), stand cancelled as on the Effective
Date, and shall be of no effect and such Transferor Company or
the Transferee Company, as the case may be, shall have no
further obligation outstanding in that behalf.
(iv) Without prejudice to the provisions of clause (d) (ii) above,
the guarantees, letters of credit, letters of comfort and other
similar arrangements, if any, given or executed or made by ICICI
in favour of, for the benefit of and on behalf of, ICICI Capital
and/or ICICI PFS in favour of any person shall stand discharged.
(e) If the Effective Date occurs after the Appointed Date, the following
provisions shall apply:
(i) where any of the liabilities and obligations of the Transferor
Companies as on the Appointed Date transferred to the Transferee
Company have been discharged by the Transferor Companies after
the Appointed Date and prior to the Effective Date, such
discharge shall be deemed to have been for and on account of the
Transferee Company;
(ii) all loans raised and utilized and all debts, duties,
undertakings, liabilities and obligations incurred or undertaken
by the Transferor Companies in relation to or in connection with
the Undertaking after the Appointed Date and prior to the
Effective Date shall be deemed to have been raised, used,
incurred or undertaken for and on behalf of the Transferee
Company and to the extent they are outstanding on the Effective
Date, shall, pursuant to the provisions of Section 394(2) of the
Act, without any further act, instrument or deed be and stand
transferred to or vested in or be deemed to be transferred to
and vested in the Transferee Company and shall become the
liabilities and obligations of the Transferee Company which
shall meet, discharge and satisfy the same; and
(iii) all estates, assets, rights, title, interests and authorities
accrued to and/or acquired by the Transferor Companies in
relation to or in connection with the Undertaking after the
Appointed Date and prior to the Effective Date shall have been
deemed to have been accrued to and/or acquired for and on behalf
of the Transferee Company and shall, pursuant to the provisions
of Section 394(2) of the Act, without any further act,
instrument or deed be and stand transferred to or vested in or
be deemed to be transferred to or vested in the Transferee
Company to that extent and shall become the estates, assets,
right, title, interests and authorities of the Transferee
Company.
6. If the Effective Date occurs after the Appointed Date:
(a) each of the Transferor Companies with effect from the Appointed Date
and upto and including the Effective Date:
(i) shall carry on and shall be deemed to have carried on all the
business and activities as hitherto and shall hold and stand
possessed of and shall be deemed to have held and stood
possessed of the Undertaking on account of, and in trust for,
the Transferee Company; and
19
(ii) all the profits or incomes accruing or arising to the Transferor
Companies, or expenditure or losses arising or incurred
(including the effect of taxes, if any, thereon) by the
Transferor Companies shall, for all purposes, be treated and be
deemed to be and accrue as the profits or incomes or expenditure
or losses or taxes of the Transferee Company, as the case may
be.
(b) each of the Transferor Companies with effect from the Appointed Date
and upto and including the Effective Date shall carry on its business
and activities with reasonable diligence and business prudence and
shall not undertake financial commitments either for itself or on
behalf of its subsidiaries or group companies or any third party, or
sell, transfer, alienate, charge, mortgage or encumber the
Undertaking or any part thereof, save and except in each case in the
following circumstances:
(i) if the same is in its ordinary course of business as carried on
by it as on the date of filing of this Scheme with the High
Court of Judicature at Bombay and the High Court of Gujarat at
Ahmedabad; or
(ii) if the same is expressly permitted by this Scheme; or
(iii) if prior written consent of the Transferee Company has been
obtained.
(c) the Transferee Company with effect from the Appointed Date and upto
and including the Effective Date shall carry on its business and
activities with reasonable diligence and business prudence and shall
not undertake financial commitments either for itself or on behalf of
its subsidiaries or group companies or any third party, or sell,
transfer, alienate, charge, mortgage or encumber its undertaking or
any part thereof, save and except in each case in the following
circumstances:
(i) if the same is in its ordinary course of business as carried on
by it as on the date of filing this Scheme with the High Court
of Judicature at Bombay and the High Court of Gujarat at
Ahmedabad; or
(ii) if the same is expressly permitted by this Scheme; or
(iii) if prior written consent of each of the Transferor Companies
has been obtained.
7. (a) The Board of Directors of ICICI and the Transferee Company have
jointly constituted a committee in the manner described in sub-clause
(b) below (the "Joint Committee") to perform the functions specified
in subclause (c) below from the date of filing of this Scheme with
the High Court of Judicature at Bombay and the High Court of Gujarat
at Ahmedabad until the Effective Date.
(b) The constitution of the Joint Committee shall be as mentioned
hereinbelow:
(i) Shri K. V. Kamath (Managing Director and Chief Executive
Officer, ICICI), as the Chairman of the Joint Committee;
(ii) Shri H. N. Sinor (Managing Director and Chief Executive Officer,
ICICI Bank), as a member of the Joint Committee;
(iii) Shri K. V. Kamath shall have the power and authority to appoint
such additional members of the Joint Committee, as may be
necessary, from amongst the whole time Directors and/or
employees of ICICI;
(iv) Shri H. N. Sinor shall have the power and authority to appoint
such additional members of the Joint Committee, as may be
necessary, from amongst the whole time Directors and/or
employees of ICICI Bank.
(c) From the date of filing of this Scheme with the High Court of
Judicature at Bombay and the High Court of Gujarat at Ahmedabad and
until the Effective Date, the Joint Committee shall perform the
following functions:
(i) in case of any ambiguity or any question as to whether any
matter is within or outside the ordinary course of the business
of the Transferor Companies and/or the Transferee Company, it
shall determine the same on the basis of evidence that it may
deem relevant for the purpose (including the books and records
of the Transferor Companies and/or the Transferee Company);
(ii) to consider for approval the matters pertaining to the share
capital of the Transferor Companies and/or the Transferee
Company as specified in Clause 9 below;
(iii) to deal with the matters, if any, in relation to change in the
employees' compensation structure of the Transferor Companies
and the Transferee Company and matters incidental or
consequential or related thereto; and
(iv) to perform such other functions specifically provided elsewhere
in this Scheme or as may be specifically conferred on it by the
Boards of Directors of ICICI and the Transferee Company
respectively.
20
(d) Unless otherwise agreed to between Shri K. V. Kamath and Shri H. N.
Sinor, the quorum for meetings of the Joint Committee shall be two
(2). The Joint Committee shall meet at such times and places, and
shall observe and follow such rules and procedure formulated by the
Joint Committee, from time to time, in regard to the transaction of
business at its meetings. The Chairman of the Joint Committee or, if
for any reason, the Chairman is unable to attend a meeting of the
Joint Committee, any other member elected by the members present from
amongst themselves at the meeting shall preside at such meeting. All
matters shall be decided by the Joint Committee by a majority vote of
the members present and voting at the meeting, and in the event of an
equality of votes, the Chairman or in his absence, the person
presiding, shall have the second or casting vote. If, however,
without convening a meeting of the members of the Joint Committee any
matter is decided by the Joint Committee wherein the consent or
approval of the majority of the members of the Joint Committee is
obtained by letter or letters or any instrument signed by such
members of the Joint Committee then such letter or letters or
instrument shall constitute a resolution passed or decision taken at
the meeting of the Joint Committee duly convened and held and shall
have the effect accordingly. All decisions of the Joint Committee
determined as aforesaid shall be binding on the Transferor Companies
and the Transferee Company.
8. ICICI may, on the Appointed Date, transfer all the shares of the
Transferee Company held by it on such date (the "ICICI Bank Shares") to an
individual trustee or a board of trustees (including the survivors or
survivor of any of the trustees comprising such board of trustees) or a
corporate trustee (hereinafter referred to as the "Trustees"), to have and
to hold the ICICI Bank Shares in trust together with all additions or
accretions thereto upon trust exclusively for the benefit of ICICI and its
successor subject to the powers, provisions, discretions, rights and
agreements contained in the instrument (the "Trust Deed") establishing the
aforesaid trust (the "Trust"). The Trustees shall not exercise any voting
rights with respect to ICICI Bank Shares. It is proposed that the Trustee
shall, within a period of 24 months from the Effective Date subject
however to the prevailing market conditions (in which case, the said
period may be suitably extended in the discretion of the Trustees), sell,
transfer or dispose of the ICICI Bank Shares at such time or times and in
such manner as may be proper in accordance with provisions of the Trust
Deed and shall remit the proceeds thereof to ICICI or its successor and
consequent thereto all obligations of the Trustees under the Trust Deed
shall stand discharged and the trust shall stand terminated.
9. (a) From the date of filing of this Scheme with the High Court of
Judicature at Bombay and the High Court of Gujarat at Ahmedabad and
upto and including the Effective Date, none of the Transferor
Companies and/or the Transferee Company shall make any change in its
capital structure in any manner either by any increase (including by
way of issue of equity and/or preference shares on a rights basis or
by way of a public issue, bonus shares and/or convertible debentures
or otherwise), decrease, reduction, reclassification, sub- division,
consolidation, re-organisation, or in any other manner which may, in
any way, affect the Share Exchange Ratio (as defined in Clause 13
below), except with the prior approval of the Joint Committee
provided that nothing contained in this sub-clause shall be deemed to
affect any pre-existing obligations of any of the Transferor
Companies and/or the Transferee Company, including in respect of the
issue of further employees' stock options, vesting of stock options
or exercise of vested options under any existing scheme or conversion
of any loan or convertible security into equity shares in accordance
with the terms of any loan obtained or convertible security issued by
any of the Transferor Companies and/or the Transferee Company.
(b) (i) In respect of the stock options granted by ICICI under the
employees' stock options scheme to its directors and employees
and employees of ICICI Capital or ICICI PFS or any other
subsidiary or associate company of ICICI which have not yet been
exercised and are outstanding ("ICICI Stock Options"), the said
directors and employees shall, in lieu of the options held by
them in ICICI, receive such number of options in the Transferee
Company determined in accordance with the Share Exchange Ratio
(as defined in Clause 13 below). The exercise price of the
options received by the aforesaid directors and employees in
lieu of the ICICI Stock Options shall be twice the price payable
by the said directors and employees for the exercise of the
ICICI Stock Options. All other terms and conditions in relation
to the options aforesaid shall be similar to those contained in
the employees stock option scheme of the Transferee Company.
(ii) Upon the coming into effect of this Scheme, Section IV Part I of
the employees' stock options scheme of the Transferee Company
shall stand amended in the following manner:
"The maximum number of Options granted to any Eligible Employee
in a financial year shall not exceed 0.05% of the issued equity
shares of the Bank at the time of grant of the Options and the
aggregate of all such Options granted to the Eligible Employees
shall not exceed five percent of the aggregate number
21
of the issued equity shares of the Bank after coming into effect
of the amalgamation of ICICI Limited, ICICI Capital Services
Limited and ICICI Personal Financial Services Limited with the
Bank and the issuance of equity shares by the Bank pursuant to
the aforesaid amalgamation of ICICI Limited, ICICI Capital
Services Limited and ICICI Personal Financial Services Limited
with the Bank."
10. Upon the coming into effect of this Scheme:
(a) all suits, actions and legal and other proceedings by or against the
Transferor Companies pending and/or arising on or before the
Appointed Date or the Effective Date (whichever is later) shall be
transferred in the name of the Transferee Company and shall be
continued and be enforced by or against the Transferee Company as
effectually and in the same manner and to the same extent as if the
same had been pending and/or arisen by or against the Transferee
Company.
(b) the Transferee Company shall be notified as the 'designated person'
under the provisions of Section 16 read with Section 2(d) of the
Shipping Development Fund Committee (Abolition) Act, 1986 and all
suits, actions and legal and other proceedings by or against ICICI in
its capacity as such 'designated person' pending and/or arising on or
before the Appointed Date or the Effective Date (whichever is later)
shall be transferred in the name of the Transferee Company and shall
be continued and be enforced by or against the Transferee Company as
effectually and in the same manner and to the same extent as if the
Transferee Company had originally been notified as the 'designated
person' in that behalf and as if the same had been pending and/ or
arisen by or against the Transferee Company.
11. (a) Upon the coming into effect of this Scheme, and subject to the
provisions of this Scheme, all contracts, deeds, bonds, agreements,
arrangements and other instruments (including all tenancies, leases,
licenses and other assurances in favour of any of the Transferor
Companies or powers or authorities granted by or to any of them) of
whatsoever nature to which any of the Transferor Companies is a party
or to the benefit of which any of the Transferor Companies may be
eligible, and which are subsisting or having effect immediately
before the Appointed Date or the Effective Date (whichever is later),
shall, without any further act, instrument or deed, be in full force
and effect in favour of or against the Transferee Company, as the
case may be, and may be enforced as fully and effectually as if,
instead of such Transferor Company, the Transferee Company had been a
party or beneficiary or obligee thereto.
(b) The Transferee Company may, at any time after the coming into effect
of this Scheme in accordance with the provisions hereof, if so
required, under any law or otherwise, execute deeds of confirmation
in favour of any party to any contract or arrangement to which any of
the Transferor Companies is a party or any writings as may be
necessary to be executed in order to give formal effect to the above
provisions. The Transferee Company shall be deemed to be authorized
to execute any such writings on behalf of the Transferor Companies
and to carry out or perform all formalities or compliances required
for the purposes referred to above on the part of the Transferor
Companies.
12. Upon the coming into effect of this Scheme:
(a) the employees of the Transferor Companies who are in service on the
Appointed Date or the Effective Date (whichever is later), shall
become the employees solely of the Transferee Company on such date
without any break or interruption in service and on terms and
conditions as to remuneration not less favourable than those
subsisting with reference to the respective Transferor Companies on
the said date.
(b) the existing provident fund, gratuity fund, and pension and/or
superannuation fund or trusts created by the Transferor Companies or
any other special funds created or existing for the benefit of the
employees of the Transferor Companies shall be transferred to the
relevant funds of the Transferee Company. In the event that the
Transferee Company does not have its own fund with respect to any
such matters, the Transferee Company shall create its own funds to
which the contributions pertaining to the employees of Transferor
Companies shall be transferred.
PART IV - REORGANIZATION OF CAPITAL
13. (a) Upon the coming into effect of this Scheme, and in consideration of
the transfer of and vesting of the Undertaking and the Liabilities of
the Transferor Companies in the Transferee Company in terms of this
Scheme, the Transferee Company shall without any further application,
act, instrument or deed, issue and allot to the equity shareholders
of ICICI whose names are recorded in the Register of Members of ICICI
(the "Members"), on a date (hereinafter referred to as the "Record
Date") to be fixed by the Board of Directors of
22
the Transferee Company or a committee of such Board of Directors,
equity shares of Rs. 10/- (Rupees ten only) each, credited as fully
paid up, in the ratio of 1(one) equity share of the face value of Rs.
10/- (Rupees ten only) each in the Transferee Company for every 2
(two) equity shares of the face value of Rs. 10/- (Rupees ten only)
each held in ICICI.
(the above ratio in which the shares of the Transferee Company are to
be allotted to the shareholders of ICICI by the Transferee Company is
hereinafter referred to as the "Share Exchange Ratio").
(b) The share certificates in relation to the shares held by the said
Members in ICICI (and the ADRs that have been issued representing the
underlying shares in ICICI) shall be deemed to have been
automatically cancelled and be of no effect on and from such Record
Date, without any further act, instrument or deed. In so far as the
issue of shares pursuant to sub-clause (a) above is concerned, each
of the said Members of ICICI, shall have the option, exercisable by
notice in writing by the said Members to the Transferee Company on or
before such date as may be determined by the Board of Directors of
the Transferee Company or a committee of such Board of Directors, to
receive either in certificate form or in dematerialised form, the
shares of the Transferee Company in lieu thereof and in terms hereof.
In the event that such notice has not been received by the Transferee
Company in respect of any of the said Members, the shares of the
Transferee Company shall be issued to such Members in certificate
form. Those of the said Members exercising the option to receive the
shares in dematerialised form shall be required to have an account
with a depository participant and shall provide details thereof and
such other confirmations as may be required. It is only thereupon
that the Transferee Company shall issue and directly credit the
demat/dematerialised securities account of such Member with the
shares of the Transferee Company.
(c) No shares shall be issued by the Transferee Company pursuant to the
amalgamation of ICICI Capital and ICICI PFS, both of which are wholly
owned subsidiaries of ICICI.
(d) In respect of equity shares of ICICI where calls are in arrears,
without prejudice to any remedies that ICICI or the Transferee
Company, as the case may be, shall have in this behalf, the
Transferee Company shall not be bound to issue any shares of the
Transferee Company (whether partly paid or otherwise) nor to confirm
any entitlement to such holder until such time as the
calls-in-arrears are paid.
(e) Upon the coming into effect of this Scheme, the Transferee Company
shall issue to the holders of 0.001% preference shares of Rs.
1,00,00,000/- each fully paid-up (the "Preference Shares") of ICICI
one 0.001% preference share of Rs. 1,00,00,000/- fully paid in lieu
of every Preference Share on the same terms and conditions subject to
the approval of the Reserve Bank of India and issue of notification
and/or grant of permission for issuance of such preference shares,
and/or amendment of the Banking Regulation Act, 1949. Provided
however, in case such approval and/or grant of permission and/or
amendment is not forthcoming ICICI will make alternate arrangements
for accounting for the Preference Shares. The Preference Shares of
ICICI shall stand cancelled upon the issuance of the preference
shares by the Transferee Company as aforesaid. Nothing contained in
this Clause shall affect the redemption on maturity of any of the
Preference Shares of ICICI prior to the Effective Date.
14. No fractional certificates shall be issued by the Transferee Company in
respect of fractional entitlements, if any, to any Member. The Board of
Directors of the Transferee Company shall, instead consolidate all such
fractional entitlements and thereupon issue and allot equity shares in
lieu thereof to the Trust or a director or an officer of the Transferee
Company or such other person as the Transferee Company shall appoint in
this behalf who shall hold the shares in trust on behalf of the Members
entitled to fractional entitlements with the express understanding that
such Trust, director(s) or officer(s) or person shall sell the same in the
market at such time or times and at such price or prices in the market and
to such person or persons, as it/he/they deem fit, and pay to the
Transferee Company, the net sale proceeds thereof, whereupon the
Transferee Company shall distribute such net sale proceeds to the Members
of ICICI in proportion to their respective fractional entitlements.
15. Equity shares issued and allotted by the Transferee Company in terms of
Clause 13 shall be subject to the provisions of the Articles of
Association of the Transferee Company and shall rank pari passu in all
respects with the then existing equity shares of the Transferee Company,
including in respect of dividends, if any, that may be declared by the
Transferee Company, on or after the Appointed Date.
16. Equity shares of the Transferee Company issued in terms of Clause 13
above, shall, subject to applicable regulations, be listed or admitted to
trading on the relevant stock exchange/s, whether in India or abroad,
where the equity shares of the Transferee Company are presently listed or
admitted to trading.
23
17. (a) Upon the coming into effect of this Scheme and the issue of shares in
the Share Exchange Ratio, pursuant to Clause 13 above, the Transferee
Company shall instruct its depositary (the "Depositary") to issue
ADRs of the Transferee Company to the existing investors in ADRs of
ICICI in an appropriate manner in accordance with the terms of the
Deposit Agreement entered into amongst the Transferee Company,
Bankers Trust Company and all registered holders and beneficial
owners from time to time of the ADRs of the Transferee Company (the
"Deposit Agreement"). The Transferee Company and the Depositary shall
enter into such further documents as may be necessary and appropriate
in this behalf.
(b) The Transferee Company shall take necessary steps for the issue of
ADRs pursuant to Clause 17(a) above and for listing the ADRs on the
New York Stock Exchange, including without limitation the filing of a
supplemental listing application with the New York Stock Exchange and
any required amendment of the Form F-6 under the Securities Act of
1933, as amended, of the United States of America (the "Securities
Act").
(c) The ADRs issued to the existing investors in the ADRs of ICICI
pursuant to Clause 17(a) above shall be similar in all material
respects with the then existing ADRs of the Transferee Company.
(d) The equity shares underlying the ADRs issued to the existing
investors in the ADRs of ICICI shall not be registered under
Securities Act in reliance upon the exemption from registration
contained in Section 3(a)(10) of the Securities Act, and upon a
no-action letter issued by the staff of the US Securities and
Exchange Commission. To obtain this exemption, the Transferee Company
will rely on the approval of the Scheme by the High Court of
Judicature at Bombay and the High Court of Gujarat at Ahmedabad
following the hearing by each court.
(e) If, on account of the Share Exchange Ratio, fractional ADRs of the
Transferee Company have to be issued, then, in accordance with
Section 4.03 of the Deposit Agreement, in lieu of delivering receipts
for fractional ADRs the Depository may, in its discretion, sell the
shares represented by the aggregate of such fractions, at public or
private sale, at such place or places and at such price or prices as
it may deem proper, and distribute the net proceeds of any such sale
in accordance with the terms of the Deposit Agreement.
PART V - GENERAL TERMS AND CONDITIONS
18. (a) The Transferor Companies and the Transferee Company shall be entitled
to declare and pay dividends, whether interim or final, to their
respective equity shareholders in respect of the accounting period
prior to the Appointed Date. Provided that any such declaration after
the Appointed Date and prior to the Effective Date shall be made with
the prior approval of the Board of Directors of the Transferor
Companies and the Transferee Company.
(b) Until the coming into effect of this Scheme, the holder of equity
shares of the Transferor Companies and the Transferee Company shall,
save as expressly provided otherwise in this Scheme, continue to
enjoy their existing rights under their respective articles of
association including the right to receive dividends.
(c) It is clarified that the aforesaid provisions in respect of
declaration of dividends, whether interim or final, are enabling
provisions only and shall not be deemed to confer any right on any
member of any of the Transferor Companies and/or the Transferee
Company to demand or claim any dividends which, subject to the
provisions of the Act, shall be entirely at the discretion of the
respective Boards of Directors of the Transferor Companies and the
Transferee Company and subject, wherever necessary, to the approval
of the shareholders of the Transferor Companies and the Transferee
Company, respectively.
19. (a) Upon the coming into effect of this Scheme and with effect from the
Appointed Date, for the purpose of accounting for and dealing with
the value of the assets and liabilities of ICICI in the books of the
Transferee Company, the fair value of the assets (after deducting
such provisions as are outstanding in the books of ICICI on the date
immediately preceding the Appointed Date in respect of any asset or
class of assets) and liabilities shall be determined on the Appointed
Date to the satisfaction of the Transferee Company.
(b) Upon the coming into effect of the Scheme and with effect from the
Appointed Date:
(i) If the fair value of any class of assets of ICICI determined in
accordance with sub-clause (a) above is less than the value of
such class of assets appearing in the books of ICICI immediately
prior to the Appointed Date, the assets shall be accounted for
and dealt with in the books of the Transferee Company at the
value appearing in the books of ICICI on the date immediately
preceding the Appointed Date and a provision equal to the
difference between the value appearing in the books of ICICI and
the fair value determined in accordance with sub-clause (a)
above shall be made in the books of the Transferee Company.
24
(ii) If the fair value of any class of assets of ICICI determined in
accordance with sub-clause (a) above is greater than the value
of such class of assets appearing in the books of ICICI
immediately prior to the Appointed Date, the assets shall be
accounted for and dealt with in the books of the Transferee
Company at the fair value.
(iii) Provisions outstanding in the books of ICICI on the date
immediately preceding the Appointed Date in respect of any asset
or class of assets shall be accounted for and dealt with in the
books of the Transferee Company as provisions against the assets
or class of assets against which such provisions were held in
the books of ICICI on the date immediately preceding the
Appointed Date.
(iv) The liabilities of ICICI shall be accounted for and dealt with
in the books of the Transferee Company at the fair value
determined in accordance with sub-clause (a) above.
(c) The excess of the fair value of the net assets of ICICI over the
paid-up value of the shares to be issued and allotted pursuant to the
terms of Clause 13, shall be accounted for and dealt with in the
books of the Transferee Company as follows:
(i) The balance in "Special Reserve Account" of ICICI shall continue
to be designated as Special Reserve Account in the books of the
Transferee Company;
(ii) The balance in "Debenture Redemption Reserve Account" of ICICI
shall continue to be designated as a Debenture Redemption
Reserve Account in the books of the Transferee Company;
(iii) The aggregate balance in "Capital Reserve Account", "Capital
Redemption Reserve Account", "Share Premium Account", "General
Reserve Account", "Profit and Loss Account" and any other
account included in reserves and surplus of ICICI on the date
immediately preceding the Appointed Date shall be reduced by the
provisions created in accordance with sub-clause (b)(i) above
and such further adjustments as may be deemed necessary
including such adjustments as may be required to ensure the
uniform application of accounting standards and policies adopted
by the Transferee Company and the net balance thereof shall be
credited by the Transferee Company to its General Reserve
Account.
(d) (i) Upon the coming into effect of the Scheme and with effect from
the Appointed Date, the assets and liabilities of ICICI Capital
and ICICI PFS shall be accounted for and dealt with in the books
of the Transferee Company at their fair values to be determined
on the Appointed Date to the satisfaction of the Transferee
Company.
(ii) In determining the fair value of the assets and liabilities of
ICICI Capital and ICICI PFS and making the necessary
adjustments, the provisions of sub-clauses (a) to (c) above
shall be applied mutatis mutandis to ICICI Capital and ICICI
PFS.
(iii) An amount equal to the net assets of ICICI Capital and ICICI
PFS shall be credited by the Transferee Company to its General
Reserve Account.
20. Upon the coming into effect of this Scheme:
(a) Clauses V of the Memorandum of Association of the Transferee Company
shall, without any further act, instrument or deed, be and stand
altered, modified and amended pursuant to Sections 94 and 394 and
other applicable provisions of the Act in the manner set forth in
Schedule I hereto.
(b) The Articles of Association of the Transferee Company shall, without
any further act, instrument or deed, be and stand altered, modified
and amended pursuant to Sections 31 and 394 and other applicable
provisions of the Act in the manner set forth in Schedule II hereto.
21. Upon the coming into effect of this Scheme, the Board of Directors of the
Transferee Company shall be reconstituted in accordance with the
provisions of the Act and the Banking Regulation Act, 1949. Provided that,
subject to the approval of the Reserve Bank of India, the maximum number
of Directors on the Board of Directors shall be increased to 21 (exclusive
of the nominee director appointed by the Government of India and the
director as may be nominated pursuant to the trust documents in relation
to the issue of debentures or bonds of the Transferee Company and/or the
Transferor Companies).
22. Upon the coming into effect of this Scheme, the borrowing limits of the
Transferee Company in terms of Section 293 (1)(d) of the said Act, shall
without further act, instrument or deed stand enhanced by an amount
aggregating to Rs.100,550 crore being the aggregate borrowing limits of
the Transferor Companies, such limits being incremental to the existing
limits of the Transferee Company.
25
23. The Transferor Companies shall with all reasonable despatch, make
applications/petitions under Sections 391 and 394 and other applicable
provisions of the Act to the High Court of Judicature at Bombay for
sanctioning of this Scheme and for dissolution of the Transferor Companies
without winding up under the provisions of law, and obtain all approvals
as may be required under law. Upon coming into effect of this Scheme, the
Transferor Companies shall, without any further act, deed, or instrument,
be dissolved without winding-up.
24. The Transferee Company shall also with all reasonable despatch, make
applications/petitions under Sections 391 and 394 and other applicable
provisions of the Act to the High Court of Gujarat at Ahmedabad for
sanctioning of this Scheme under the provisions of law, and obtain all
approvals as may be required under law.
25. (a) The Transferor Companies and the Transferee Company may assent from
time to time on behalf of all persons concerned to any modifications
or amendments or additions to this Scheme or to any conditions or
limitations which either the Boards of Directors of any of the
Transferor Companies and the Transferee Company deem fit, or which
the High Court of Judicature at Bombay and/or the High Court of
Gujarat at Ahmedabad and/or any other authorities (including the
Reserve Bank of India) under law may deem fit to approve of or impose
and which the Transferor Companies and the Transferee Company may in
their discretion deem fit and to resolve all doubts or difficulties
that may arise in carrying out and implementing this Scheme and to
do, authorise and execute all acts, instruments, deeds, matters and
things necessary, or to review the position relating to the
satisfaction of the conditions to this Scheme and if necessary, to
waive any of those (to the extent permissible under law) for bringing
this Scheme into effect. In the event of any of the conditions that
may be imposed by the Courts or other authorities (including the
Reserve Bank of India) which the Transferor Companies or the
Transferee Company may find unacceptable for any reason, then the
Transferor Companies and the Transferee Company are at liberty to
withdraw the Scheme. The aforesaid powers of the Transferor Companies
and the Transferee Company may be exercised by their respective
Boards of Directors, a committee or committees of the concerned Board
of Directors or any director authorised in that behalf by the
concerned Board of Directors (hereinafter referred to as the
"delegates").
(b) For the purpose of giving effect to this Scheme or to any
modifications or amendments thereof or additions thereto, the
delegate of the Transferor Companies and Transferee Company may give
and are authorised to determine and give all such directions as are
necessary including directions for settling or removing any question
of doubt or difficulty that may arise and such determination or
directions, as the case may be, shall be binding on all parties, in
the same manner as if the same were specifically incorporated in this
Scheme.
(c) In the event of there being any pending share transfers, whether
lodged or outstanding, of any shareholder of ICICI, the Board of
Directors or any committee thereof of ICICI shall be empowered in
appropriate cases, even subsequent to the Record Date to effectuate
such a transfer in ICICI as if such changes in registered holder were
operative as on the Record Date, in order to remove any difficulties
arising to the transferor or the transferee of the share in the
Transferee Company and in relation to the new shares after the Scheme
becomes effective.
26. This Scheme is conditional upon and subject to:
(a) the Scheme being agreed to by the requisite majorities of the members of
the Transferor Companies and the Transferee Company as required under the
Act and the requisite orders of the High Court of Judicature at Bombay and
the High Court of Gujarat at Ahmedabad referred to in Clauses 23 and 24
above being obtained;
(b) the approval of the Reserve Bank of India being obtained;
(c) such other sanctions and approvals including from any governmental
authority or contracting party, if any, as may be required by law or
contract in respect of the Scheme being obtained; and
(d) the certified copies of the court orders referred to in this Scheme being
filed with the Registrar of Companies, Maharashtra, and the Registrar of
Companies, Gujarat.
27. In the event of this Scheme not becoming effective by June 30, 2002 or by
such later date as may be agreed to by the respective Boards of Directors
of the Transferor Companies and the Transferee Company, this Scheme shall
become null and void and in that event no rights and liabilities
whatsoever shall accrue to or be incurred inter se by the parties or their
shareholders or creditors or employees or any other person. In such case
each company shall bear its own costs or as may be mutually agreed amongst
themselves.
28. All costs, charges and expenses, including any taxes and duties of the
Transferor Companies and Transferee Company respectively in relation to or
in connection with this Scheme and incidental to the completion of the
amalgamation of the Transferor Companies in pursuance of this Scheme shall
be borne and paid by ICICI.
26
Schedule I
Amendment to the Memorandum of Association
Clause V of the Memorandum of Association of the Transferee Company shall stand
modified and amended by deleting the Clause and replacing it with the
following:
"The authorized capital of the Company shall be Rs. 2,250,00,00,000
divided into 1,90,00,00,000 shares of Rs. 10/- each and 350 shares of Rs.
1 crore each with rights privileges and conditions attached thereto as are
provided by the Articles of Association of the Company for the time being
with power to increase or reduce the capital of the Company and to divide
the shares in the capital for the time being into several classes and to
attach thereto respectively such preferential, cumulative, convertible,
guarantee, qualified or other special rights, privilege, condition or
restriction, as may be determined by or in accordance with the Articles of
Association of the Company for the time being and to vary, modify, or
abrogate any such right, privilege or condition or restriction in such
manner as may for the time being be permitted by the Articles of
Association of the Company or the legislative provisions for the time
being in force."
27
Schedule II
Amendments to the Articles of Association
The Articles of Association of the Company shall stand modified and amended in
the following manner.
1. By deleting the definition of ICICI in Article 3.
2. By deleting Article 5(a) and replacing it with the following: -
"5(a) The Authorised Share Capital of the Company is Rs. 2,250,00,00,000
divided into 1,90,00,00,000 equity shares of Rs. 10/- each and 350
preference shares of Rs. 1 crore each."
3. By inserting the word 'debentures' in Article 10(a) after the word
'shares' and before the words 'or other interest....'.
4. By inserting a new Article 80A as follows:
"The Company may purchase its own shares in the manner provided for
in Section 77A of the Act."
5. By deleting Article 99(b) and replacing it with the following:
"99(b) If there be no Chairman or if at any meeting he shall not be
present within 15 minutes after the time appointed for holding such
meeting, or is unwilling to act, the Managing Director shall be
entitled to act as the Chairman of such meeting failing which the
Non-Rotational Directors present may choose one of their number to
act as Chairman of the meeting and in default of their doing so, the
Members present shall choose one of the Directors to take the Chair
and if no Directors present be willing to take the Chair, the Members
present shall choose one of their number to be the Chairman of the
meeting."
6. deleting Article 113 and replacing it with the following:
"113 (a) on a show of hands, every Member present in person shall
have one vote; and
(b) on a poll, the voting rights of Members shall be as
provided in Section 87 of the Act, but will be subject to
the ceiling of ten per cent of the total voting rights or
such other percentage as may be stipulated by Section 12(2)
of the Banking Regulation Act."
7. By deleting Article 126 and replacing it with the following:
"126 Until otherwise determined by a General Meeting, the number of
Directors shall not be less than three or more than 21 excluding the
Government Director (referred to in Article 128A) and the Debenture
Director (referred to in Article 129) (if any)."
8. By deleting Article 128 and replacing it with the following:
"128 Not more than one-third of the total number of Directors shall be
non-rotational Directors and, except for the Debenture Director and
the Government Director, such non-rotational Directors (hereinafter
referred to as the "Non-Rotational Directors") shall be appointed by
the Board of Directors of the Company. The remaining Directors shall
be persons whose period of office is liable to determination by
rotation and subject to the provisions of the Act shall be appointed
by the Company in General Meeting."
9. By inserting a new Article 128A after the existing Article 128:
"128A(a) During such time as the Guarantee Agreement dated March 14, 1955
or the Guarantee Agreement dated July 15, 1959 or the Guarantee
Agreement dated October 28, 1960 or the Guarantee Agreement
dated February 28, 1962, between the President of India and The
International Bank for Reconstruction and Development shall
remain in force the President of India shall have the right from
time to time to appoint one person as a Director of the Company
and to remove such person from office and on a vacancy being
caused in such office from any cause whether by resignation,
death, removal or otherwise to appoint a Director in the vacant
place. The Company shall be entitled to agree with the President
of India for the appointment of a Director of the Company by the
President of India as contemplated by this Article in respect of
any future advance or advances by the Government of India or in
respect of any guarantee or guarantees that may be given by the
Government of India in connection with the Company's future
borrowings from The International Bank for Reconstruction and
Development or any other financial institution. The Director
appointed under this Article is herein referred to as "the
Government Director" and the term "Government Director" means
the Director for the time being in office under this Article.
The
28
Government Director shall not be liable to retire by rotation or
be removed from office except by the President of India as
aforesaid. Subject as aforesaid the Government Director shall be
entitled to the same rights and privileges and be subject to the
same obligations as any other Director of the Company."
10. By inserting the following sentence at the end of Article 132 after the
words "...or the Central Government.":
"No Director who is a Government servant shall be entitled to receive any
remuneration under this Article or other provisions of these presents
except as authorised by the Government."
11. By inserting a new Article 132A after the existing Article 132:
"132A Subject to the provisions of Article 132 in the case of a Government
servant, the Directors may allow and pay to any Director who is not a
bona fide resident of the place where a meeting is held and who shall
come to such place for the purpose of attending a meeting such sum as
the Directors may consider fair compensation for travelling, hotel
and other expenses in addition to his remuneration as above specified
and the Directors may from time to time fix the remuneration to be
paid to any member or members of their body constituting a committee
appointed by the Directors in terms of these presents and may pay the
same."
12. By inserting a new Article 132B after the Article 132A:
"132B Subject to the provisions of Article 132 in the case of a Government
servant if any Director, being willing, shall be called upon to
perform extra services or to make any special exertions in going out
or residing at a particular place or otherwise for any of the
purposes of the Company, the Company may remunerate such Director
either by fixed sum or otherwise as may be determined by the
Directors and such remuneration may be either in addition to or in
substitution for his remuneration above provided."
13. By deleting Article 140(b)(iii)
14. By deleting Article 142 and replacing it with the following:
"142 At every Annual General Meeting of the Company, one third of such
Directors for the time being as are liable to retire by rotation or
if their number is not three or a multiple of three, then the number
nearest to onethird, shall retire from office. The Debenture
Directors, the Government Directors and the Non-Rotational Directors,
subject to Article 151, shall not be subject to retirement under this
Article."
15. By deleting the words "nomination of ICICI Directors by ICICI" in Article
149(d) and replacing it with the words "appointment of the Non-Rotational
Directors".
16. By inserting the words "or a Non-Rotational Director" instead of the words
"or a Nominee Director" in Article 150(a).
17. By deleting Article 151(a) and replacing it with the following:
"151(a) Subject to the provisions of the said Acts and these presents, the
Board of Directors of the Company shall be entitled to appoint from
time to time, one or more of the Non-Rotational Directors to act as
the Whole-time or Executive Chairman and Managing Director or
Part-time Chairman or Whole-time Chairman (hereinafter referred to as
the "Executive Chairman") or a Managing Director or Managing
Director(s) and/ or Whole-time Director or Whole-time Director(s) of
the Company (hereinafter referred to as the "Managing Director") for
such term not exceeding five years at a time as the Board of
Directors may think fit to manage the affairs and business of the
Company and may from time to time (subject to provisions of any
contract between him and the Company) may remove or dismiss him or
them from office and appoint another in his place."
18. By deleting Article 151(b).
19. By deleting Article 151(c).
20. By deleting the following paragraph in Article 155:
"Provide further, that no quorum for a Meeting of the Board shall be
constituted and no such meeting shall proceed to transact any business
unless at least one ICICI Director or his Alternate are present at such
meeting, except where for a particular meeting the said requirement for a
quorum is waived in writing by the ICICI Directors or their Alternates."
29
21. By deleting Article 157 and replacing it with the following:
"157 The Directors may subject to the provisions of the Act delegate any
of their powers to Committees consisting of Directors and/or such
other person or persons as they think fit, and they may from time to
time revoke and substitute such delegation. Any Committee so formed
shall in the exercise of the powers so delegated, conform to any
regulations that may from time to time be imposed on it by the
Directors. All acts done by any such Committee in conformity with
such regulations and in fulfilment of the purposes of its appointment
but not otherwise, shall have the force and the effect as if done by
the Board."
22. By deleting Article 159(a) and replacing it with the following:
"159(a) All meetings of the Directors shall be presided over by the
Chairman if present, but if at any meeting of Directors, the Chairman
be not present, at the time appointed for holding the same, then and
in that case the Managing Director shall be entitled to be the
Chairman of such meeting, failing which the Board shall choose one of
the Non-Rotational Directors then present to preside at the meeting."
23. By deleting Article 161(c).
30
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
ORDINARY ORIGINAL JURISDICTION
COMPANY APPLICATION NO. 360 OF 2001
In the matter of the Companies Act, 1956;
-And-
In the matter of Sections 391 to 394 of the Companies Act, 1956;
-And-
In the matter of ICICI Bank Limited, a company incorporated
under the Companies Act, 1956 and having its Registered Office
at Landmark, Race Course Circle, Vadodara 390 007, Gujarat;
-And-
In the matter of Scheme of Amalgamation of ICICI Limited, ICICI
Capital Services Limited and ICICI Personal Financial Services
Limited with ICICI Bank Limited.
ICICI Bank Limited, a company incorporated )
under the Companies Act, 1956 and having ) .....Applicant Company.
its Registered Office at Landmark, Race Course )
Circle, Vadodara 390 007, Gujarat. )
FORM OF PROXY
-------------
I/We, the undersigned Equity Shareholder/s of the Applicant Company hereby
appoint __________________ of _______________and failing him/her
_______________________of ______________________ as my/our proxy, to act for
me/us at the meeting of the Equity Shareholders of the Applicant Company to be
held at Central Gujarat Chamber of Commerce Auditorium, Second Floor, Vanijya
Bhavan, Race Course Circle, Vadodara 390 007 on Friday, the 25th day of
January, 2002 at 3.00 p.m. (1500 hours) for the purpose of considering, and if
thought fit, approving with or without modification, the arrangement embodied
in the Scheme of Amalgamation of ICICI Limited, ICICI Capital Services Limited
and ICICI Personal Financial Services Limited with ICICI Bank Limited and at
such meeting and at any adjournment or adjournments thereof, to vote for me/us
and in my/our name ________________ (here, if for, insert 'for'; if against,
insert 'against', and in the latter case, strike out the words below after
"Scheme of Amalgamation") the said arrangement embodied in the said Scheme of
Amalgamation, either with or without modification, as my/our proxy may approve.
(Strike out what is not necessary.)
Dated this ____________ day of _______________ ------------
Name:_________________________________________ | Affix |
Address:______________________________________ | 30 paise |
______________________________________________ | Revenue |
______________________________________________ | Stamp |
Folio No.:____________________________________ ------------
Signature:____________________
NOTES:
1. All alterations made in the Form of Proxy should be initialled.
2. Proxy must be deposited at the Registered Office of the Applicant Company,
not later than FORTY EIGHT hours before the meeting.
3. In case of multiple proxies, proxy later in time shall be accepted.
Item 2
INFORMATION STATEMENT
Provided to the shareholders and
American Depositary Receipt holders of
ICICI LIMITED and ICICI BANK LIMITED
for the
COURT CONVENED MEETINGS OF SHAREHOLDERS
TO BE HELD ON JANUARY 25, 2002 FOR ICICI BANK LIMITED
AND JANUARY 30, 2002 FOR ICICI LIMITED
The Date of this Information Statement is December 21, 2001.
1
TABLE OF CONTENTS
AMALGAMATION ................................................................. 3
EFFECT OF AMALGAMATION .................................................. 3
SHARE EXCHANGE RATIO .................................................... 3
WHAT YOU WILL RECEIVE IN THE AMALGAMATION ............................... 3
SALIENT FEATURES OF THE SCHEME .......................................... 3
SHARE PRICES AND ADR PRICES ............................................. 4
WHERE YOU CAN FIND MORE INFORMATION ..................................... 8
BACKGROUND OF THE AMALGAMATION .......................................... 8
APPROVAL OF THE BOARDS OF DIRECTORS .....................................10
RATIONALE FOR THE AMALGAMATION ..........................................11
SHAREHOLDING OF ICICI IN ICICI BANK .....................................12
VALUATION PROCESS AND METHODOLOGY AND OPINIONS OF FINANCIAL ADVISORS ....12
APPROVALS REQUIRED AND CONDITIONS TO COMPLETION OF THE AMALGAMATION .....19
EXPECTED TIMING OF THE AMALGAMATION .....................................20
INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS IN THE AMALGAMATION .......20
BOARD OF DIRECTORS AND MANAGEMENT AFTER THE AMALGAMATION ................22
RISK FACTORS .................................................................23
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS .............................25
TAXATION .....................................................................26
INDIAN TAX CONSEQUENCES .................................................26
US FEDERAL INCOME TAX CONSIDERATIONS ....................................26
US RESALE RESTRICTIONS, LISTING REQUIREMENTS, DESCRIPTION OF ICICI
BANK SECURITIES & RELATED INFORMATION ......................................29
RESTRICTIONS ON SALE OF SHARES BY AFFILIATES OF ICICI AND ICICI BANK ....29
LISTING AND REGISTRATION AFTER THE AMALGAMATION .........................29
DESCRIPTION OF ICICI BANK SHARES ........................................29
DESCRIPTION OF ICICI BANK ADRs ..........................................29
RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES ..................29
PROCEDURES FOR WITHDRAWING FROM THE ADR PROGRAM .........................29
EXCHANGE OF ICICI SHARES ................................................30
EXCHANGE OF ICICI ADRs ..................................................30
FINANCIAL INFORMATION - US GAAP ..............................................31
SELECTED HISTORICAL FINANCIAL DATA FOR ICICI ............................31
SELECTED HISTORICAL FINANCIAL DATA FOR ICICI BANK .......................34
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA ...............36
ACCOUNTING TREATMENT FOR THE AMALGAMATION ...............................41
GLOSSARY OF TERMS ............................................................42
ANNEXURE A : FAIRNESS OPINIONS ...............................................43
ANNEXURE B : RISK FACTORS ....................................................48
ANNEXURE C : PROCEDURE FOR SHAREHOLDERS, ADR HOLDERS AND INTERESTED PARTIES
TO APPEAR AT THE COURT HEARING TO SANCTION THE SCHEME ...........57
APPENDIX A : FORMAT OF NOTICE OF INTENTION TO APPEAR AT THE HEARING OF
THE COURT .......................................................58
APPENDIX B : FORMAT OF AFFIDAVIT LISTING THE GROUNDS OF SUPPORT/OBJECTION ....59
ICICI and ICICI Bank shareholders and ADR holders are urged to read carefully
all of the materials delivered in this package, including this Information
Statement, to get better acquainted with the provisions thereof.
2
AMALGAMATION
1. Pursuant to the Order dated the 20th day of December, 2001, passed by the
High Court of Judicature at Bombay in Company Application No. 606 of 2001,
the meeting of the Equity Shareholders of ICICI Limited ("ICICI") to be
held on the 30th day of January, 2002 and pursuant to the Order dated the
19th day of December, 2001 passed by the High Court of Gujarat at
Ahmedabad in Company Application No. 360 of 2001, the meeting of the
Equity Shareholders of ICICI Bank Limited ("ICICI Bank" or the "Transferee
Company") to be held on the 25th day of January, 2002, are being convened
for the purpose of considering, and if thought fit, approving with or
without modification, the arrangement embodied in the Scheme of
Amalgamation of ICICI, ICICI Capital Services Limited and ICICI Personal
Financial Services Limited with ICICI Bank (the "Scheme").
2. In this Information Statement, ICICI Capital Services Limited is referred
to as "ICICI Capital" and ICICI Personal Financial Services Limited is
referred to as "ICICI PFS". ICICI, ICICI Capital and ICICI PFS are
collectively referred to as the "Transferor Companies". Where the context
so requires, the Transferor Companies and the Transferee Company are
together referred to as the "Companies".
3. A copy of the Scheme approved by each of the Board of Directors of ICICI,
ICICI Capital, ICICI PFS and ICICI Bank at their respective meetings held
on October 25, 2001, setting out the terms and conditions of the
amalgamation of the Transferor Companies with the Transferee Company, is
enclosed with the Notice and Explanatory Statement that has been sent with
this Information Statement.
EFFECT OF AMALGAMATION
4. Upon effectiveness of the Scheme, the Transferor Companies will merge with
the Transferee Company, with the Transferee Company as the sole surviving
entity. The Undertaking and Liabilities (as defined in the Scheme) and all
assets, rights, title, interest and obligations of the Transferor
Companies will stand transferred to and vested in the Transferee Company.
SHARE EXCHANGE RATIO
5. The Board of Directors of ICICI (the "ICICI Board") and the Board of
Directors of ICICI Bank (the "ICICI Bank Board") have approved the issue
and allotment of ICICI Bank equity shares to the ICICI shareholders in the
ratio of 1 (one) ICICI Bank equity share of face value of Rs.10/- (Rupees
ten only) each, credited as fully paid-up, for every 2 (two) ICICI equity
shares of face value of Rs.10/- (Rupees ten only) each, credited as fully
paid-up (such ratio in which ICICI Bank shares will be allotted to ICICI
shareholders is referred to as the "Share Exchange Ratio").
6. No ICICI Bank shares shall be issued in exchange for ICICI Capital equity
shares and ICICI PFS equity shares, as both entities are wholly-owned
subsidiaries of ICICI.
WHAT YOU WILL RECEIVE IN THE AMALGAMATION
7. ICICI equity shareholders whose names are recorded in its Register of
Members as of the date fixed by the ICICI Bank Board (the "Record Date")
shall be issued and allotted ICICI Bank equity share(s) in accordance with
the Share Exchange Ratio.
8. The holders of American Depositary Receipts ("ADRs") of ICICI will be
issued ICICI Bank ADRs. There are five ICICI equity shares underlying each
ICICI ADR and two ICICI Bank equity shares underlying each ICICI Bank ADR.
The number of ICICI Bank ADRs to be issued to ICICI ADR holders following
the amalgamation shall be determined by the Share Exchange Ratio. For
instance, in exchange for every four ICICI ADRs, holders thereof shall be
issued five ICICI Bank ADRs.
9. In the event that the issuance of ICICI Bank equity shares in exchange for
ICICI equity shares in accordance with the Share Exchange Ratio results in
fractional entitlements, no fractional share certificates shall be issued
by ICICI Bank. All such fractional entitlements will be consolidated and
ICICI Bank shall issue and allot equity shares in lieu of the consolidated
entitlement to the Trust (as defined below in paragraph 13) or to a
director or an officer of ICICI Bank, or any other person as ICICI Bank
shall appoint for this purpose who shall hold the shares so allotted in
trust for the shareholders with fractional entitlements. These shares
shall be sold in the secondary market and the net sale proceeds shall be
distributed to the shareholders in proportion to their respective
fractional entitlements. For information about the Trust see "Amalgamation
- Shareholding of ICICI in ICICI Bank".
10. In the event that the issuance of ICICI Bank ADRs in exchange for ICICI
ADRs in accordance with the Share Exchange Ratio results in fractional
entitlements, no fractional ADRs shall be issued by ICICI Bank. In lieu of
delivering receipts for fractional ADRs, Bankers Trust Company, as
Depositary (the "Depositary") may, in its discretion, sell the shares
represented by the aggregate of such fractions, at public or private sale,
at such place or places and at such price or prices as it may deem proper,
and distribute the net proceeds of any such sale in accordance with the
terms of the ICICI Deposit Agreement.
SALIENT FEATURES OF THE SCHEME
11. The Scheme provides that the entire undertaking and business of the
Transferor Companies i.e. all assets, liabilities, permits, consents,
licenses etc. shall vest in the Transferee Company with effect from the
later of March 30, 2002 and the date on which the approval of the Reserve
Bank of India for the Scheme becomes effective (the "Appointed Date").
Further, all the employees and the employee funds of the Transferor
Companies would also stand vested in the Transferee
3
Company on the same terms and conditions and all legal proceedings initiated by
and against the Transferor Companies shall be transferred in the name of the
Transferee Company. However, all shares pledged with each of the Transferor
Companies as security shall be transferred to a separate trustee company,
(separate from the Trust referred to in paragraph 13 below) which shall hold
such pledged shares in trust as trustee exclusively for the benefit of the
persons for whose benefit the pledge had been created. The effective date of
the Scheme (the "Effective Date") shall be the last of the dates on which all
conditions, matters and filings referred to in Clause 26 of the Scheme have
been fulfilled and necessary orders, approvals and consents referred to therein
have been obtained.
12. Until the Effective Date, the Transferor Companies and the Transferee
Company shall carry on their business and activities with reasonable
diligence and business prudence and shall not undertake any financial
commitments outside their ordinary course of business or dispose of or
encumber any of their assets. Further, a joint committee consisting of the
Managing Director and Chief Executive Officer of ICICI and the Managing
Director and Chief Executive Officer of ICICI Bank and such other members
as may be appointed by them, shall be constituted from the date the Scheme
is filed in the High Courts to determine what would be in the ordinary
course of business, to determine any changes in employees' compensation
structures and to perform certain other functions entrusted to it under
the Scheme.
13. Pursuant to the Scheme, on the Appointed Date, ICICI may transfer all of
the ICICI Bank shares held by it on the Appointed Date to a trust (the
"Trust") comprising of an individual trustee or a board of trustees
(including the survivors or survivor of any of the trustees comprising
such board of trustees) or a corporate trustee ("Trustees") exclusively
for the benefit of ICICI and its successors. The Trust would not exercise
any voting rights on the shares. It is currently expected that those
shares would be divested by the end of fiscal 2003 depending on market
conditions at that time. The Trustees will have the discretion to extend
this period in such manner as may be proper in accordance with provisions
of the trust deed constituting the Trust.
ICICI and ICICI Bank shareholders and ADR holders are requested to read
the entire text of the Scheme enclosed with the Notice and Explanatory
Statement and sent with this Information Statement to get better
acquainted with the provisions thereof as stated above. The above is only
a brief summary of the same and is qualified in its entirety by reference
to the full text of the Scheme.
SHARE PRICES AND ADR PRICES
Equity Shares
14. ICICI's equity shares are listed and traded on the stock exchanges at
Chennai, Bangalore, Delhi, Kolkata, Mangalore and Vadodara, the Stock
Exchange, Mumbai ("BSE") and the National Stock Exchange of India Limited
("NSE"). The equity shares were first listed on the BSE in 1955. The
prices for the equity shares as quoted in the official list of each of the
Indian stock exchanges are in Indian rupees. The following table shows:
o the reported high and low closing prices quoted in rupees for the
ICICI equity shares on the BSE; and
o the reported high and low closing prices for the ICICI equity shares,
converted into US dollars, based on the noon buying rate on the last
business day of each period presented.
Price per equity share(*)
-----------------------------------------
High Low High Low
-----------------------------------------
Annual prices:
Fiscal 1997 ...........................Rs. 113.00 Rs. 50.25 US$ 3.15 US$ 1.40
Fiscal 1998 ........................... 106.75 57.75 2.70 1.46
Fiscal 1999 ........................... 122.60 39.30 2.88 0.92
Fiscal 2000 ........................... 190.05 41.40 4.35 0.95
Fiscal 2001 ........................... 154.00 69.00 3.30 1.48
Quarterly prices:
Fiscal 2000:
First Quarter ......................... 78.00 41.40 1.80 0.95
Second Quarter ........................ 95.00 72.00 2.17 1.65
Third Quarter ......................... 113.45 75.95 2.61 1.75
Fourth Quarter ........................ 190.05 96.50 4.35 2.21
4
Price per equity share(*)
-----------------------------------------
High Low High Low
-----------------------------------------
Fiscal 2001:
First Quarter ......................... 154.00 101.95 3.45 2.28
Second Quarter ........................ 151.80 97.85 3.30 2.12
Third Quarter ......................... 102.85 69.00 2.20 1.48
Fourth Quarter ........................ 112.00 84.90 2.39 1.81
Fiscal 2002:
First Quarter ......................... 89.50 69.45 1.90 1.47
Second Quarter ........................ 71.65 41.75 1.51 0.88
Third Quarter (through November 30) ... 58.05 44.90 1.21 0.94
Monthly prices:
March 2001 ............................ 104.00 84.90 2.22 1.81
April 2001 ............................ 87.75 77.00 1.87 1.64
May 2001 .............................. 89.50 81.55 1.90 1.74
June 2001 ............................. 80.05 69.45 1.70 1.47
July 2001 ............................. 71.65 58.35 1.52 1.24
August 2001 ........................... 59.30 51.40 1.26 1.09
September 2001 ........................ 53.30 41.75 1.13 0.87
October 2001 .......................... 58.05 44.90 1.21 0.94
November 2001 ......................... 53.10 49.45 1.11 1.03
(*) Data from the BSE. The prices quoted on the NSE and other stock exchanges
may be different.
15. ICICI Bank's equity shares are listed and traded on the stock exchanges at
Chennai, Delhi, Kolkata and Vadodara, the BSE and the NSE. The equity
shares were first listed on the Vadodara Stock Exchange in 1997. The
prices for the equity shares as quoted in the official list of each of the
Indian stock exchanges are in Indian Rupees. The following table shows:
o the reported high and low closing prices quoted in rupees for the
ICICI Bank equity shares on the NSE; and
o the reported high and low closing prices for the ICICI Bank equity
shares, converted into US dollars, based on the noon buying rate on
the last business day of each period presented.
Price per equity share(*)
-----------------------------------------
High Low High Low
-----------------------------------------
Annual prices:
Fiscal 1998 ...........................Rs. 54.50 Rs. 35.00 US$ 1.38 US$ 0.89
Fiscal 1999 ........................... 65.00 20.75 1.53 0.49
Fiscal 2000 ........................... 275.00 22.70 6.30 0.52
Fiscal 2001 ........................... 279.65 189.70 5.97 4.05
Quarterly prices:
Fiscal 1999:
First Quarter ......................... 65.00 32.00 1.53 0.75
Second Quarter ........................ 44.00 32.10 1.04 0.76
Third Quarter ......................... 35.00 21.55 0.82 0.51
Fourth Quarter ........................ 33.60 20.75 0.79 0.49
Fiscal 2000:
First Quarter ......................... 38.60 22.70 0.89 0.52
Second Quarter ........................ 45.45 32.00 1.04 0.73
Third Quarter ......................... 75.00 32.15 1.72 0.74
Fourth Quarter ........................ 275.00 66.00 6.30 1.51
5
Price per equity share(*)
-----------------------------------------
High Low High Low
-----------------------------------------
Fiscal 2001:
First Quarter ........................ 279.65 189.70 6.26 4.25
Second Quarter ........................ 234.00 133.00 5.10 2.90
Third Quarter ......................... 182.00 103.60 3.89 2.22
Fourth Quarter ........................ 220.00 145.80 4.70 3.11
Fiscal 2002:
First Quarter ......................... 193.50 124.60 4.11 2.65
Second Quarter ........................ 140.00 67.95 2.95 1.43
Third Quarter (through November 30) ... 114.55 71.50 2.39 1.49
Monthly prices:
March 2001 ............................ 220.00 192.20 4.70 4.10
April 2001 ............................ 193.50 155.10 4.13 3.31
May 2001 .............................. 163.00 138.25 3.47 2.94
June 2001 ............................. 148.50 124.60 3.15 2.65
July 2001 ............................. 140.00 104.50 2.97 2.21
August 2001 ........................... 109.90 103.40 2.33 2.19
September 2001 ........................ 110.50 67.95 2.31 1.42
October 2001 .......................... 114.55 71.50 2.38 1.49
November 2001 ......................... 109.00 100.90 2.27 2.10
(*) Data from the NSE. The prices quoted on the BSE and other stock exchanges
may be different.
ADRs
16. ICICI ADRs, each representing five ICICI equity shares, were issued in
September 1999 in a public offering and were listed and traded on the New
York Stock Exchange ("NYSE") under the symbol IC.d. In August 1996, ICICI
had issued Global Depositary Receipts ("GDRs"), each representing five
ICICI equity shares, which were listed on the London Stock Exchange.
Following the offering of ICICI ADRs in September 1999, ICICI completed an
exchange offer of its GDRs for its US Securities Exchange Commission
("SEC")-registered ADRs on a one-for-one basis. Following this exchange
offer in November 1999, ICICI's GDRs were delisted from the London Stock
Exchange. The ADRs issued in exchange for the GDRs were listed and traded
on the NYSE under the symbol IC. The trading symbol of the ADRs sold in
the public offering in September 1999, being IC.d, was different from the
trading symbol of the ADRs issued in the exchange offer, being IC. The
equity shares underlying the ADRs sold in the public offering were issued
in the middle of fiscal 2000 and were subject to a pro rata dividend for
fiscal 2000 whereas the equity shares underlying the ADRs issued in the
exchange offer were issued in August 1996 and were subject to a full
dividend for fiscal 2000. After June 19, 2000, the record date for the
final dividend for fiscal 2000, all outstanding ICICI ADRs ranked pari
passu and since then have traded under the symbol IC on the NYSE. On
September 30, 2001, ICICI had approximately 51.28 million ADRs, equivalent
to 256.41 million of its equity shares, outstanding. The following table
sets forth, for the periods indicated, the reported high and low closing
prices on the NYSE for the outstanding ICICI ADRs traded under the symbol
IC.
Price per ADR(*)
-----------------------
High Low
-----------------------
Annual prices:
Fiscal 2000 ..................................... US$ 40.50 US$ 10.63
Fiscal 2001 ..................................... 26.75 7.25
Quarterly prices:
Fiscal 2000:
Third Quarter (from November 1, 1999) ........... 17.50 10.63
Fourth Quarter .................................. 40.50 15.25
Fiscal 2001:
First Quarter ................................... 26.75 14.56
Second Quarter .................................. 18.94 11.00
Third Quarter ................................... 12.25 7.25
Fourth Quarter .................................. 13.19 10.63
6
Price per ADR(*)
-----------------------
High Low
-----------------------
Fiscal 2002:
First Quarter ................................... 12.20 9.15
Second Quarter .................................. 9.95 4.95
Third Quarter (through November 30) ............. 7.30 5.15
Monthly prices:
March 2001 ...................................... 13.10 11.10
April 2001 ...................................... 12.17 10.40
May 2001 ........................................ 12.20 10.58
June 2001 ....................................... 11.76 9.15
July 2001 ....................................... 9.95 7.96
August 2001 ..................................... 8.05 6.69
September 2001 .................................. 7.07 4.95
October 2001 .................................... 7.30 5.15
November 2001 ................................... 6.80 5.44
(*) Data from the NYSE
17. ICICI Bank ADRs, each representing two ICICI Bank equity shares, were
issued in March 2000 in a public offering and were listed and traded on
the NYSE under the symbol IBN. The following table sets forth, for the
periods indicated, the reported high and low closing prices on the NYSE
for the outstanding ICICI Bank ADRs traded under the symbol IBN.
Price per ADR(*)
-----------------------
High Low
-----------------------
Fiscal 2000:
Fourth Quarter (from March 28, 2000) ............ US$ 15.38 US$ 14.38
Fiscal 2001:
First Quarter ................................... 18.75 11.75
Second Quarter .................................. 15.12 7.37
Third Quarter ................................... 9.00 4.62
Fourth Quarter .................................. 9.50 6.00
Fiscal 2002:
First Quarter ................................... 7.50 5.30
Second Quarter .................................. 5.72 2.70
Third Quarter (through November 30) ............. 5.25 2.85
Monthly prices:
March 2001 ...................................... 8.50 6.00
April 2001 ...................................... 7.50 6.69
May 2001 ........................................ 6.80 6.15
June 2001 ....................................... 6.35 5.30
July 2001 ....................................... 5.72 4.60
August 2001 ..................................... 5.59 4.73
September 2001 .................................. 4.61 2.70
October 2001 .................................... 5.25 2.85
November 2001 ................................... 4.90 4.00
(*) Data from the NYSE
7
18. ICICI Capital equity shares and ICICI PFS equity shares are held entirely
by ICICI or its nominees and are not listed on any stock exchange.
WHERE YOU CAN FIND MORE INFORMATION
19. In the United States, ICICI and ICICI Bank file their respective annual
reports and other information as is required from time to time with the
SEC. A copy of such documents filed by ICICI and ICICI Bank, respectively,
can be obtained at the SEC's public reference rooms in Washington, D.C.,
New York, New York and Chicago, Illinois. The SEC can be contacted at
+1-800-SEC-0330 for further information on the public reference rooms. The
SEC filings are also available to the public at the SEC's website at
http://www.sec.gov. Copies of documents filed by ICICI and ICICI Bank with
the SEC are also available at the offices of the NYSE, located at 20 Broad
Street, New York, New York 10005. In addition to this Information
Statement and the Notice and the Explanatory Statement, the publicly
available information listed below may also be reviewed:
ICICI Period
----- ------
Annual Report on Form 20-F Year ended March 31, 2001
Current Report on Form 6-K Furnished on October 25 and
October 29, 2001
ICICI Bank Period
---------- ------
Annual Report on Form 20-F Year ended March 31, 2001
Current Report on Form 6-K Furnished on October 25 and
October 29, 2001
20. In India, ICICI and ICICI Bank distribute annual reports to all their
registered shareholders and file the same with the Registrar of Companies
of Maharashtra and Gujarat respectively. ICICI and ICICI Bank also file
information on their quarterly results and other information with the
stock exchanges in India where their securities are listed. In addition to
this Information Statement the publicly available information listed below
may also be reviewed:
ICICI Period
----- ------
Annual Report Year ended March 31, 2001
Press Release on results for the six
months ended September 30, 2001 Issued on October 25, 2001
ICICI Bank Period
---------- ------
Annual Report Year ended March 31, 2001
Press Release on results for the six
months ended September 30, 2001 Issued on October 25, 2001
21. A copy of the documents referred to in paragraphs 19 and 20 above may be
obtained by a request directed to:
For ICICI:
Mr. Jyotin Mehta, General Manager and Company Secretary
By Mail: ICICI Limited, ICICI Towers, Bandra-Kurla Complex, Bandra (East),
Mumbai 400 051
By email: mehtajyotin@icici.com
By Telephone: +91 22 653 1414
For ICICI Bank:
Mr. Bhashyam Seshan, Company Secretary
By Mail: ICICI Bank Limited, ICICI Towers, Bandra-Kurla Complex, Bandra
(East), Mumbai 400 051
By email: bhashyams@icicibank.com
By Telephone: +91 22 653 1414
BACKGROUND OF THE AMALGAMATION
22. The ICICI group, which comprises ICICI, its subsidiaries and other
affiliate companies, is a diversified financial services group. ICICI was
formed in 1955 at the initiative of the World Bank, the Government of
India and representatives of Indian industry. The principal objective was
to create a development financial institution for providing medium-term
and long-term project financing to Indian businesses. Until the late
1980s, ICICI primarily focused its activities on project finance,
providing long-term funds to a variety of industrial projects. With the
liberalization of the financial sector in India in the 1990s, ICICI
transformed its business from a development financial institution offering
only project finance to a diversified financial services provider that,
along with its subsidiaries and affiliates, offers a wide variety of
products and services. As India's economy became more market-oriented and
integrated with the world economy, ICICI capitalized on the new
opportunities to provide a wider range of financial products and services
to a broader spectrum of clients. ICICI set up independent operations
through the incorporation of subsidiaries and affiliates in the areas of
venture capital funding (1988), asset management (1993), investment
banking (1993), commercial banking (1994), brokering and marketing (1994),
personal finance (1997), Internet stock trading (1999), home finance
(1999) and insurance (2000). ICICI operates as an autonomous and
independent commercial enterprise making decisions and pursuing strategies
that are designed to maximize shareholder value.
23. ICICI Capital is a wholly-owned subsidiary of ICICI, and is one of the
largest distributors of financial and investment products in India. It
also provides front-office services to the retail and semi-retail
investors of ICICI, and undertakes the management of the various ICICI
centres, which are low-cost stand-alone offices acting as marketing and
service centers, set up by ICICI.
8
24. ICICI PFS is also a wholly-owned subsidiary of ICICI, and is engaged in
the distribution and servicing of various retail credit products and other
services offered by ICICI and ICICI Bank.
25. ICICI Bank is a private sector commercial bank organized under the laws of
India in 1994. ICICI Bank offers a wide range of banking products to
corporate and retail customers through a variety of delivery channels.
ICICI Bank is an affiliate company of ICICI. ICICI Bank offers products
and services which largely complement the products and services offered by
ICICI and other ICICI group companies. ICICI Bank seeks to take advantage
of the customer relationships of the ICICI group. These relationships have
been particularly effective in helping ICICI Bank gain access to the
larger corporations, as ICICI Bank's balance sheet on a stand-alone basis
would not have permitted it to take the large exposures that may be
undertaken by ICICI given its large balance sheet capabilities. ICICI Bank
also seeks to benefit from ICICI's corporate relationships in growing its
retail business. ICICI Bank sells retail products to the employees of
ICICI group's corporate customers including offering corporate customers
its payroll deposit scheme for their employees. ICICI's retail bondholders
also present ICICI Bank with an opportunity for cross-selling a variety of
products, including bank accounts, credit cards, depositary share accounts
and, to a limited extent, retail loans.
26. In May 1994, when ICICI Bank was incorporated as a subsidiary of ICICI and
granted a banking license, ICICI held 75% of the equity share capital of
ICICI Bank and the balance of 25% of the equity share capital of ICICI
Bank was held by SCICI Limited. Following the amalgamation of SCICI
Limited with ICICI, ICICI Bank became a wholly-owned subsidiary of ICICI.
The Reserve Bank of India imposed a condition that ICICI reduce its
shareholding in ICICI Bank in stages, first to not more than 75.0% of its
equity share capital and ultimately to not more than 40.0% of its equity
share capital. In fiscal 1998, ICICI reduced its shareholding in ICICI
Bank to just below 75.0% of its equity share capital as required, through
a public offering of shares in India. In March 2000, ICICI Bank completed
an equity offering in the form of ADRs listed on the NYSE for an amount of
US$ 175 million. After this offering, ICICI's shareholding in ICICI Bank
was approximately 62.2% of its equity share capital. Effective March 10,
2001, ICICI Bank acquired Bank of Madura Limited, an old private sector
Indian bank, in an allstock amalgamation, and ICICI's shareholding in
ICICI Bank reduced to approximately 55.6% after the amalgamation. ICICI
had been in discussions with the Reserve Bank of India to determine
whether and to what extent it might still be required to sell or reduce
its interest in ICICI Bank. During fiscal 2001, the Reserve Bank of India
reiterated its requirement of a reduction of ICICI's holding in ICICI Bank
and advised ICICI to draw up a firm plan for dilution of its stake. In
line with the Reserve Bank of India's directive, ICICI reduced its
shareholding in ICICI Bank to approximately 46.4% of its equity share
capital through the sale of equity shares of ICICI Bank in the Indian
secondary markets to institutional investors in March 2001. As a result of
the foregoing, ICICI Bank ceased to be a subsidiary of ICICI as of March
22, 2001 and was accounted for under the equity method of accounting from
April 1, 2000 for the purposes of US GAAP financial statements. Further,
during the first five months (April to August) of fiscal 2002, ICICI sold
another 0.4% of the equity share capital of ICICI Bank in the Indian
secondary markets to institutional investors. On September 30, 2001, ICICI
held 46.0% of the equity share capital of ICICI Bank.
27. The issue of universal banking, which in the Indian context means
conversion of long-term development financial institutions into commercial
banks, has been discussed at length over the past few years. The Reserve
Bank of India in its Mid-Term Review of Monetary and Credit Policy for
fiscal 2000 and its circular on Approach to Universal Banking issued on
April 28, 2001, announced that it would consider proposals from
development financial institutions (like ICICI) wishing to transform
themselves into banks on a case-by-case basis. In its Mid-Term Review of
Monetary and Credit Policy for fiscal 2002, the Reserve Bank of India
encouraged financial institutions to submit proposals for their
transformation into banks.
28. As a bank, ICICI would have the ability to accept low-cost demand deposits
and offer a wider range of products and services, and greater
opportunities for earning non-fund based income in the form of banking
fees and commissions. In view of the benefits of transformation into a
bank and the Reserve Bank of India's pronouncements on universal banking,
ICICI explored various corporate structuring alternatives for its
transformation into a universal bank. ICICI also held discussions with the
Reserve Bank of India on an appropriate transition path and compliance
with regulatory requirements. ICICI Bank also considered various strategic
alternatives, in the context of the emerging competitive scenario in the
Indian banking industry, and the move towards universal banking. ICICI
Bank identified a large capital base and size and scale of operations as
key success factors in the Indian banking industry. The strategic
alternatives examined by ICICI and ICICI Bank included an amalgamation of
the two entities, in view of ICICI's significant shareholding in ICICI
Bank, and the existing strong business synergies between the two entities.
ICICI also considered the reorganisation of its subsidiary companies.
29. Following this strategising on the various alternatives including an
amalgamation of ICICI and ICICI Bank, the senior managements of ICICI and
ICICI Bank commenced a programme of in-depth confidential discussions on
the various strategic alternatives in July 2001. These discussions were
held on various dates during July-August 2001. Based on these discussions,
the managements of ICICI and ICICI Bank formed the view that the
amalgamation of ICICI with ICICI Bank would be the optimal strategic
alternative for both entities, and would create the optimal legal
structure for ICICI group's universal banking strategy. The managements of
ICICI and ICICI Bank accordingly decided to prepare, for submission to
their respective Boards of Directors, a proposal for the amalgamation of
ICICI and two of its wholly-owned subsidiaries, viz. ICICI Capital and
ICICI PFS, with ICICI Bank. The rationale for the amalgamation considered
by the management and the Board of Directors of the two companies is
discussed in detail in the section "Amalgamation - Rationale for the
Amalgamation".
30. The managements of ICICI and ICICI Bank decided to appoint external
financial advisors to advise them on the valuation of shares of both
entities and to recommend, to the respective Boards of Directors, a range
of share exchange ratios. ICICI
9
appointed JM Morgan Stanley Private Limited ("JM Morgan Stanley") and
ICICI Bank appointed DSP Merrill Lynch Limited ("DSP Merrill Lynch") as
their advisors, respectively, on October 1, 2001. Subsequently, in
addition to these advisors appointed by ICICI and ICICI Bank respectively,
ICICI and ICICI Bank jointly appointed the accounting firm Deloitte
Haskins & Sells, to undertake a valuation of shares of both companies and
recommend a share exchange ratio to the Board of Directors of each
company.
31. On October 17, 2001, ICICI Bank informed the Indian stock exchanges and
the NYSE, where its equity shares and ADRs are listed, that its Board of
Directors would meet on October 25, 2001, to consider its audited
half-yearly results for the six months ended September 30, 2001.
Separately, on October 18, 2001, ICICI informed the Indian Stock Exchanges
and the NYSE, where its equity shares and ADRs are listed, that its Board
of Directors would meet on October 25, 2001, to consider its audited
half-yearly results for the six months ended September 30, 2001.
Subsequently, on October 22, 2001, the Reserve Bank of India announced its
Mid-Term Review of Monetary and Credit Policy for fiscal 2002, in which it
encouraged financial institutions to submit proposals for their
transformation into banks. In view of the above announcement by the
Reserve Bank of India and the completion of the valuation process by JM
Morgan Stanley, DSP Merrill Lynch and Deloitte Haskins & Sells, the
managements of ICICI and ICICI Bank decided to place the amalgamation
proposal before their respective Boards of Directors at their meetings
scheduled for October 25, 2001. On October 24, 2001, each company
separately informed the Indian stock exchanges and the NYSE that their
respective Boards of Directors would also consider the amalgamation
proposal at their meetings on October 25, 2001.
APPROVAL OF THE BOARDS OF DIRECTORS
Approval of the ICICI Board
32. At the meeting of the ICICI Board on October 25, 2001, Mr. K. V. Kamath,
Managing Director and CEO made a presentation to the ICICI Board on the
proposal for the amalgamation of ICICI, ICICI Capital and ICICI PFS with
ICICI Bank.
33. JM Morgan Stanley made a presentation to the ICICI Board on the valuation
and recommended a share exchange ratio in the range of 1 share of ICICI
Bank for 1.8 to 2 shares of ICICI. JM Morgan Stanley stated that in its
opinion a share exchange ratio within such range would be fair to ICICI
shareholders.
34. Deloitte Haskins & Sells made a presentation to the ICICI Board and
recommended a share exchange ratio of 1 share of ICICI Bank for 2 shares
of ICICI, and stated that in its opinion such share exchange ratio would
be fair to the shareholders of both entities.
35. The ICICI Board discussed and approved the proposal for amalgamation and
the Share Exchange Ratio.
36. JM Morgan Stanley opined to the ICICI Board that, as of the date of the
meeting of the ICICI Board and based upon and subject to the various
considerations set forth in its opinion, the Share Exchange Ratio was fair
from a financial point of view to ICICI shareholders.
37. In arriving at its decision the ICICI Board considered, inter alia, the
following:
- the recommendations and opinions of JM Morgan Stanley and Deloitte
Haskins & Sells;
- the benefits of the proposed amalgamation described in the section
"Amalgamation - Rationale for the Amalgamation";
- the move towards universal banking and the Reserve Bank of India's
policy statements and guidelines on the same;
- the ICICI group's strategy over the past few years of operating as a
virtual universal bank;
- the advantages of ICICI Bank, which already had a banking license,
being the surviving entity in the amalgamation;
- compliance by the merged entity with various statutory/regulatory
requirements applicable to banks;
- the key features of the Scheme; and
- the purchase method of accounting for the amalgamation.
Approval of the ICICI Bank Board
38. At the meeting of the ICICI Bank Board on October 25, 2001, Mr. H. N.
Sinor, Managing Director and CEO, made a presentation to the ICICI Bank
Board on the proposal for the amalgamation of ICICI, ICICI Capital and
ICICI PFS with ICICI Bank.
39. DSP Merrill Lynch made a presentation to the ICICI Bank Board on the
valuation and recommended a share exchange ratio in the range of 1 share
of ICICI Bank for 1.8 to 2 shares of ICICI. DSP Merrill Lynch stated that
in its opinion a share exchange ratio within such range would be fair to
ICICI Bank shareholders.
40. Deloitte Haskins & Sells made a presentation to the ICICI Bank Board and
recommended a share exchange ratio of 1 share of ICICI Bank for 2 shares
of ICICI, and stated that in its opinion such share exchange ratio would
be fair to the shareholders of both entities.
41. The two Directors nominated by ICICI on the ICICI Bank Board viz. Mr. K.
V. Kamath and Ms. Lalita D. Gupte, did not participate in the discussions
on the proposal for amalgamation at the meeting of the ICICI Bank Board.
10
42. The ICICI Bank Board discussed and approved the proposal for amalgamation
and the Share Exchange Ratio.
43. DSP Merrill Lynch opined to the ICICI Bank Board that, as of the date of
the meeting of the ICICI Bank Board and based upon and subject to the
various considerations set forth in its opinion, the Share Exchange Ratio
was fair from a financial point of view to the ICICI Bank shareholders.
44. In arriving at its decision the ICICI Bank Board considered, inter alia,
the following:
- the recommendations and opinions of DSP Merrill Lynch and Deloitte
Haskins & Sells;
- the benefits of the proposed amalgamation described in the section
"Amalgamation - Rationale for the Amalgamation";
- the move towards universal banking and the Reserve Bank of India's
policy statements and guidelines on the same;
- ICICI Bank's relationship with the ICICI group, and the ICICI group's
strategy over the past few years of operating as a virtual universal
bank;
- the advantages of ICICI Bank, which already had a banking license,
being the surviving entity in the amalgamation;
- compliance by the merged entity with various statutory/regulatory
requirements applicable to banks;
- the key features of the Scheme; and
- the purchase method of accounting for the amalgamation.
Approval of the Board of ICICI Capital
45. At the meeting of the Board of Directors of ICICI Capital on October 25,
2001, the Board of Directors considered the proposal for the amalgamation
of ICICI Capital, ICICI and ICICI PFS with ICICI Bank. The Board of
Directors noted that as all of the equity shares of ICICI Capital were
held by ICICI or its nominees, no shares would be issued by ICICI Bank to
ICICI Capital shareholders. The Board of Directors discussed and approved
the proposal for amalgamation. In arriving at its opinion, the Board of
Directors considered the following:
- ICICI Capital is a wholly-owned subsidiary of ICICI, and is engaged
in distribution of financial and investment products and in providing
front-office services to the retail and semi-retail investors of
ICICI, and undertaking the management of the various ICICI centres.
- The amalgamation of ICICI Capital, ICICI, and ICICI PFS with ICICI
Bank would consolidate and integrate the retail business.
Approval of the Board of ICICI PFS
46. At the meeting of the Board of Directors of ICICI PFS on October 25, 2001,
the Board of Directors considered the proposal for the amalgamation of
ICICI PFS, ICICI and ICICI Capital with ICICI Bank. The Board of Directors
noted that as all of the equity shares of ICICI PFS were held by ICICI or
its nominees, no shares would be issued by ICICI Bank to ICICI PFS
shareholders. The Board of Directors discussed and approved the proposal
for amalgamation. In arriving at its opinion, the Board of Directors
considered the following:
- ICICI PFS is a wholly-owned subsidiary of ICICI, and is engaged in
distribution and servicing of various retail credit products and
other services offered by ICICI and ICICI Bank.
- The amalgamation of ICICI PFS, ICICI, and ICICI Capital with ICICI
Bank would consolidate and integrate the retail business.
RATIONALE FOR THE AMALGAMATION
47. The amalgamation is expected to be beneficial to both ICICI and ICICI Bank
shareholders. The management of ICICI and the ICICI Board believe that the
amalgamation would enhance value for ICICI shareholders through the merged
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 management of ICICI Bank and the
ICICI Bank Board believe that the amalgamation would enhance value for
ICICI Bank shareholders through a large capital base and scale of
operations, seamless 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. Factors that could cause the merged entity's results to
differ materially from the forward- looking statements can be found in the
section entitled "Risk Factors" and in Annexure B. See also information
regarding the safeharbor protection for forward-looking statements in the
section entitled "Information Regarding Forward-Looking Statements".
48. The merged entity would be the second largest among all banks in India,
ranked on the basis of their total assets. 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 merged entity would have improved capability to
offer a wider range of products and services, ranging from project finance
to retail finance, with a diversified resource base, improved portfolio
risk management capability and deeper client relationships.
11
49. The amalgamation of ICICI Capital and ICICI PFS (which are wholly-owned
subsidiaries of ICICI) with ICICI Bank would consolidate and integrate the
retail business, which will be a key driver of growth for the merged
entity, with respect to both assets and liabilities. Both ICICI Bank's and
the ICICI group's retail strategy is based on the offering of multiple
products through multiple delivery channels to provide choice and
convenience to customers. The channels are currently owned by different
ICICI group companies. Offering the entire range of products and services
through multiple channels also results in greater economies of scale.
50. The process of integration of operations of ICICI, ICICI Capital and ICICI
PFS with ICICI Bank is expected to be smooth in view of the existing
strong synergies amongst them.
SHAREHOLDING OF ICICI IN ICICI BANK
51. On September 30, 2001, ICICI held 46.0% of the equity share capital of
ICICI Bank. Pursuant to the Scheme, ICICI may, on the Appointed Date,
transfer all of the ICICI Bank shares held by it on the Appointed Date to
the Trust to hold such ICICI Bank shares in trust exclusively for the
benefit of ICICI and its successors. It is currently expected that the
Trustees would divest the shares by the end of fiscal 2003 depending on
market conditions at that time. The Trustees will have the discretion to
extend this period in such manner as may be proper in accordance with
provisions of the trust deed constituting the Trust. Based on ICICI's
shareholding in ICICI Bank on September 30, 2001 (unless the shareholding
is reduced on or before the Appointed Date) and the Share Exchange Ratio,
the holding of the Trust in ICICI Bank after the amalgamation would be
equivalent to 16.5% of the equity share capital of the merged entity.
VALUATION PROCESS AND METHODOLOGY AND OPINIONS OF FINANCIAL ADVISORS
Opinion of ICICI's Financial Advisor
52. ICICI retained JM Morgan Stanley to act as its financial advisor in
connection with the proposed amalgamation of ICICI with ICICI Bank. On
October 25, 2001, at the meeting of the ICICI Board, JM Morgan Stanley
opined that, as of such date and based upon and subject to matters set
forth in its opinion, the Share Exchange Ratio was fair, from a financial
point of view, to the ICICI equity shareholders.
53. The full text of JM Morgan Stanley's opinion, which sets forth the
assumptions made, procedures followed, matters considered, and
qualifications and limitations on the review undertaken by JM Morgan
Stanley is annexed as Annexure A (1) to this Information Statement. JM
Morgan Stanely has consented to the disclosure of its opinion in this
Information Statement with the understanding that the Information
Statement is being circulated among all the shareholders and ADR holders
of ICICI and ICICI Bank respectively. The summary of JM Morgan Stanley's
opinion set forth in this Information Statement is qualified in its
entirety by reference to the full text of such opinion. ICICI ADR holders
and equity shareholders of ICICI are urged to and should read such opinion
carefully and in its entirety.
54. The following should be considered when reading the discussion of the JM
Morgan Stanley opinion in this Information Statement:
- JM Morgan Stanley's opinion was directed to the ICICI Board for its
information in connection with its consideration of the amalgamation
and addresses only the fairness from a financial point of view of the
Share Exchange Ratio to holders of equity shares of ICICI; and
- JM Morgan Stanley's opinion does not address the merits of the
underlying decision of ICICI to engage in the proposed amalgamation
and does not constitute a recommendation as to how holders of ICICI
equity shares should vote with respect to the amalgamation.
55. The summary of the financial analysis set forth below is not a complete
description of the analysis underlying JM Morgan Stanley's opinion or the
presentation made by JM Morgan Stanley to the ICICI Board but summarizes
the material analysis performed and presented thereby. The preparation of
a fairness opinion is a complex analytic process involving various
determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible
to partial analysis or summary description. In arriving at its opinion, JM
Morgan Stanley did not attribute any particular weight to any analysis or
factor that it considered. In addition, JM Morgan Stanley may have given
various analyses and factors more or less weight than other analyses and
factors and may have deemed various assumptions more or less probable than
other assumptions, so that the range of valuations resulting from any
particular analysis described below should therefore not be taken to be JM
Morgan Stanley's view of the actual value of ICICI or ICICI Bank.
Accordingly, JM Morgan Stanley believes that its analysis must be
considered as a whole and that selecting portions of its analysis, without
considering all of its analysis, would create an incomplete view of the
process underlying the preparation of JM Morgan Stanley's opinion.
56. In connection with rendering its opinion, JM Morgan Stanley, among other
things:
- reviewed certain publicly available business and financial
information relating to ICICI and ICICI Bank that JM Morgan Stanley
deemed to be relevant;
- reviewed certain financial forecasts and projections concerning ICICI
and ICICI Bank, prepared by or on behalf of the managements of ICICI
and ICICI Bank respectively and provided to JM Morgan Stanley for
purposes of its analysis and discussed these financial projections
and related materials with the managements of ICICI and ICICI Bank
respectively;
12
- discussed the past and current operations and financial conditions
and the future prospects of ICICI and ICICI Bank with executives
designated by ICICI and ICICI Bank, respectively, including their
senior executives;
- performed valuation analyses, on a stand-alone basis, on ICICI and
ICICI Bank;
- reviewed the reported market prices and valuation multiples for ICICI
equity shares and ICICI Bank equity shares and compared them with
market prices and valuation multiples of certain other
publicly-traded companies that JM Morgan Stanley deemed to be
relevant and comparable;
- reviewed the financial terms, to the extent publicly available, of
certain comparable transactions;
- participated in certain discussions and negotiations among
representatives of ICICI and ICICI Bank and their respective
financial advisors in connection with the transactions contemplated
by the scheme of arrangement; and
- considered such other factors and performed such other analyses as JM
Morgan Stanley deemed appropriate or necessary.
57. In rendering its opinion, JM Morgan Stanley assumed and relied upon,
without independent verification, the accuracy and completeness of all
information that was publicly available or provided or otherwise made
available to JM Morgan Stanley by ICICI or ICICI Bank for the purposes of
its opinion. With respect to the financial projections and forecasts
provided by the managements of ICICI and ICICI Bank, JM Morgan Stanley
assumed that such projections and forecasts were reasonably prepared in
good faith and reflect the best currently available estimates and
judgments by the managements of ICICI and ICICI Bank with respect to the
future financial performance of ICICI and ICICI Bank, respectively. JM
Morgan Stanley expresses no opinion and accordingly accepts no
responsibility with respect to or for such projections, forecasts and
analyses or the assumptions on which they are based. JM Morgan Stanley did
not review any books and records of ICICI and ICICI Bank (other than those
provided or made available to JM Morgan Stanley). JM Morgan Stanley did
not assume any obligation to conduct, nor have they conducted, any
physical inspection of the assets, properties or facilities of ICICI and
ICICI Bank and neither expresses any opinion with respect thereto nor
accepts any responsibility therefor. JM Morgan Stanley did not make any
independent valuation or appraisal of the assets or liabilities of ICICI
or ICICI Bank, nor was it furnished with any such appraisals. JM Morgan
Stanley did not review any internal management information statements or
any non-public reports, and, instead, with the consent of ICICI, JM Morgan
Stanley relied upon information that was publicly available or provided or
otherwise made available to JM Morgan Stanley by ICICI or ICICI Bank for
the purposes of its opinion. JM Morgan Stanley is not an expert in the
evaluation of the sufficiency of the securities or assets that either
ICICI or ICICI Bank may hold in respect of loans and advances made by
them, and allowances for loan losses, and JM Morgan Stanley did not make
an independent evaluation of the adequacy of the securities in respect of
loans and advances and allowances for loan losses of ICICI or ICICI Bank,
nor reviewed any individual credit files relating to ICICI and ICICI Bank.
In addition, JM Morgan Stanley is not an expert in the evaluation of
litigation or other actual or threatened claims. JM Morgan Stanley assumed
that the allowances or other reserves of ICICI and ICICI Bank established
to cover losses in connection with any loan losses, litigation or other
claims will be adequate to cover all such losses. JM Morgan Stanley
expresses no opinion and accordingly accepts no responsibility for or with
respect to such allowances or reserves or the assumptions upon which they
are based. In addition, JM Morgan Stanley assumed that the Scheme will be
approved by the courts and by regulatory authorities and that the
amalgamation will be consummated substantially in accordance with the
terms set forth in the Scheme.
58. JM Morgan Stanley assumed that in the course of obtaining necessary
regulatory or other consents or approvals for the Scheme, no restrictions
would be imposed that would have a material adverse effect on the benefits
of the amalgamation that ICICI and ICICI Bank may have contemplated. JM
Morgan Stanley's opinion is necessarily based on financial, economic,
market and other conditions as they currently exist and can be reasonably
evaluated on, and on the information made available to JM Morgan Stanley
as of October 25, 2001. Although subsequent developments may affect the
opinion of JM Morgan Stanley, JM Morgan Stanley does not have an
obligation to update, revise or reaffirm its opinion. In arriving at its
opinion, JM Morgan Stanley was not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition, business
combination or other extraordinary transaction involving ICICI or any of
its assets, nor did JM Morgan Stanley negotiate with any party other than
ICICI Bank, which expressed their interest in entering into a business
combination with ICICI.
Summary of Financial Analysis
59. The following is a brief summary of the material analyses performed by JM
Morgan Stanley in connection with the rendering of the fairness opinion
dated as of October 25, 2001. These summaries of financial analyses
include information presented in tabular format to the ICICI Board. In
order to fully understand the financial analyses used by JM Morgan
Stanley, the tables must be read together with the text of each summary.
The tables alone do not completely describe the financial analyses.
Dividend Discount Analysis
JM Morgan Stanley performed a discounted dividend analysis of ICICI and
ICICI Bank to estimate a range of present values per equity share of ICICI
and ICICI Bank assuming that each entity continued to operate as a
stand-alone entity. This range was determined by adding (i) the present
value of the estimated future dividend stream that each entity could
generate and (ii) the present value of the terminal value of equity shares
of each entity at the end of year 2008. To determine a projected
13
dividend stream, JM Morgan Stanley assumed a constant tangible common
equity to tangible risk-weighted asset ratio of 10%. JM Morgan Stanley
used a forecast horizon of seven years, i.e., up to 2008, based on
management projections and discussions with them on the same. The
"terminal value" of ICICI and ICICI Bank equity shares at the end of the
period was determined by applying price-to-book value multiple derived
from Gordon's Formula using an estimated sustainable return on equity and
carrying out a sensitivity analysis assuming three "perpetual growth rates
to year 2008 projected book value". Based on this, the terminal
price-to-book value ranged from 0.75(X) to 0.86(X) for ICICI and from
2.44(X) to 3.35(X) for ICICI Bank. The dividend stream and "terminal
value" were discounted to present values using discount rates of 16.5%,
17.0% and 17.5% for ICICI and 15.9%, 15.4% and 14.9% for ICICI Bank, which
JM Morgan Stanley viewed as the appropriate range of discount rates for a
company with ICICI's and ICICI Bank's risk characteristics, respectively.
The investments and subsidiaries of ICICI and ICICI Bank were separately
valued through methods considered appropriate by JM Morgan Stanley and
such value was added to the dividend discount value of ICICI and ICICI
Bank respectively.
The above analysis implied share exchange ratios ranging from 1 equity
share of ICICI Bank for 1.83 to 2.11 equity shares of ICICI.
This analysis is not necessarily indicative of actual values or actual
future results and does not purport to reflect the prices at which any
securities may trade at the present or at any time in the future. Dividend
discount analysis is a widely used valuation methodology, but the results
of such methodology are highly dependent upon the numerous assumptions
that must be made, including earning growth rates, dividend payout rates,
terminal values and discount rates.
Historical Market Price Analysis
JM Morgan Stanley reviewed the price performance of ICICI and ICICI Bank
on the domestic stock exchanges (the BSE and the NSE) and of the ADRs on
the NYSE during the one week, one month and three month period ending
August 31, 2001. JM Morgan Stanley selected this period because, among
other things, trading during the period beginning September 2001 was
considered affected because rumors regarding the proposed amalgamation of
ICICI and ICICI Bank were reported in the media during the early part of
September and the capital markets in general were significantly affected
by the attack on the World Trade Center in New York City, New York on
September 11, 2001.
The volume-weighted average of closing market price (number of shares of
ICICI per share of ICICI Bank) during the one week, one month and
three-month period ending August 31, 2001 was as follows:
Period ending
August 31, 2001 1 week average 1-month average 3-month average
--------------- -------------- --------------- ---------------
BSE (Rs./share) .... 2.04 2.12 1.86
NSE (Rs./share) .... 2.04 2.11 1.93
NYSE (USD/share) ... 1.70 1.78 1.44
Based on the historical market prices, the implied share exchange ratio
ranged from 1 ICICI Bank equity share for 1.44 to 2.12 ICICI equity
shares.
Precedent Transaction Analysis
JM Morgan Stanley reviewed certain terms, to the extent publicly
available, of seven selected international acquisition transactions and
analyzed the premiums paid in these transactions over unaffected market
prices.
JM Morgan Stanley also analyzed the share exchange ratios implied by such
unaffected market prices. JM Morgan Stanley selected such transactions
because they were structured as minority squeeze-out transactions similar
to the amalgamation.
The table below provides the high and low premiums/discounts to the market
price of the acquired companies implicit in the share exchange ratios one
day before the announcement of these transactions:
Selected transactions Premium/(discount) to stock prices
---------------------------------- ----------------------------------
High ............................. 28.0%
Low .............................. 15.2%
The Share Exchange Ratio implied the following premium/discount to the
unaffected price of ICICI Bank i.e. price on August 30, 2001:
Premium/(discount) to unaffected
Stock exchange where quoted stock price of ICICI Bank
---------------------------------- ---------------------------------
BSE .............................. (1.7)%
NSE .............................. (1.4)%
NYSE ............................. 18.9%
JM Morgan Stanley also reviewed the terms of five select mergers within
group companies in India. JM Morgan Stanley selected these transactions
because such companies had common shareholders and they operated closely
together before
14
their merger, as in the case of ICICI and ICICI Bank.
The table below provides the high and low premiums/discounts to the market
price of the acquired companies implicit in the share exchange ratios one
day before the announcement of these transactions:
------------------------------------------------------------------------------------
Selected transactions Premium/(discount) Premium/(discount) Premium/(discount)
to average stock to average stock to average stock
prices for one week prices for one month prices for three
prior to prior to months prior to
announcement announcement announcement
------------------------------------------------------------------------------------
High ................ 16.1% 17.8% 21.5%
Low ................. 1.1% 4.3% (4.8)%
Based on the Share Exchange Ratio, the premium received by the
shareholders of ICICI Bank in the amalgamation, based on the trading price
for ICICI and ICICI Bank stock dating back from August 31, 2001 compare as
follows:
------------------------------------------------------------------------------------
Selected transactions Premium/(discount) Premium/(discount) Premium/(discount)
to average stock to average stock to average stock
prices for one week prices for one month prices for three
prior to prior to months prior to
August 31, 2001 August 31, 2001 August 31, 2001
------------------------------------------------------------------------------------
BSE ................. (3.97)% (5.90)% 3.22%
NSE ................. (3.93)% (5.88)% 3.28%
In performing its analyses, JM Morgan Stanley made numerous assumptions
with respect to industry performance, general business, economic, market
and financial conditions and other matters, many of which are beyond the
control of JM Morgan Stanley, ICICI or ICICI Bank. Any estimates contained
in the analysis performed by JM Morgan Stanley are not necessarily
indicative of actual values or future results, which may be significantly
more or less favorable than suggested by such analysis. The analyses
performed were prepared solely as a part of JM Morgan Stanley's analysis
of the fairness from a financial point of view of the Share Exchange Ratio
pursuant to the Scheme to holders of equity shares of ICICI and were
conducted in connection with the delivery by JM Morgan Stanley of its
opinion dated October 25, 2001 to the ICICI Board. Neither JM Morgan
Stanley's analyses nor the estimates of the value of businesses or
securities purport to be appraisals or to reflect the prices at which such
businesses or securities of ICICI might actually be sold. Accordingly,
such analysis and estimates are inherently subject to substantial
uncertainty. In addition, the fairness opinions dated as of October 25,
2001 were among several factors taken into consideration by the ICICI
Board in making its determination to approve the Scheme. Consequently, the
analysis described above should not be viewed as determinative of the
opinion of the ICICI Board or ICICI's management with respect to the value
of ICICI or ICICI Bank or whether the ICICI Board would have been willing
to agree to a different share exchange ratio or form of consideration.
60. JM Morgan Stanley, as part of its investment banking and financial
advisory business, is continuously engaged in the valuation of businesses
and securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and
other purposes. In addition, JM Morgan Stanley is a full service
securities firm engaged in securities trading, brokerage and financing
activities. In the ordinary course of JM Morgan Stanley's trading and
brokerage activities, JM Morgan Stanley or its affiliates may at any time
hold long or short positions, and may trade or otherwise effect
transactions for its own account or the accounts of customers, in debt or
equity securities or senior or subordinate loans of ICICI or ICICI Bank.
Engagement Letter and Other Relationships
61. Pursuant to an engagement letter, ICICI agreed to pay JM Morgan Stanley a
customary fee for its services as financial advisor in connection with the
amalgamation upon delivery of the opinion. ICICI also agreed to indemnify
JM Morgan Stanley and its affiliates, their respective directors,
officers, agents and employees and each person, if any, controlling JM
Morgan Stanley or any of its affiliates, against certain liabilities and
expenses, including liabilities under the US securities laws, arising out
of JM Morgan Stanley's engagement. In the past, JM Morgan Stanley and its
affiliates have provided financial advisory and financing services to
ICICI and ICICI Bank unrelated to the amalgamation and have received fees
for rendering these services.
Opinion of ICICI Bank's Financial Advisor
62. ICICI Bank retained DSP Merrill Lynch to act as its financial advisor in
connection with the proposed amalgamation of ICICI with ICICI Bank. On
October 25, 2001, at the meeting of the ICICI Bank Board, DSP Merrill
Lynch opined, that, as of that date and based upon and subject to the
matters set forth in its opinion and such other matters as DSP Merrill
Lynch considered relevant, the Share Exchange Ratio was fair, from a
financial point of view, to ICICI Bank equity shareholders.
63. The full text of DSP Merrill Lynch's opinion, which sets forth the
assumptions made, procedures followed, matters considered, and
qualifications and limitations on the review undertaken by DSP Merrill
Lynch is annexed as Annexure A(2) to this Information Statement. DSP
Merrill Lynch has consented to the disclosure of its opinion in this
Information Statement with the understanding that the Information
Statement is being circulated among all the shareholders and ADR holders
of
15
ICICI and ICICI Bank respectively. The summary of DSP Merrill Lynch's
opinion set forth in this Information Statement is qualified in its
entirety by reference to the full text of such opinion. ICICI Bank ADR
holders and equity shareholders are urged to and should read such opinion
carefully and in its entirety.
64. The following should be considered when reading the discussion of the DSP
Merrill Lynch opinion in this Information Statement:
- DSP Merrill Lynch's opinion was directed to the ICICI Bank Board for
its information in connection with its consideration of the
amalgamation and addresses only the fairness from a financial point
of view, of the Share Exchange Ratio to the holders of equity shares
of ICICI Bank; and
- DSP Merrill Lynch's opinion does not address the merits of the
underlying decision of ICICI Bank to engage in the proposed
amalgamation and does not constitute a recommendation as to how
holders of ICICI Bank's equity shares should vote with respect to the
amalgamation.
65. In arriving at its opinion, DSP Merrill Lynch, among other things:
- reviewed certain publicly available business and financial
information relating to ICICI and ICICI Bank that DSP Merrill Lynch
deemed to be relevant;
- reviewed certain internal financial information, including financial
forecasts and projections, relating to the business, earnings, cash
flow, assets, liabilities and prospects of ICICI and ICICI Bank,
prepared by and furnished to DSP Merrill Lynch by the management of
ICICI and ICICI Bank, respectively;
- conducted discussions with members of senior management of ICICI and
ICICI Bank concerning the matters described above, as well as their
respective businesses and prospects before and after giving effect to
the amalgamation including certain synergies, cost savings and
related expenses expected to result from the amalgamation;
- reviewed current and historical market prices, trading volumes and
valuation multiples for ICICI shares and ICICI Bank shares;
- reviewed the financial results of operations of ICICI and ICICI Bank,
including the audited financial statements for the fiscal year ended
March 31, 2001 and the quarter ended June 30, 2001;
- reviewed publicly available valuation multiples with respect to
certain companies DSP Merrill Lynch believed to be generally
comparable to those of ICICI Bank and ICICI;
- compared certain financial terms of the amalgamation with publicly
available financial terms of certain other transactions which DSP
Merrill Lynch believed to be generally relevant;
- reviewed the Scheme dated October 24, 2001; and
- considered such other information as DSP Merrill Lynch deemed
necessary or appropriate.
66. In rendering its opinion, DSP Merrill Lynch assumed and relied upon,
without independent verification, the accuracy and completeness of all
information that was publicly available or provided or otherwise made
available to DSP Merrill Lynch by ICICI or ICICI Bank for the purposes of
its opinion. With respect to the financial projections and forecasts
provided by the managements of ICICI and ICICI Bank, DSP Merrill Lynch
assumed that such projections and forecasts were reasonably prepared in
good faith and reflect the best currently available estimates and
judgements by the managements of ICICI and ICICI Bank with respect to the
future financial performance of ICICI and ICICI Bank, respectively. DSP
Merrill Lynch expresses no opinion and accordingly accepts no
responsibility with respect to or for such projections, forecasts and
analyses or the assumptions on which they are based. DSP Merrill Lynch did
not assume any obligation to conduct, nor have they conducted, any
physical inspection of the assets, properties or facilities of ICICI and
ICICI Bank and neither expresses any opinion with respect thereto nor
accept any responsibility therefor. DSP Merrill Lynch did not make any
independent valuation or appraisal of the assets or liabilities of ICICI
or ICICI Bank, nor was it furnished with any such appraisals. DSP Merrill
Lynch did not review any internal management information statements or any
non-public reports, and, instead, with the consent of ICICI Bank, DSP
Merrill Lynch relied upon information that was publicly available or
provided or otherwise made available to DSP Merrill Lynch by ICICI or
ICICI Bank for the purposes of its opinion. DSP Merrill Lynch is not an
expert in the evaluation of the sufficiency of the securities or assets
that either ICICI or ICICI Bank may hold in respect of loans and advances
made by them, and allowances for loan losses, and DSP Merrill Lynch did
not make an independent evaluation of the adequacy of the securities in
respect of loans and advances and allowances for loan losses of ICICI or
ICICI Bank, nor reviewed any individual credit files relating to ICICI and
ICICI Bank. In addition, DSP Merrill Lynch did not evaluate the likelihood
of certain material contingent liabilities crystallizing including with
respect to certain tax matters.
67. With respect to the potential cost savings and other synergies anticipated
by the managements of ICICI Bank and ICICI to result from the
amalgamation, DSP Merrill Lynch assumed that management expected cost
savings to exceed expenses and such expectations on cost savings and
synergies reasonably reflected the best available information and
judgements of the managements of ICICI Bank and ICICI (including the
achievability thereof). DSP Merrill Lynch further assumed that the
amalgamation will be accounted for as a purchase transaction under
generally accepted accounting principles in India and that, after the
amalgamation, ICICI Bank will continue to exist as a banking company under
the Banking Regulation Act, 1949. DSP Merrill Lynch also assumed that the
final form of the Scheme will be similar in all material respects to the
Scheme dated October 24, 2001.
16
68. DSP Merrill Lynch's opinion is necessarily based upon market, economic,
regulatory and other conditions as they exist and can be evaluated on, and
on the information made available to DSP Merrill Lynch by ICICI Bank and
ICICI as of the date of such opinion. Subsequent developments may affect
its opinion, and DSP Merrill Lynch does not have any obligation to update,
revise, or reaffirm such opinion. DSP Merrill Lynch expressed no opinion
as to the price at which ICICI Bank's equity shares will trade at any
future time.
Summary of Financial Analysis
69. The following is a brief summary of the material analyses performed by DSP
Merrill Lynch in connection with the rendering of the fairness opinion
dated October 25, 2001. The following quantitative information, to the
extent it is based on market data, is based on market data as it existed
at or about October 19, 2001 and is not necessarily indicative of current
market conditions. No company used in the following analyses as a
comparison is directly comparable to ICICI Bank or ICICI.
The order of analyses and the results derived from the analysis described
below do not represent the relative importance or weight given to these
analyses by DSP Merrill Lynch. The summary of these financial analyses
include information presented in tabular format. In order to understand
fully the financial analyses, these tables must be read together with the
text of each summary. The tables alone do not describe completely the
financial analysis. The financial methodologies considered by DSP Merrill
Lynch in evaluating the Share Exchange Ratio were historical share price
analysis, dividend discount analysis and acquisition comparables analysis.
Historical Market Price Analysis
DSP Merrill Lynch examined the simple average and volume weighted average
of the share prices of ICICI and ICICI Bank on the domestic stock
exchanges (the BSE and the NSE) and of the ADRs listed on the NYSE during
select time periods. DSP Merrill Lynch considered the time periods from
May 30, 2001 - August 31, 2001 and July 30, 2001 - August 31, 2001 to be
the most relevant since these time periods captured recent information
affecting the share prices of the equity shares of both ICICI and ICICI
Bank but excluded the impact of some recent speculative pressure on the
share prices. Using this methodology, DSP Merrill Lynch arrived at a share
exchange ratio range of 1 ICICI Bank share for 1.6 to 2 ICICI shares.
The table below gives the implied share exchange ratios based on the
simple and volume weighted average market prices for various periods.
------------------------------------------------------------------------------------------
Period No. of Simple average Volume weighted
(CY 2001) trading days implied exchange ratio implied exchange ratio
(based on prices on (based on prices and
BSE/NSE/NYSE) volumes on BSE/NSE/NYSE)
------------------------------------------------------------------------------------------
May 30-August 31, 2001 .... 65 1.8 1.6
July 30-August 31, 2001 ... 23 2.0 1.8
Last 6 months ............. 125 1.8 1.6
Last 3 months ............. 62 1.8 1.6
Last 10 trading days ...... 10 1.6 1.5
Dividend Discount Analysis
DSP Merrill Lynch used a forecast horizon of six years (FY03-08) for the
dividend discount analysis. The major operating assumptions (operating
assets, borrowings, deposits, yields, costs, provisions and other income)
were based on estimates provided by the management of the respective
companies and refined through subsequent discussions. The cash flow stream
discounted was based on the maximum dividend payable subject to regulatory
constraints in respect of capital adequacy and prudent transfers to
statutory reserves. DSP Merrill Lynch used a cost of equity range of 17.6%
to 19.6% for ICICI and 16.5% to 18.5% for ICICI Bank. The terminal value
was derived using the perpetual growth rates estimated for both ICICI and
ICICI Bank.
Using these assumptions, a share exchange ratio range of 1 share of ICICI
Bank for 1.8 to 2 shares of ICICI was obtained.
Precedent Transaction Analysis
Precedent transaction analysis assuming ICICI Bank as the target was also
used as a valuation technique. For this analysis, various transactions
involving Indian banks were considered as appropriate comparables.
The following parameters were examined for each of the selected
transactions:
- Price-to-historical earnings ratio;
- Price-to-historical book ratio; and
- Premium to 5-day average market price.
17
ICICI Bank was valued based on the above parameters, resulting in a share
exchange ratio in the range of 1 ICICI Bank share for 1.8 to 2.1 ICICI
shares.
The summary set forth above is not a complete description of the analyses
or data presented by DSP Merrill Lynch. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. DSP Merrill Lynch believes that its
analysis and the summary of its analysis must be considered as a whole and
that selecting portions of its analysis and factors, without considering
all analysis and factors or the full narrative description of the
financial analysis, including the methodologies and assumptions underlying
the analysis, could create a misleading or incomplete view of the process
underlying its analysis and opinion. DSP Merrill Lynch based its analysis
on assumptions that it deemed reasonable, including assumptions concerning
general business and economic conditions and industry-specific factors.
DSP Merrill Lynch's analyses are not necessarily indicative of actual
values or actual future results that might be achieved, which values may
be higher or lower than those indicated.
Engagement Letter and Other Relationships
70. Pursuant to an engagement letter, ICICI Bank agreed to pay DSP Merrill
Lynch a customary fee for its services as financial advisor in connection
with the amalgamation upon delivery of the opinion. ICICI Bank also agreed
to indemnify DSP Merrill Lynch and its affiliates, their respective
directors, officers, agents and employees and each person, if any,
controlling DSP Merrill Lynch or any of its affiliates, against certain
liabilities and expenses, including liabilities under the US securities
laws, arising out of DSP Merrill Lynch's engagement. In the past, DSP
Merrill Lynch and its affiliates have provided financial advisory and
financing services to ICICI and ICICI Bank unrelated to the amalgamation
and have received fees for the rendering of these services.
Opinion of Independent Accounting Firm
71. ICICI and ICICI Bank retained Deloitte Haskins & Sells to act as an
independent accounting firm in connection with the proposed amalgamation
of ICICI with ICICI Bank. On October 25, 2001, at the meetings of the
ICICI Board and the ICICI Bank Board, Deloitte Haskins & Sells opined
that, as of that date and based upon and subject to the matters set forth
in its opinion and such other matters as Deloitte Haskins & Sells
considered relevant, the Share Exchange Ratio was fair, from a financial
point of view, to ICICI and ICICI Bank shareholders.
72. The full text of Deloitte Haskins & Sells' opinion, which sets forth the
assumptions made, procedures followed, matters considered, and
qualifications and limitations on the review undertaken by Deloitte
Haskins & Sells is annexed as Annexure A(3) to this Information Statement.
The valuation report of Deloitte Haskins & Sells shall be available for
inspection in the manner described in paragraph 40 of the Notice and
Explanatory Statement distributed with this Information Statement. The
summary of Deloitte Haskins & Sells' opinion set forth in this Information
Statement is qualified in its entirety by reference to the full text of
such opinion. ICICI and ICICI Bank shareholders and ADR holders are urged
to and should read such opinion and valuation report in their entirety.
Approach to Fair Basis of Amalgamation
73. In determining the valuation of amalgamating companies, Deloitte Haskins &
Sells placed importance not on the individual value of ICICI's and ICICI
Bank's shares separately, but on the values of the shares of one company
in terms of the value of the shares of the other.
74. The following is a brief summary of the material analyses performed by
Deloitte Haskins & Sells in connection with the rendering of the valuation
opinion dated as of October 25, 2001. The summary is not a complete
description of the analyses performed by Deloitte Haskins & Sells. The
preparation of a valuation report is a complex analytic process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible
to partial analysis or summary description. In arriving at its opinion,
Deloitte Haskins & Sells did not attribute any particular weight to any
analysis or factor that is considered by it. In addition, Deloitte Haskins
& Sells may have given various analyses and factors more or less weight
than other analyses and factors and may have deemed various assumptions
more or less probable than other assumptions, so that the range of
valuations resulting from any particular analysis described below should
therefore not be taken to be Deloitte Haskin & Sells' view of the actual
value of ICICI or ICICI Bank. Accordingly, Deloitte Haskins & Sells
believes that its analysis must be considered as a whole and that
selecting portions of its analysis, without considering all analysis,
would create an incomplete view of the process underlying the preparation
of Deloitte Haskins & Sells' opinion.
Net Asset Value
Deloitte Haskins & Sells performed an asset-based valuation of ICICI and
ICICI Bank based on the book value and the intrinsic value of the
underlying assets and liabilities of each business. It made no adjustments
to the value of the fixed assets of ICICI or ICICI Bank. The quoted
investments of both companies have been considered at market values as of
June 30, 2001 and other unquoted investments and loans and advances have
been taken at their adjusted book values as of June 30, 2001. Based upon
detailed discussions with ICICI and ICICI Bank management in relation to
the existing nonperforming assets and the provisioning norms adopted by
ICICI, Deloitte Haskins & Sells adopted the provisions estimated and
provided for against the non-performing assets without making further
adjustments thereto.
18
Deloitte Haskins & Sells determined the intrinsic value of assets and
liabilities by considering the market value of investments classified as
such as against the book value and any appreciation or depreciation in
such value compared to the book value, and in particular, the valuation of
the ICICI Bank shares held by ICICI.
The table below provides the values per share for both ICICI and ICICI
Bank based on the net book value and the intrinsic value worth of assets
of each company.
--------------------------------------------------------------------------
June 30, 2001 ICICI ICICI Bank
(Rs.) (Rs.)
--------------------------------------------------------------------------
Book Value .................... 115.08 62.53
Adjusted Book Value ........... 111.73 67.47
Deloitte Haskins & Sells performed the asset-based valuation because it
believes the value of both companies is linked to the quality of their
underlying assets and should have a role in determining the fair share
exchange ratio. As financial sector companies, the income streams of ICICI
and ICICI Bank are dependent on their ability to raise funds, the cost of
raising funds, profitable deployment alternatives and the earnings on the
same, which in turn is dependent on the value of their assets. This
valuation approach, however, is more relevant in the case where a company
is to be liquidated and the net asset values would therefore remain in the
background and would have relevance only to the extent that they support
the ability of the two entities to generate revenues. The share exchange
ratio arrived at on the basis of net assets was 1 ICICI Bank share for 0.6
ICICI share.
It must be kept in mind that the net asset value on book value basis, in
the case of ICICI reflects a significant increase in the value of its
investment in ICICI Bank as compared to book value of such investment.
ICICI has been involved in the funding of large projects, which carry
significant implementation risk. ICICI also has large exposures to
projects in various commodity industries that are cyclical in nature, and
are impacted by global economic trends. ICICI Bank has a relatively new
portfolio comprising mainly working capital finance, and carries no
implementation risk. As mentioned earlier, in a valuation exercise, major
emphasis will have to be placed on the valuation based on future earnings
potential and the value based on net assets would have a relatively lesser
role to play.
Dividend Discount Analysis
Deloitte Haskins & Sells performed a dividend discount analysis under
operating assumptions (growth in loans and advances, growth in borrowings
to support the growth in assets, requirements of statutory reserves and
dividend tax) that were based on estimates provided by the management of
the respective companies. It also reflected detailed discussions with JM
Morgan Stanley and DSP Merrill Lynch regarding the various factors and
estimates affecting the projected profitability of ICICI and ICICI Bank.
Deloitte Haskins & Sells valued separately certain assets that were not
considered as part of cash flow generating assets, including investments
in subsidiaries and other investments in the projections, and considered
them in the dividend discount analysis. In arriving at the value of the
equity shares of ICICI based on the dividend discount analysis, Deloitte
Haskins & Sells valued ICICI's shareholding in ICICI Bank based on
dividend discount analysis and appropriately incorporated it in the value
of ICICI.
The share exchange ratio arrived at on the basis of the dividend discount
analysis was 1 ICICI Bank share for 2.17 ICICI shares.
Historical Market Price Analysis
Deloitte Haskins & Sells reviewed the market prices and volumes of ICICI
and ICICI Bank shares traded on the BSE during a period of 12 months ended
September 30, 2001. The following table indicates the volume-weighted
price for ICICI and ICICI Bank on the BSE.
--------------------------------------------------------------------------
Period ICICI ICICI Bank
(Rs.) (Rs.)
--------------------------------------------------------------------------
Current price quote (October 24, 2001) ............. 58 98
Last 12 months ..................................... 80.29 143.39
Last 6 months ...................................... 69.05 130.63
For 3 month period of June, July and August 2001.... 65.23 126.29
Deloitte Haskins & Sells selected the period June-August 2001 because it
considered that period to be representative of the unaffected share price
of the shares of the two companies.
The share exchange ratio arrived at on the basis of market prices was 1
ICICI Bank share for 1.94 ICICI shares.
APPROVALS REQUIRED AND CONDITIONS TO COMPLETION OF THE AMALGAMATION
75. The amalgamation is conditional upon and subject to:
- the Scheme being agreed to by the requisite majorities of the members
of the Companies as required under the Companies Act, 1956 and the
requisite orders of the High Court of Judicature at Bombay and the
High Court of Gujarat
19
at Ahmedabad referred to in Clauses 23 and 24 of the Scheme being
obtained (the detailed procedure for shareholders, ADR holders and
interested parties to appear at the court hearing to sanction the
Scheme is annexed as Annexure C);
- the approval of the Reserve Bank of India being obtained;
- such other sanctions and approvals including from any governmental
authority or contracting party, if any, as may be required by law or
contract in respect of the Scheme being obtained; and
- the certified copies of the court orders referred to in the Scheme
being filed with the Registrar of Companies, Maharashtra, and the
Registrar of Companies, Gujarat.
76. The securities to be issued pursuant to the amalgamation have not been
approved or disapproved by the SEC or any US state securities commission,
nor has the SEC or any US state securities commission passed upon the
accuracy or adequacy of this Information Statement. Any representation to
the contrary is a criminal offence in the United States.
77. ICICI Bank has received a "no-action letter" from the staff of the SEC
stating that it will not recommend enforcement action against ICICI Bank
if, pursuant to the Scheme, ICICI Bank shares are issued to ICICI
shareholders without registration under the US Securities Act of 1933 in
reliance on the exemption from registration contained in Section 3(a)(10)
thereof. For more information see "US Resale Restrictions, Listing
Requirements, Description of ICICI Bank Securities & Related Information -
Restrictions on Sale of Shares by Affiliates of ICICI and ICICI Bank".
EXPECTED TIMING OF THE AMALGAMATION
78. If the Effective Date does not occur by June 30, 2002 (or by any later
date as agreed between the Boards of Directors of the Transferor Companies
and the Transferee Company), the Scheme shall become null and void. In
such a case, no rights and liabilities shall be accrued or incurred by the
Companies, their shareholders, creditors, employees or any other person.
In the event of the Scheme becoming null and void, each of the Companies
shall bear its own costs or the costs shall be borne in such manner as may
be mutually agreed.
INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS IN THE AMALGAMATION
79. The Directors and executive officers of ICICI and their shareholding and
stock options granted in ICICI and ICICI Bank on October 31, 2001 were as
follows:
-----------------------------------------------------------------------------------------------------------
ICICI ICICI Bank
------------------------------------------------
Name Age Position Stock Stock
Shareholding options Shareholding options
-----------------------------------------------------------------------------------------------------------
Mr. N. Vaghul 65 Chairman 50,586 - 2,250 -
Mr. B. K. Jhawar 66 Director - - - -
Mr. R. Seshasayee 53 Director - - - -
Dr. Rakesh Khurana 53 Director - - - -
Dr. Ashok Ganguly 66 Director - - - -
Mr. D. Sengupta 59 Director - - - -
Mr. N. R. Narayana Murthy 55 Director - - - -
Prof. Marti G. Subrahmanyam 55 Director 2,598 - - -
Mr. Lakshmi N. Mittal 51 Director - - - -
Mr. S. K. Purkayastha 57 Director - - - -
Mr. G. N. Bajpai 59 Director - - - -
Mr. Anupam Puri 56 Director - - - -
Mr. K. V. Kamath 53 Managing Director and 35,000 360,000 1,000 75,000
Chief Executive Officer
Ms. Lalita D. Gupte 52 Joint Managing Director 10,085 330,000 1,000 52,500
and Chief Operating
Officer - International
Business
Ms. Kalpana Morparia 52 Executive Director 30,383 180,000 1,000 20,000
Mr. Subrata Mukherji 48 Executive Director 3,009 180,000 1,000 18,000
Mr. Sanjiv Kerkar 50 Senior General Manager 6,182 180,000 1,200 18,000
Mr. P. H. Ravikumar(1) 50 Senior General Manager - 12,000 1,000 54,700
Ms. Ramni Nirula 49 Senior General Manager 4,133 120,000 - 12,000
Mr. Devdatt Shah 46 Senior General Manager - 120,000 - -
Ms. Shikha Sarma 42 Senior General Manager 1,833 180,000 1,000 18,000
Mr. Balaji Swaminathan(1) 36 Senior General Manager - 60,000 - -
and Chief Financial Officer
Mr. Jyotin Mehta 43 General Manager and - 20,000 - -
Company Secretary
(1)Joined ICICI in fiscal 2002.
20
80. The Directors and executive officers of ICICI Bank and their shareholding
and stock options granted in ICICI Bank and ICICI on October 31, 2001 were
as follows:
-----------------------------------------------------------------------------------------------------------
ICICI Bank ICICI
------------------------------------------------
Name Age Position Stock Stock
Shareholding options Shareholding options
-----------------------------------------------------------------------------------------------------------
Mr. K. V. Kamath 53 Director 1,000 75,000 35,000 360,000
Ms. Lalita D. Gupte 52 Director 1,000 52,500 10,085 330,000
Mr. B. V. Bhargava 65 Director 4,600 - 16,564 -
Mr. Uday M. Chitale 52 Director - - - -
Mr. Somesh R. Sathe 56 Director - - - -
Mr. R. Rajamani 65 Director - - - -
Dr. Satish C. Jha 67 Director - - - -
Mr. H. N. Sinor 56 Managing Director and 1,100 131,250 - 90,000
Chief Executive Officer
Ms. Chanda D. Kochhar(1) 39 Executive Director 1,000 15,000 4,965 120,000
Dr. Nachiket Mor(1) 37 Executive Director - 12,000 - 120,000
Mr. M. N. Gopinath 52 Senior Executive Vice 200 56,250 - 8,000
President
Mr. Ashok Alladi 50 Senior Executive Vice - 43,750 - 6,000
President
Mr. G. Venkatakrishnan 50 Senior Executive Vice - 50,000 500 5,000
President and Chief
Financial Officer
Mr. M. N. Shenoi 43 Senior Executive Vice 1,000 40,000 - 5,000
President
Mr. R. B. Nirantar 46 Senior Executive Vice 100 43,750 - 7,500
President
Mr. A. Hari Prasad 46 Senior Executive Vice - 43,750 - 5,000
President
Mr. V. Nachiappan 47 Senior Executive Vice - - 4,746 -
President
Mr. Bhashyam Seshan 45 Company Secretary 1,200 17,500 - -
(1) Joined ICICI Bank in fiscal 2002.
81. The Directors and executive officers of ICICI Capital and their
shareholding and stock options granted in ICICI and ICICI Bank on October
31, 2001 were as follows:
-----------------------------------------------------------------------------------------------------------
ICICI ICICI Bank
------------------------------------------------
Name Age Position Stock Stock
Shareholding options Shareholding options
-----------------------------------------------------------------------------------------------------------
Ms. Lalita D. Gupte 52 Chairperson 10,085 330,000 1,000 52,500
Ms. Kalpana Morparia 52 Director 30,383 180,000 1,000 20,000
Mr. Subrata Mukherji 48 Director 3,009 180,000 1,000 18,000
Mr. V. Srinivasan 45 Director 5,916 120,000 1,000 12,000
Ms. Madhabi Puri Buch 35 Director 2,283 90,000 1,200 7,500
Mr. M. N. Gopinath 52 Director - - 200 56,250
Mr. Amitabh Chaturvedi 33 Executive Director - 40,000 - 2,500
Mr. R. K. Saxena 45 Company Secretary - 10,000 500 -
21
82. The Directors and executive officers of ICICI PFS and their shareholding
and stock options granted in ICICI and ICICI Bank on October 31, 2001 were
as follows:
-----------------------------------------------------------------------------------------------------------
ICICI ICICI Bank
------------------------------------------------
Name Age Position Stock Stock
Shareholding options Shareholding options
-----------------------------------------------------------------------------------------------------------
Mr. K. V. Kamath 53 Chairman 35,000 360,000 1,000 75,000
Ms. Lalita D. Gupte 52 Director 10,085 330,000 1,000 52,500
Ms. Kalpana Morparia 52 Director 30,383 180,000 1,000 20,000
Mr. Subrata Mukherji 48 Director 3,009 180,000 1,000 18,000
Mr. Sanjiv Kerkar 50 Director 6,182 180,000 1,200 18,000
Mr. Nagesh Pinge 43 Director 2,026 90,000 - -
Ms. Madhabi Puri Buch 35 Director 2,283 90,000 1,200 7,500
Mr. V. Vaidyanathan 33 Managing Director - 65,000 - -
Mr. Rajesh Chawathe 31 Company Secretary 150 - 800 -
BOARD OF DIRECTORS AND MANAGEMENT AFTER THE AMALGAMATION
83. Following the amalgamation of the Companies, the ICICI Bank Board will be
reconstituted in accordance with the provisions of the Banking Regulation
Act, 1949 and the Companies Act, 1956.
84. In the merged entity, the executive management is not expected to be more
than one-half of the total strength of the Board.
85. It is proposed that the Board of Directors of the merged entity would be
headed by Mr. N. Vaghul, the current Chairman of ICICI as the
non-executive Chairman.
86. It is proposed that the merged entity would have seven whole-time
directors with Mr. K. V. Kamath as the Managing Director and Chief
Executive Officer, Mr. H. N. Sinor and Ms. Lalita D. Gupte as Joint
Managing Directors and Ms. Kalpana Morparia, Mr. S. Mukherji, Ms. Chanda
D. Kochhar and Dr. Nachiket Mor as Executive Directors.
22
RISK FACTORS
The proposed merger is a complex transaction. All of the information in this
Information Statement should be read and considered carefully. The information
under "Risk Factors" in this Information Statement and in the reports ICICI and
ICICI Bank have filed with the SEC and in India should also be carefully
considered.
This Information Statement does not contain all the information that ADR
holders or shareholders of ICICI and ICICI Bank may desire in approving the
matters to be voted on. Each shareholder and ADR holder must conduct and rely
on its own evaluation of the terms of the amalgamation, including the merits
and risks involved with respect to the stock of ICICI Bank to be received in
the amalgamation.
The Risk Factors have been divided into two sections. The Risk Factors set
forth below are certain risk factors relating to the amalgamation. For the
convenience of investors, an updated version of the risk factors contained in
ICICI's and ICICI Bank's Annual Report on Form 20-F for the year ended March
31, 2001 have been updated and annexed as Annexure B to this Information
Statement.
87. There can be no certainty that the amalgamation will be approved by the
relevant regulatory agencies, the courts in India and the shareholders.
The Scheme is subject to the approval of the shareholders of the
Companies, the Reserve Bank of India, the High Court of Judicature at
Bombay and the High Court of Gujarat at Ahmedabad, and such other
approvals, including governmental approval, as may be required to be
obtained by law or contract. There can be no certainty that the approvals
will be obtained or of the time that may be required for the approvals to
be obtained. Any delay in obtaining, or failure to obtain all or any of
these approvals could delay the effectiveness of the Scheme or cause the
Scheme not to come into effect. This could adversely affect the business,
future financial performance, stockholders' equity and the price of the
equity shares and ADRs of ICICI, ICICI Bank and the merged entity.
88. The businesses currently being conducted by ICICI would, following the
amalgamation, become subject for the first time to a number of banking
regulations under Indian law, which may impact the profitability of the
merged entity in its initial years.
Following the amalgamation, the businesses currently being conducted by
ICICI would become subject for the first time to a number of banking
regulations under Indian law, including directed lending, maintenance of
statutory liquidity and reserve ratios and higher effective income tax
rates. Compliance with these regulations may impact the profitability of
the combined businesses in the merged entity in its initial years. The
merged entity will have a different mix of assets and funding sources than
ICICI and ICICI Bank as independent and separate entities. The impact of
the statutory liquidity ratio, which requires that a significant portion
of an Indian bank's liabilities be held in Indian government securities,
would increase market risk exposure that of the merged entity. The income,
profitability and market risk profile of the merged entity may therefore
be adversely affected in the initial years by the impact of the aforesaid
regulatory requirements. This may result in lower income in the initial
years after the amalgamation. Under the directed lending regulations in
India, banks are required to lend 40.0% of their net bank credit to
certain sectors, including, among others, small-scale industries and the
agriculture sector and lend 12.0% of their net bank credit in the form of
export credit. The directed lending portfolio of the merged entity would
increase significantly due to compliance with these norms on ICICI's
outstanding loan portfolio. The merged entity may experience a significant
increase in impaired loans in its directed lending portfolio since
economic difficulties are likely to affect those borrowers more severely
and the merged entity would be less able to control the quality of this
portfolio. The merged entity may not be able to maintain the business,
growth and financial performance of the two separate companies in the
initial years and any failure to do so could adversely affect its
stockholders' equity and the price of its equity shares and ADRs.
89. No assurance can be given that the merged entity will be able to
successfully integrate the operations of the four companies.
Following the amalgamation, the operations of each of the Companies,
including their businesses, business systems and processes, systems and
technology, and human resources will have to be integrated with the
operations of ICICI Bank. There can be no certainty that the merged entity
will be able to successfully integrate the operations of each of the
Companies, or of the time that may be required for the integration to be
completed. Any failure to successfully integrate the operations or delay
in completing the integration could adversely affect the business of the
merged entity, its future financial performance, its stockholders' equity
and the price of its equity shares and ADRs.
90. There is no certainty that ICICI Bank will be able to raise the resources
required to comply with the regulations applicable to banks in respect of
the businesses being conducted by ICICI.
There can be no certainty that ICICI Bank will be able to raise the
additional resources that will be required to comply with the regulations
applicable to banks in respect of the businesses being conducted by ICICI,
or of the time that may be required to raise these resources. In view of
the large resource requirement, ICICI Bank may have to incur higher
interest and operating costs to raise the additional resources. Any
failure to raise the additional resources or delay in raising the
resources may result in a delay in completion of the amalgamation.
Further, most of ICICI Bank's funding requirements are met through
shortterm funding sources, primarily in the form of deposits including
inter-bank deposits. However, a large portion of the merged entity's
assets would have medium or long-term maturities, creating a potential for
funding mismatches. In ICICI Bank's
23
experience, a substantial portion of its customer deposits has been rolled
over upon maturity and has been, over time, a stable source of funding.
However, no assurance can be given that this experience will continue. If
a substantial number of its depositors do not roll over deposited funds
upon maturity, the liquidity position of the merged entity could be
adversely affected. Any failure to raise the additional resources or delay
in raising the resources or increase in interest and operating costs
incurred in order to raise the additional resources or failure to obtain
rollover of maturing customer deposits or replace them with fresh deposits
could adversely affect the business, future financial performance,
stockholders' equity and the price of equity shares and ADRs of the merged
entity.
91. The business of the merged entity would be particularly vulnerable to
volatility in interest rates caused by deregulation of the financial
sector in India.
Over the last few years, the Indian government has deregulated the
financial sector, which has increased competition. Before 1991, ICICI's
operations and profitability substantially reflected ICICI's lending at
interest rates set by the Indian government and were funded to a large
extent by relatively low-cost government guaranteed rupee funds. From
August 1991, ICICI was permitted flexibility in setting interest rates on
virtually all of the loans it extended. Since 1992, ICICI was also
required to raise all of its new domestic funds at market rates. These
developments have resulted in greater volatility of interest rates and
margins for substantially all financial institutions in India, including
ICICI. Based on ICICI and ICICI Bank's lending book's asset-liability
position at year-end fiscal 2001, the net interest income would decline
with an increase in interest rates. Further in the trading book, the value
of the fixed income trading portfolio would decline with an increase in
interest rates. Following the amalgamation of ICICI with ICICI Bank, the
businesses currently being conducted by ICICI would become subject to the
maintenance of a statutory liquidity ratio, which requires that an amount
equal to a specified percentage of a bank's liabilities be invested in
government securities. This would increase the interest rate risk exposure
of the merged entity. The volatility in interest rates could adversely
affect the business of the merged entity, its future financial
performance, its stockholders' equity and the price of its equity shares
and ADRs.
92. The opinions of the financial advisors of ICICI and ICICI Bank will not
reflect changes in circumstances prior to the amalgamation.
Neither ICICI nor ICICI Bank intends to obtain an updated opinion from
their respective financial advisors. Changes in the operations and
prospects of ICICI or ICICI Bank, general market and economic conditions
and other factors that are beyond the control of either company, and on
which the opinion of the respective financial advisors are based, may
alter the value of ICICI or ICICI Bank or their equity share prices and
ADR prices by the time the amalgamation is completed. The opinions of
ICICI's and ICICI Bank's financial advisors do not address the fairness of
the share exchange ratio at the time of the shareholder meetings, at the
time the amalgamation is completed or at any time other than October 25,
2001, the date on which the ICICI Board and the ICICI Bank Board approved
the Scheme.
93. The existence of the shares held in trust may adversely affect the market
price of the equity shares and ADRs of the merged entity.
On September 30, 2001, ICICI held 46.0% of the equity share capital of
ICICI Bank. Pursuant to the Scheme, ICICI may, on the Appointed Date,
transfer all the ICICI Bank shares held by it on the Appointed Date in
favour of the Trust to hold such ICICI Bank shares in trust exclusively
for the benefit of ICICI and its successors. It is currently expected that
the shares would be divested by the end of fiscal 2003 depending on market
conditions at that time. The Trustees will have the discretion to extend
this period in such manner as may be proper in accordance with provisions
of the trust deed constituting the Trust. Based on ICICI's shareholding in
ICICI Bank on September 30, 2001 (unless the shareholding is reduced on or
before the Appointed Date) and the Share Exchange Ratio, the holding of
the Trust in ICICI Bank after the amalgamation would be equivalent to
16.5% of the equity share capital of the merged entity. The
non-cancellation and divestment of the shares of ICICI Bank by the Trust
will dilute the holding of shareholders or the holders of ADRs of ICICI
Bank in the merged entity and could adversely affect the price of the
equity shares and ADRs of the merged entity.
94. There may be restrictions on resales in the United States or to US persons
of ICICI Bank Shares or ADRs by Affiliates of ICICI and/or ICICI Bank.
The ICICI Bank equity shares and ADRs to be issued pursuant to the
amalgamation to persons deemed to be affiliates of ICICI or ICICI Bank, as
the case may be, under the US Securities Act of 1933 on the Record Date,
may be resold in the United States only in transactions permitted under
the US Securities Act of 1933. Persons who may be deemed to be affiliates
of ICICI or ICICI Bank include individuals who, or entities that, directly
or indirectly control, or are controlled by, or are under common control
with ICICI or ICICI Bank and would include certain officers and directors
of ICICI and ICICI Bank, and would likely include principal shareholders
as well. For more detailed information about the resale restrictions see
the section entitled "US Resale Restrictions, Listing Requirements,
Description of ICICI Bank Securities & Related Information - Restrictions
on Sale of Shares by Affiliates of ICICI and ICICI Bank".
The Trust will be deemed to be an affiliate of ICICI Bank and as a result,
the shares held by the Trust will also be subject to US restrictions on
resale. For more detailed information about the resale restrictions see
the section entitled "US Resale Restrictions, Listing Requirements,
Description of ICICI Bank Securities & Related Information-Restrictions on
Sale of Shares by Affiliates of ICICI and ICICI Bank".
24
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
95. This Information Statement contains forward-looking statements based on
the current beliefs and expectations of ICICI's and ICICI Bank's
management and subject to significant risks and uncertainties.
Forward-looking statements may include statements regarding the
amalgamation, the period following completion of the amalgamation and the
future results of operations or financial performance of the Companies
following the amalgamation, as set forth under "Amalgamation - Background
of the Amalgamation", "Amalgamation - Rationale for the Amalgamation" and
"Financial Information - US GAAP - Unaudited Pro Forma Condensed
Consolidated Financial Data". Forward-looking statements may also include
statements preceded by, or followed by or that include words such as
"expects", "believes", "anticipates", "intends", "plans", "estimates"
"would be", "would enhance", "would facilitate", "will", "will likely",
"is likely", "are likely", "can", "may", "could" or similar expressions.
Actual results may differ from those set forth in the forward-looking
statements. The forward-looking statements involve risks, assumptions and
uncertainties. Many of the factors that will determine these results and
values are beyond ICICI's and ICICI Bank's ability to control or predict.
Shareholders are cautioned not to put undue reliance on any forward-
looking statement. In addition, ICICI and ICICI Bank do not have any
intention or obligation to update forward-looking statements after they
distribute this Information Statement, even if new information, future
events or other circumstances have made them incorrect or misleading. For
those statements, ICICI and ICICI Bank claim the protection of the safe
harbor for the forward-looking statements contained in the US Private
Securities Litigation Reform Act of 1995.
Shareholders of ICICI and ICICI Bank should understand that the important
factors that may have an adverse effect on the results of ICICI's and
ICICI Bank's operations, financial condition, liquidity and the price of
the equity shares and ADRs of ICICI, ICICI Bank and the merged entity
include but are not limited to: the ability to obtain the Reserve Bank of
India, governmental and other approvals for the amalgamation on the
proposed terms and schedule; the failure of ICICI and ICICI Bank
shareholders to approve the amalgamation or the failure of the High Court
of Judicature at Bombay or the High Court of Gujarat at Ahmedabad to
approve the Scheme; the impact of the regulations applicable to banks
under Indian law to which the business being conducted by ICICI would for
the first time become subject following the amalgamation; the risk that
the businesses will not be integrated as swiftly as planned; the risk that
the revenue synergies and cost savings from the amalgamation may not be
fully realized or may take longer to realize than expected; disruption of
the amalgamation making it more difficult to maintain relationships with
clients, employees or suppliers; the effect of economic conditions and
interest rates on a national, regional or international basis and market
volatility in the securities markets or foreign exchange rates or indices;
the risk of new and changing regulation in India and internationally;
competitive pressures in the financial services industries; and
unfavourable political or other developments in Indian or international
markets. Additional factors that could cause ICICI's and ICICI Bank's
results to differ materially from those described in the forward-looking
statements can be found in the section "Risk Factors" earlier in this
Information Statement and in Annexure B.
All forward-looking statements attributable to either ICICI or ICICI Bank
or any person acting on ICICI's or ICICI Bank's behalf are qualified in
their entirety by the cautionary statements contained or referred to in
this section.
25
TAXATION
ICICI strongly urges each shareholder and ADR holder to consult its own tax
advisor to determine the particular tax consequences to it of the amalgamation
and the ownership of ICICI Bank equity shares or ADRs after the amalgamation.
Unless the context otherwise indicates, references in this section to ICICI or
ICICI Bank equity shares or stock also includes the ICICI or ICICI Bank ADRs,
respectively and references to ICICI or ICICI Bank shareholders includes ICICI
or ICICI Bank ADR holders, respectively.
INDIAN TAX CONSEQUENCES
96. Upon the effectiveness of the Scheme no capital gains will arise to ICICI
equity shareholders on account of or consequent to the issue of ICICI Bank
equity shares in lieu of ICICI equity shares (see section 47 (vii) of the
Income Tax Act, 1961).
97. On transfer of ICICI Bank equity shares issued to ICICI equity
shareholders under or pursuant to the Scheme, capital gains, whether
short-term or long-term, will arise in India and such capital gains will
be subject to Indian capital gains tax (see section 115AC of the Income
Tax Act, 1961). The holding period of such ICICI Bank equity shares shall
include the period for which the respective investors had held the ICICI
equity shares (see section 2 (42A) of the Income Tax Act, 1961). All
transactions of trading of ADRs outside India, amongst non-resident
investors will be free from any liability to capital gains tax in India
under section 47 (vii)(a) of the Income Tax Act, 1961.
US FEDERAL INCOME TAX CONSIDERATIONS
98. In the opinion of Davis Polk & Wardwell, US legal counsel for ICICI and
ICICI Bank, the following discussion sets forth the material United States
federal income tax consequences of the amalgamation to US holders, as
defined below, of ICICI or ICICI Bank equity shares, and of the ownership
of ICICI Bank equity shares after the amalgamation.
99. For purposes of this discussion, a US holder is a beneficial owner of
ICICI or ICICI Bank equity shares, as applicable, that holds such shares
as a capital asset and that is, for United States federal income tax
purposes:
- a citizen or resident of the United States,
- a corporation, or other entity taxable as a corporation, organized in
or under the laws of the United States or of any political
subdivision thereof, or
- an estate or trust the income of which is subject to United States
federal income taxation regardless of its source.
100. This discussion does not address all aspects of federal income taxation
that may be relevant to a US holder in light of its particular
circumstances or to a US holder that is a member of a special class of
holders subject to special rules, such as:
- dealers or traders securities or currencies,
- financial institutions,
- insurance companies,
- tax-exempt entities,
- holders that hold the equity shares of ICICI or ICICI Bank as part of
a straddle or conversion transaction or other arrangement involving
more than one position,
- holders that own, or are deemed for federal income tax purposes to
own, ten per cent or more of the voting stock of ICICI or ICICI Bank,
as the case may be,
- persons subject to United States federal alternative minimum tax,
- partnerships or other entities classified as partnerships for federal
income tax purposes,
- holders that have a principal place of business or "tax home" outside
of the United states, or
- holders whose "functional currency" is not the US dollar.
101. This discussion is not a complete analysis or description of all potential
federal income tax consequences of the amalgamation, or of the ownership
of ICICI Bank equity shares, that may be applicable to a particular US
holder, nor does it address any non-income tax or any foreign, state or
local tax consequences.
102. This discussion is based upon the United States Internal Revenue Code of
1986, as amended (the "Code"), final, temporary and proposed Treasury
Regulations, administrative announcements and judicial decisions in effect
as of the date of this Information Statement, changes to any of which may
affect the tax consequences described herein, possibly with retroactive
effect. This discussion is also based in part on representations by the
Depositary for ICICI Bank ADRs, and assumes that the obligations provided
for in or otherwise contemplated by the Deposit Agreement relating to such
ADRs and any related agreements will be performed in accordance with their
respective terms.
26
103. The characterization of the amalgamation as a reorganization as set forth
under "Taxation - US Federal Income Tax Considerations - Federal Income
Tax Consequences of the Amalgamation" is also based on representations and
covenants made by ICICI and ICICI Bank contained in certificates of
officers of those companies, and assumes, among other things, (1) the
absence of relevant changes in facts or in law between the date of this
Information Statement and the Effective Date, and (2) the completion of
the amalgamation under the current terms of the Scheme. If any of the
representations, covenants or assumptions were inaccurate, the federal
income tax consequences of participation in the amalgamation may differ
from those described herein.
Federal Income Tax Consequences of the Amalgamation
104. For federal income tax purposes, the amalgamation will be treated as a
reorganization within the meaning of Section 368(a) of the Code.
Ordinarily, a US holder does not recognize gain or loss upon the
effectiveness of a reorganization. However, notwithstanding the
qualification of the amalgamation as a reorganization, a US holder that
has unrealized appreciation on its ICICI equity shares may be subject to
federal income taxation if proposed Treasury Regulations Section 1.1291-6
(the "Proposed Regulations") were to apply to the amalgamation. See
"Taxation - US Federal Income Tax Considerations - Federal Income Tax
Consequences of the Amalgamation - PFIC Considerations" and "Taxation - US
Federal Income Tax Considerations - Federal Income Tax Consequences of the
Amalgamation - Tax Consequences to ICICI Shareholders If the Proposed
Regulations Apply" below.
PFIC Considerations
105. Special adverse federal income tax rules apply if a US holder holds stock
of a company that is treated as a Passive Foreign Investment Company
("PFIC") for any taxable year during which the US holder held stock. ICICI
believes that it is likely to have been and to be a PFIC for all relevant
taxable years prior to the amalgamation. The rules relating to PFICs may
affect the federal income tax consequences of the amalgamation to any US
holder whose tax basis (very generally, cost) for its ICICI equity shares
is less than their fair market value. The discussion under "Taxation - US
Federal Income Tax Considerations - Federal Income Tax Consequences of the
Amalgamation - PFIC Considerations" and "Taxation - US Federal Income Tax
Considerations - Federal Income Tax Consequences of the Amalgamation - Tax
Consequences to ICICI Shareholders If the Proposed Regulations Apply"
below assumes that a US holder of ICICI equity shares has not made a mark
to market election under Section 1296 of the Code with respect to its
ICICI equity shares during any prior taxable year.
106. If ICICI was a PFIC for a taxable year during which a US holder held
stock, the US holder would generally be subject to special rules with
respect to, among other things, any gain realized on the sale, exchange or
other disposition of the ICICI stock. Under these special rules:
- any such gain would be allocated ratably over the US holder's holding
period for the ICICI stock,
- the amount allocated to the year of such sale, exchange or other
disposition or to any taxable year prior to the first taxable year
(beginning after December 31, 1986) in which ICICI was a PFIC would
be taxed as ordinary income, and
- the amount allocated to each of the other taxable years would be
subject to tax at the highest rate of tax in effect with respect to
the applicable class of taxpayer for the applicable taxable year and
an interest charge generally applicable to underpayments of tax would
be imposed with respect to the resulting tax attributable to each
such taxable year (which interest charge would accrue from the due
date of the return for each such taxable year).
107. Under the Proposed Regulations, which are proposed to be effective from
April 11, 1992, the surrender of PFIC stock in a reorganization (such as
the amalgamation) would be treated as a taxable disposition of PFIC stock
unless specific exceptions were met. If the Proposed Regulations are
effective with respect to the amalgamation, any gain upon the exchange of
ICICI equity shares for ICICI Bank equity shares would likely be taxable
unless ICICI Bank is a PFIC for the taxable year in which the amalgamation
is consummated. ICICI Bank does not expect to be a PFIC for such taxable
year. See "Taxation - US Federal Income Tax Considerations - Federal
Income Tax Consequences of Owning ICICI Bank Stock - PFIC Considerations
With Respect to ICICI Bank" below.
108. If the Proposed Regulations are adopted (including at a time subsequent to
the Effective Date) in their current form and with their currently stated
effective date, the Proposed Regulations would be in effect on the
Effective Date. See "Taxation - US Federal Income Tax Considerations -
Federal Income Tax Consequences of the Amalgamation - Tax Consequences to
ICICI Shareholders If the Proposed Regulations Apply" below.
109. There is no assurance as to whether, or when, the Proposed Regulations may
be finalized; nor is there assurance as to the contents or the effective
date of any final Treasury Regulations. Accordingly, US holders of ICICI
equity shares, particularly those with gain on their shares, are strongly
urged to consult their own tax advisors regarding the impact of the PFIC
rules, including the Proposed Regulations, on the tax consequences of the
amalgamation in their particular circumstances.
Tax Consequences to ICICI Shareholders If the Proposed Regulations Apply
110. If the Proposed Regulations apply in their current form and the US holder
had not made a mark to market election in a prior taxable year with
respect to its ICICI equity shares, such holder will likely be required to
recognize gain, upon the exchange in the amalgamation, subject to tax in
the manner described under "Taxation - US Federal Income Tax
Considerations
27
- Federal Income Tax Consequences of the Amalgamation - PFIC
Considerations" above in an amount equal to the excess of the sum of (1)
the fair market value of the ICICI Bank equity shares received and (2) the
amount of cash received in respect of any fractional share, over the tax
basis of the US holder in its ICICI equity shares. Such holder will have a
tax basis in the ICICI Bank equity shares received in the amalgamation
equal to the fair market value of such shares on the Effective Date, and
its holding period will begin on the day following the Effective Date.
Tax Consequences to ICICI Shareholders If the Proposed Regulations Do Not
Apply
111. If the Proposed Regulations do not apply to a US holder of ICICI equity
shares (including by reason of the US holder's having (1) an unrealized
loss on its ICICI equity shares or (2) timely made a mark to market
election with respect to its ICICI equity shares), such holder will:
- not recognize any gain or loss upon its exchange in the amalgamation
of such shares for ICICI Bank equity shares, except to the extent, if
any, of the difference between the amount of cash received in respect
of any fractional ICICI Bank equity share and the portion of the tax
basis of the ICICI equity shares allocable to that fractional share.
- have a tax basis in the ICICI Bank equity shares received in the
amalgamation equal to (1) the tax basis of the ICICI equity shares
surrendered, less (2) any tax basis of the ICICI equity shares that
is allocable to any fractional ICICI Bank equity share in respect of
which cash is received, and
- have a holding period for ICICI Bank equity shares which includes the
holding period for the ICICI equity shares surrendered in the
amalgamation. Tax Consequences to ICICI Bank Shareholders
112. For federal income tax purposes, holders of ICICI Bank equity shares will
not recognize gain or loss as a result of the amalgamation.
Federal Income Tax Consequences of Owning ICICI Bank Stock
Taxation of Dividends
113. Dividends received by a US holder on its ICICI Bank equity shares, other
than certain pro rata distributions of ICICI Bank equity shares or rights
to acquire ICICI Bank equity shares, will generally constitute foreign
source dividend income for federal income tax purposes. The amount of the
dividend the US holder will be required to include in income will equal
the US dollar value of the rupees, calculated by reference to the exchange
rate in effect on the date the payment is received by the depositary in
the case of ICICI Bank ADRs, or by the shareholder in the case of ICICI
Bank equity shares, regardless of whether the payment is converted into US
dollars. If a US holder realizes gain or loss on a sale or other
disposition of rupees, it will be US source ordinary income or loss. A US
holder will not be entitled to claim a dividends- received deduction for
dividends paid by ICICI Bank.
Taxation of Capital Gains
114. A US holder will recognize capital gain or loss for federal income tax
purposes on the sale, exchange or other disposition of ICICI Bank equity
shares in the same manner as it would on the sale or exchange of any other
shares held as capital assets. The gain or loss will generally be US
source income or loss. A US holder should consult its own tax advisor on
the treatment of capital gains, which may be taxed at lower rates than
ordinary income for non-corporate taxpayers, and capital losses, the
deductibility of which may be limited.
PFIC Considerations With Respect to ICICI Bank
115. Based upon certain proposed Treasury Regulations which are proposed to be
effective for taxable years beginning after December 31, 1994 and upon
certain management estimates, ICICI Bank does not expect to be a PFIC
following the amalgamation. ICICI Bank has based the expectation that it
is currently not a PFIC on, among other things, provisions in the proposed
Treasury Regulations that provide that certain restricted reserves
(including cash and securities) of banks are assets used in connection
with banking activities and are not passive assets, as well as the
composition of ICICI Bank's income and ICICI Bank's assets from time to
time. Since there can be no assurance that such proposed Treasury
Regulations will be finalized in their current form, and the composition
of income and assets of ICICI Bank will vary over time, there can be no
assurance that ICICI Bank will not be considered a PFIC for any taxable
year. If ICICI Bank is a PFIC for any taxable year during which a US
holder holds ICICI Bank equity shares, the US holder would be treated in a
manner comparable to that described under "Taxation - US Federal Income
Tax Considerations - Federal Income Tax Consequences of the Amalgamation -
PFIC Considerations" above.
116. US holders are strongly urged to consult their own tax advisors regarding
the possibility that the merged entity will be a PFIC and the rules that
would apply to them if the merged entity were a PFIC.
28
US RESALE RESTRICTIONS, LISTING REQUIREMENTS, DESCRIPTION OF ICICI BANK
SECURITIES & RELATED INFORMATION
RESTRICTIONS ON SALE OF SHARES BY AFFILIATES OF ICICI AND ICICI BANK
117. ICICI Bank shares and ADRs to be issued to ICICI shareholders and ADR
holders pursuant to the Scheme will not have been registered under the US
Securities Act of 1933 in reliance upon the exemption from the
registration requirements of the US Securities Act of 1933 provided by
Section 3(a)(10) of that Act. ICICI Bank has received a "no-action letter"
from the staff of the SEC stating that it will not recommend that the SEC
take enforcement action if ICICI Bank shares are issued to ICICI
shareholders pursuant to the Scheme without compliance with the
registration requirements of the US Securities Act of 1933 in reliance on
the exemption from registration contained in Section 3(a)(10) thereof. As
a result, in the hands of most holders, the ICICI Bank shares and ADRs
- will not be treated as "restricted securities" within the meaning of
Rule 144(a)(3) under the US Securities Act of 1933; and
- may be resold by former holders of ICICI shares (except affiliates as
described below) without regard to Rules 144 or 145(c) and (d) under
the US Securities Act of 1933.
118. Persons who receive the ICICI Bank shares or ADRs pursuant to the Scheme
and who
- were affiliates of ICICI before implementation of the Scheme but are
not affiliates of ICICI Bank after completion of the Scheme, or
- will be affiliates of ICICI Bank after completion of the Scheme
will be permitted to resell their ICICI Bank shares or ADRs in the United
States in the manner permitted by Rule 144(d) under the US Securities Act
of 1933, in each case without regard to the holding period requirement
(one year) of Rule 144(d) under the US Securities Act Rules. Persons who
may be deemed to be affiliates of ICICI or ICICI Bank include individuals
who, or entities that, directly or indirectly control, or are controlled
by, or are under common control with ICICI or ICICI Bank and would include
certain officers and directors of ICICI and ICICI Bank and would likely
include principal shareholders as well. The persons referred to above in
addition to reselling their ICICI Bank shares or ADRs in the United States
in the manner permitted by Rule 145(d) under the US Securities Act of 1933
may also sell such securities pursuant to any other available exemption
under the US Securities Act of 1933. ICICI shareholders or ADR holders who
believe they may be affiliates for the purposes of the US Securities Act
of 1933, should consult their own legal advisers in the event they plan to
sell such shares or ADRs to a United States person or in the United
States.
Under the Scheme, ICICI's equity holding in ICICI Bank would be held by
the Trust exclusively for the benefit of ICICI and its successors. Sales
by the Trust into the United States will require registration or an
exemption from registration under the US Securities Act of 1933.
LISTING AND REGISTRATION AFTER THE AMALGAMATION
119. Upon the effectiveness of the Scheme, the holders of ICICI shares and ADRs
on the Record Date (as defined in the Scheme) will be issued and allotted
ICICI Bank shares and ADRs in accordance with and subject to the Share
Exchange Ratio. In terms of the listing agreement entered into by ICICI
Bank with various stock exchanges, namely, the stock exchanges at Kolkata,
Delhi, Chennai, Vadodara and on the BSE and the NSE for ICICI Bank shares
and the NYSE for the ICICI Bank ADRs, ICICI Bank will make a listing
application to such stock exchanges and notify them of the Record Date in
the prescribed format. Upon such notification, trading in the shares of
ICICI will be suspended on such stock exchanges from two to three weeks
before the Record Date. Trading of ICICI ADRs on the NYSE will also be
suspended, however, a "when issued" market will be created for the trading
of ICICI Bank ADRs to be issued under the Scheme.
DESCRIPTION OF ICICI BANK SHARES
120. Information concerning ICICI Bank's equity shares is contained under
"Description of Equity Shares" in ICICI Bank's Form F-1/A filed with the
SEC on March 27, 2000.
DESCRIPTION OF ICICI BANK ADRs
121. Information concerning ICICI Bank's ADRs is contained under "Description
of the American Depositary Shares" in ICICI Bank's Form F-1/A filed with
the SEC on March 27, 2000.
RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES
122. Information concerning the restrictions on foreign ownership of Indian
Securities is contained under "Restriction on Foreign Ownership of Indian
Securities" in ICICI Bank's Annual Report on Form 20-F filed with the SEC
on September 28, 2001.
PROCEDURES FOR WITHDRAWING FROM THE ADR PROGRAM
123. Information concerning the surrender of ADRs and the withdrawal of the
underlying equity shares from the depositary facility is contained in the
relevant Deposit Agreement. The information stated below is general in
nature and comprises only the main provisions thereof. For more complete
information, you are advised to review the provisions of the relevant
Deposit Agreement, a copy of which is available for inspection at the
offices of the Depositary located at Bankers Trust Company, C/o Bankers
Trust ADR Window, 120 Broadway, 13th Floor, New York, NY 10271 or call +1
(201) 593 6700.
29
124. Pursuant to the Deposit Agreement:
- An ADR holder wishing to surrender ADRs for cancellation, must do so
at the Depositary's corporate trust office in New York City. The ADR
Certificate should be brought to the Depositary located at Bankers
Trust Company, C/o. Bankers Trust ADR Window, 120 Broadway, 13th
Floor, New York, NY 10271. If American Depositary Shares ("ADSs") are
held through a broker-dealer, bank or other participant in The
Depositary Trust Company, please contact such entity regarding
delivery of the ADSs to the Depositary for cancellation. ADR holders
should call +1(201) 593 6700 with any questions on how to surrender
ADRs and to withdraw from the ADR program.
- The Depositary may require the ADR holder to properly endorse the
surrendered ADR in blank, to properly execute an instrument of
transfer in blank, or to provide a written order directing the
Depositary to withdraw and deliver the equity shares in
dematerialised form to a book-entry account in India in accordance
with that order; physical delivery of equity shares is not available;
- The entitlement of the ADR holder to delivery (to the ADR holder or
upon the ADR holder's order) of the underlying equity shares is
conditional upon the payment of the fees and expenses of the
Depositary and of all expenses, taxes and other governmental charges
payable in connection with the surrender and withdrawal;
- Delivery of the equity shares will be made to an account directed by
the ADR holder within the book entry system of India (to the extent
the ADR holder does not have such an account, the ADR holder will
need to establish an account with a participant of the National
Securities Depository Limited or Central Depository Services (India)
Limited to hold or sell the equity shares in electronic
dematerialized form, and the ADR holder may incur customary fees and
expenses in doing so); and
- ADRs representing less than 1 share cannot be surrendered. In the
event that the surrendered ADRs evidence fractional equity share
entitlements, the Depositary shall withdraw and deliver a whole
number of equity shares and shall issue and deliver a new ADR
evidencing the remaining fractional equity share.
125. If a foreign institutional investor, non-resident Indian or overseas
corporate body were to withdraw its equity shares from the ADR program,
its investment in the equity shares would be subject to the general
restrictions on foreign ownership noted above and may be subject to the
portfolio investment restrictions, including the 10-49.0% portfolio
investment limitations, and the 5-24.0% non-resident Indian limitation.
The application of these limitations, however, is not clear. Secondary
purchases of securities of Indian companies in India by foreign direct
investors or investments by non-resident Indians, persons of Indian
origin, overseas corporate bodies and foreign institutional investors
above the ownership levels set forth above requires Indian government
approval on a case-by-case basis. It is unclear whether similar
case-by-case approvals of ownership of equity shares withdrawn from the
depositary facility by foreign institutional investors, non-resident
Indians and overseas corporate bodies would be required.
126. If an ADR holder withdraws equity shares from the ADR program and has
direct or indirect holdings in the merged entity exceeding 15.0% of the
merged entity's total equity, the ADR holder will be required to make a
public offer to the remaining shareholders (under the Securities and
Exchange Board of India (Substantial Acquisition of Shares and Takeovers)
Regulations, 1997).
127. After delivery of the equity shares is made, ADR holders wishing to
transfer the equity shares withdrawn from the depositary facility, must
receive the prior approval of the Reserve Bank of India, unless the
transfer is made on a stock exchange or in connection with an offer under
the Indian regulations regarding takeovers.
For more information see Annexure B - "Risk Factors" - "ADR holders
ability to sell in India any equity shares withdrawn from the depositary
facility may be subject to delays if specific government approval is
required."
128. The Depositary will not assist any person or persons in establishing the
necessary account or accounts in India for the equity shares or with any
compliance with applicable laws, rules and/or regulations. An ADR holder
should seek the advice of US and Indian financial, legal and/or tax
advisors before taking any action.
EXCHANGE OF ICICI SHARES
129. The share certificates in relation to the ICICI shares held by the ICICI
shareholders (and the ADRs that have been issued representing the
underlying ICICI shares) shall be deemed to have been automatically
cancelled and be of no effect on and from the Record Date, without any
further act, instrument or deed. Each of ICICI shareholders, shall have
the option, exercisable by notice in writing by the ICICI shareholders to
ICICI Bank (at the address specified in paragraph 21 of this Information
Statement) on or before such date as may be determined by the ICICI Bank
Board or a committee of the ICICI Bank Board, to receive either in
certificate form or in dematerialised form, the ICICI Bank shares in
accordance with and subject to the Share Exchange Ratio. In the event that
the notice is not received by ICICI Bank in respect of any of the ICICI
shareholders, the ICICI Bank shares shall be issued to such ICICI
shareholders in certificate form. Those ICICI shareholders exercising the
option to receive the ICICI Bank shares in dematerialised form shall be
required to have an account with a depositary participant and shall
provide details of the depositary and such other confirmations as may be
required. Thereafter, ICICI Bank shall issue and directly credit the
demat/dematerialized securities account of such ICICI shareholder with the
ICICI Bank shares.
EXCHANGE OF ICICI ADRs
130. After the effectiveness of the Scheme, the Depositary will mail a notice
to registered holders of ICICI ADRs regarding the mechanics of exchange of
ICICI ADRs for ICICI Bank ADRs. Holders of registered ICICI ADRs will need
to follow the instructions set out in such notice to exchange their ICICI
ADRs for ICICI Bank ADRs. Upon effectiveness of the Scheme, with no action
on the part of holders of book-entry ICICI ADRs, an appropriate notation
will be made at the relevant bookentry facility with respect to the
book-entry ICICI ADRs to credit such holders' accounts with the
appropriate number of ICICI Bank ADRs.
30
FINANCIAL INFORMATION - US GAAP
SELECTED HISTORICAL FINANCIAL DATA FOR ICICI
131. The selected financial and other data for and at year-end fiscal 1997,
1998, 1999, 2000 and 2001 has been derived from the consolidated financial
statements, prepared in accordance with US GAAP. ICICI's consolidated
financial statements have been audited by KPMG, India, independent
auditors. Capital adequacy ratios have been calculated both from the
unconsolidated financial statements prepared in accordance with Indian
GAAP and the consolidated financial statements prepared in accordance with
US GAAP.
132. ICICI's consolidated subsidiaries at and for the year-ended fiscal 2001
did not include ICICI Bank. Effective March 10, 2001, ICICI Bank acquired
Bank of Madura Limited, an old private sector bank in India, in an all
stock merger and, as a result, the ownership interest of ICICI was reduced
from 62.2% to 55.6%. In addition, during March 2001, ICICI reduced its
interest in ICICI Bank to 46.4% through sales of equity shares in the
Indian secondary markets to institutional investors. As a result of the
foregoing, ICICI Bank ceased to be one of the subsidiaries of ICICI as of
March 22, 2001 and was accounted for under the equity method of accounting
from April 1, 2000, the beginning of the fiscal year in which ICICI's
majority ownership interest in ICICI Bank was deemed to be temporary.
ICICI Bank continues to be reported on a consolidated basis for the years
ended March 31, 1997, 1998, 1999 and 2000. As a result, financial
statements of fiscal 2001 and fiscal 2000 are not strictly comparable.
Historical results do not necessarily predict the results in the future.
Year ended March 31,
--------------------------------------------------------------------
1997 1998 1999 2000 2001 2001(1)
--------------------------------------------------------------------
(in millions, except per common share data)
Selected income statement data:
Interest revenue ................................ Rs. 41,564 Rs. 54,387 Rs. 70,293 Rs. 79,296 Rs. 81,080 US$ 1,731
Interest expense ................................ (33,238) (42,431) (58,043) (67,492) (67,961) (1,451)
Net interest revenue ............................ 8,326 11,956 12,250 11,804 13,119 280
Dividends ....................................... 800 553 676 1,502 406 9
Net interest revenue,
including dividends ........................... 9,126 12,509 12,926 13,306 13,525 289
Provisions for loan losses ...................... (4,266) (4,768) (6,067) (6,363) (9,892) (211)
Net interest revenue, including
dividends, after provisions for loan losses ... 4,860 7,741 6,859 6,943 3,633 78
Non-interest revenue, net ....................... 2,515 5,325 5,560 9,815 8,034 171
Net revenue ..................................... 7,375 13,066 12,419 16,758 11,667 249
Non-interest expense ............................ (2,019) (2,686) (3,795) (5,302) (5,808) (124)
Equity in earnings of affiliate ................. -- (9) (34) 20 856 18
Minority interest ............................... 135 (135) (170) (361) 34 1
Income before taxes ............................. 5,491 10,236 8,420 11,115 6,749 144
Income tax expense .............................. (994) (1,446) (1,194) (2,033) (119) (2)
Net income (before extraordinary items
and cumulative effect of change in
accounting principle, net of tax) ............. 4,497 8,790 7,226 9,082 6,630 142
Extraordinary items, net of tax(2)............... -- -- 292 -- -- --
Cumulative effect of change in
accounting principle, net of tax (3)........... -- -- 249 -- --
Net income/net income from
continuing operations ......................... 4,497 8,790 7,518 9,331 6,630 142
Operating revenue (4)............................ 44,626 59,770 76,276 90,360 89,267 1,905
Net operating income (5)......................... Rs. 4,109 Rs. 8,430 Rs. 7,330 Rs. 9,377 Rs. 6,602 US$ 141
31
Year ended March 31,
--------------------------------------------------------------------
1997 1998 1999 2000 2001 2001(1)
--------------------------------------------------------------------
(in millions, except per common share data)
Per common share:
Net income/net income from
continuing operations--basic(6)................ Rs. 10.34 Rs. 18.39 Rs. 15.66 Rs. 14.45 Rs. 8.44 US$ 0.18
Net income/net income from
continuing operations--diluted(7).............. 8.85 15.74 13.52 13.77 8.41 0.18
Net operating income--basic ..................... 9.45 17.64 15.27 14.52 8.41 0.18
Net operating income--diluted ................... 8.12 15.11 13.18 13.85 8.38 0.18
Dividends(8)..................................... 4.50 5.50 5.50 5.50 5.50 0.12
Book value ...................................... 56.28 68.78 76.06 90.29 96.67 2.06
Common shares outstanding at
end of period (in millions of common shares) .. 476 478 480 785 785
Weighted average common shares outstanding--
basic (in millions of common shares) ......... 435 478 480 646 785
Weighted average common shares outstanding--
diluted (in millions of common shares)......... 532 575 577 687 785
(1) Rupee amounts for fiscal 2001 have been translated into US dollars using
the noon buying rate in effect on March 30, 2001 of Rs. 46.85 = US$ 1.00.
(2) Represents gains from extinguishment of debt, net of tax. In fiscal 1999,
ICICI realized a post-tax gain of Rs. 292 million (US$ 6 million) through
repurchase of certain of its outstanding foreign currency bonds which
resulted in extinguishment of debt.
(3) Effective April 1, 1999, ICICI changed the method of providing
depreciation on property and equipment from the written down value method
to the straight line method. The cumulative effect of the change
aggregating Rs. 405 million (US$ 9 million), net of the related income tax
effect of Rs. 156 million (US$ 3 million) has been included in the
statement of income for fiscal 2000.
(4) Represents interest revenue, dividends and non-interest revenue, excluding
effect of business combination on noninterest revenue of Rs. 253 million
(US$ 5 million) for each of fiscal 1997, 1999, 2000 and 2001 and Rs. 495
million (US$ 11 million) for fiscal 1998.
(5) Represents net income (before extraordinary items and cumulative effect of
change in accounting principle, net of tax), minority interest, effect of
business combination on non-interest revenue of Rs. 253 million (US$ 5
million) for each of fiscal 1997, 1999, 2000 and 2001 and Rs. 495 million
(US$ 11 million) for fiscal 1998 and effect of business combinations on
non-interest expense of Rs. 187 million (US$ 4 million) for each of fiscal
1999 and 2000 and Rs. 259 million (US$ 6 million) for fiscal 2001.
(6) Represents net income before dilutive impact.
(7) Represents net income adjusted for full dilution. All convertible
instruments are assumed to be converted to common shares at the beginning
of the year, at prices that are most advantageous to the holders of
instruments. All series of convertible instruments are dilutive.
(8) In US dollars, dividends were US$ 0.10 per equity share in fiscal 1997 and
US$ 0.12 per equity share in each of fiscal 1998, 1999, 2000 and 2001.
32
At March 31,
--------------------------------------------------------------------
1997 1998 1999 2000 2001 2001(1)
--------------------------------------------------------------------
(in millions, except percentages)
Selected balance sheet data:
Total assets ....................................Rs. 380,200 Rs.489,799 Rs. 646,945 Rs. 774,279 Rs. 740,445 US$15,805
Securities ...................................... 17,118 14,582 15,041 18,871 20,115 429
Loans, net(2). .................................. 291,340 377,184 475,106 561,448 602,023 12,850
Troubled debt restructuring
(restructured loans), net ..................... 3,435 5,210 6,749 10,795 32,309 690
Other impaired loans, net ....................... 7,647 17,456 23,214 24,240 20,081 429
Total liabilities ............................... 352,595 455,476 609,661 699,073 664,027 14,173
Long-term debt .................................. 274,015 347,956 435,521 436,320 505,025 10,780
Deposits ........................................ 10,740 29,295 60,605 96,682 6,072 130
Redeemable preferred stock(3).................... 750 3,366 10,897 10,207 698 15
Stockholders' equity ............................ 26,787 32,876 36,494 70,908 75,922 1,621
Common stock .................................... 4,755 4,781 4,801 7,832 7,848 168
Profitability:
Net income as a percentage of:
Average total assets ............................ 1.31% 2.02% 1.30% 1.32% 0.93%
Average stockholders' equity .................... 17.62 27.73 20.89 16.88 8.84
Average stockholders' equity (including
redeemable preferred stock)(4)................. 17.47 27.06 19.26 15.95 8.89
Dividend payout ratio(5)......................... 47.92 33.33 38.99 42.44 71.79
Spread(6)........................................ 3.24 2.89 2.03 1.39 1.38
Net interest margin(7)........................... 3.03 3.25 2.44 1.93 2.13
Cost-to-income ratio(8).......................... 17.73 15.49 19.79 22.37 26.04
Cost-to-average assets ratio(9).................. 0.59 0.62 0.63 0.72 0.79
Capital:
Total capital adequacy ratio For ICICI(10)....... 13.28 13.02 12.46 17.27 14.66
Tier 1 capital adequacy ratio For ICICI(10)...... 10.51 8.78 8.25 11.52 9.65
Tier 2 capital adequacy ratio For ICICI(10)...... 2.77 4.24 4.21 5.75 5.01
Average stockholders' equity as a
percentage of average total assets ............ 7.43 7.29 6.27 7.83 10.62
Average stockholders' equity (including
redeemable preferred stock) as a
percentage of average total assets ............ 7.68 7.59 7.48 9.30 10.95
(1) Rupee amounts for fiscal 2001 have been translated into US dollars using
the noon buying rate in effect on March 30, 2001 of Rs. 46.85 = US$ 1.00.
(2) Net of allowance for loan losses in respect of restructured and other
impaired loans.
(3) In line with the existing regulatory requirements in India, preferred
stock issued by ICICI needs to be compulsorily redeemed within a specified
time period.
(4) Represents the ratio of net income plus dividend on redeemable preferred
stock to the sum of average stockholders' equity and average redeemable
preferred stock. Under Indian tax laws, dividend on preferred stock is not
tax deductible.
(5) Represents the ratio of total dividends paid on common stock, including
the dividend distribution tax, as a percentage of net income.
33
(6) Represents the difference between yield on average interest-earning assets
and cost of average interest- bearing liabilities. Yield on average
interest-earning assets is the ratio of interest revenue to average
interest-earning assets. Cost of average interest-bearing liabilities is
the ratio of interest expense to average interest-bearing liabilities.
(7) Represents the ratio of net interest revenue to average interest-earning
assets. The difference in net interest margin and spread arises due to the
difference in the amount of average interest-earning assets and average
interest-bearing liabilities. If average interest-earning assets exceed
average interest-bearing liabilities, net interest margin is greater than
spread, and if average interest-bearing liabilities exceed average
interest-earning assets, net interest margin is less than spread.
(8) Represents the ratio of non-interest expense, excluding amortization of
intangible assets, to the sum of net interest revenue, dividends and
non-interest revenue, excluding the effect of business combination.
(9) Represents the ratio of non-interest expense, excluding amortization of
intangible assets, to average total assets.
(10) ICICI's capital adequacy is computed in accordance with the Reserve Bank
of India guidelines. The computation is based on ICICI's unconsolidated
financial statements prepared in accordance with Indian GAAP. ICICI's
total capital adequacy ratio computed under the applicable Reserve Bank of
India guidelines and based on its consolidated financial statements
prepared in accordance with US GAAP was 14.03% at year-end fiscal 2001.
Using the same basis of computation, its Tier 1 capital adequacy ratio was
9.35% and its Tier 2 capital adequacy ratio was 4.68% at year-end fiscal
2001.
SELECTED HISTORICAL FINANCIAL DATA FOR ICICI BANK
133. ICICI Bank's selected financial and other data for and at year-end fiscal
1997, 1998, 1999, 2000 and 2001 have been derived from its financial
statements prepared in accordance with US GAAP. These financial statements
have been audited by KPMG, India, independent auditors. Historical results
do not necessarily predict the results in the future.
Year ended March 31,
--------------------------------------------------------------------
1997 1998 1999 2000 2001 2001(1)
--------------------------------------------------------------------
(in millions, except per common share data)
Selected income statement data:
Interest revenue ................................ Rs. 1,843 Rs. 2,579 Rs. 5,390 Rs. 8,434 Rs. 12,406 US$ 265
Interest expense ................................ (1,170) (1,854) (4,244) (6,656) (8,408) (180)
Net interest revenue ............................ 673 725 1,146 1,778 3,998 85
Provision for loan losses ....................... (187) (360) (540) (427) (1,082) (23)
Net interest revenue after provisions
for loan losses ............................... 486 365 606 1,351 2,916 62
Non-interest revenue, net ....................... 317 591 866 1,759 1,754 37
Net revenue ..................................... 803 956 1,472 3,110 4,670 99
Non-interest expense ............................ (406) (554) (799) (1,329) (3,104) (66)
Income before taxes ............................. 397 402 673 1,781 1,566 33
Income tax expense .............................. (155) (104) (170) (379) (258) (5)
Net income ...................................... Rs. 242 Rs. 298 Rs. 503 Rs. 1,402 Rs. 1,308 US$ 28
Per common share data:
Net income-basic ................................ Rs. 1.61 Rs. 1.84 Rs. 3.05 Rs. 8.49 Rs. 6.60 US$ 0.13
Net income-diluted .............................. 1.61 1.84 3.05 8.49 6.60 0.13
Dividends ....................................... 1.00 1.00 1.20 1.50 2.00 0.04
Book value ...................................... 11.67 14.98 17.15 57.86 74.00 1.58
Common shares outstanding at end of
period (in millions of common shares).......... 150 165 165 196.82 220.36
Weighted average common shares
outstanding - basic (in millions of
common shares)................................. 150 162 165 165.09 198.24
Weighted average common shares
outstanding - basic (in millions of
common shares)................................. 150 162 165 165.11 198.24
(1) Rupee amounts for fiscal 2001 have been translated into US dollars using
the noon buying rate in effect on March 30, 2001 of Rs. 46.85 = US$ 1.00.
34
At March 31,
--------------------------------------------------------------------
1997 1998 1999 2000 2001 2001(1)
--------------------------------------------------------------------
(in millions)
Selected balance sheet data:
Total assets .................................... Rs. 19,766 Rs. 35,278 Rs. 76,265 Rs. 130,386 Rs. 220,008 US$ 4,696
Cash and cash equivalents(2). ................... 4,099 8,728 19,928 36,361 47,306 1,010
Trading account assets .......................... 3 7,387 15,822 28,228 18,725 400
Loans, net(3).................................... 8,374 12,765 27,597 46,986 93,030 1,986
Securities available for sale ................... 3,816 1,476 3,963 4,709 24,787 529
Securities held to maturity ..................... -- -- -- -- 10,944 234
Impaired loans, net ............................. -- 179 733 670 2,428 52
Total liabilities ............................... 18,016 32,807 73,435 118,999 203,701 4,348
Long-term debt(4)................................ 89 129 1,764 2,476 2,421 52
Deposits ........................................ 13,476 26,290 60,729 98,660 164,254 3,506
Stockholders' equity ............................ 1,750 2,471 2,830 11,387 16,307 348
At or for the year ended March 31,
----------------------------------------------------------
1997 1998 1999 2000 2001
----------------------------------------------------------
(in percentages)
Profitability:
Net income as a percentage of:
Average total assets ............................ 1.52% 1.12% 0.94% 1.61% 0.95%
Average stockholders' equity .................... 14.34 12.90 18.85 42.52 9.45
Dividend payout ratio(5)......................... 61.98 59.89 43.30 19.60 37.13
Spread(6)........................................ 3.37 2.46 2.38 2.28 2.50
Net interest margin(7)........................... 5.74 3.72 2.70 2.58 3.78
Cost-to-income ratio(8).......................... 41.01 42.10 39.71 37.57 53.96
Cost-to-average assets ratio(9) ................. 2.54 2.08 1.50 1.52 2.27
Capital:
Total capital adequacy ratio(10)................. 13.04 13.48 11.06 19.64 11.57
Tier 1 capital adequacy ratio(10)................ 12.71 13.38 7.32 17.42 10.42
Tier 2 capital adequacy ratio(10)................ 0.33 0.10 3.74 2.22 1.15
Average stockholders' equity as a
percentage of average total assets ............ 10.58 8.66 5.00 3.78 10.10
(1) Rupee amounts for fiscal 2001 have been translated into US dollars using
the noon buying rate in effect on March 30, 2001 of Rs. 46.85 = US$ 1.00.
(2) Includes interest bearing deposit with banks.
(3) Net of allowance for loan losses in respect of impaired loans.
(4) Includes current portion of long term debt.
(5) Represents the ratio of total dividends payable on common stock, including
the dividend distribution tax, as a percentage of net income.
(6) Represents the difference between yield on average interest-earning assets
and cost of average interest- bearing liabilities. Yield on average
interest-earning assets is the ratio of interest revenue to average
interest-earning assets. Cost of average interest-bearing liabilities is
the ratio of interest expense to average interest-bearing liabilities.
(7) Represents the ratio of net interest revenue to average interest-earning
assets. The difference in net interest margin and spread arises due to the
difference in the amount of average interest-earning assets and average
interest-bearing liabilities. If average interest-earning assets exceed
average interest-bearing liabilities, net interest margin is greater than
spread, and if average interest-bearing liabilities exceed average
interest-earning assets, net interest margin is less than spread.
35
(8) Represents the ratio of non-interest expense to the sum of net interest
revenue and non-interest revenue.
(9) Represents the ratio of non-interest expense to average total assets.
(10) ICICI Bank's capital adequacy is computed in accordance with the Reserve
Bank of India guidelines. The computation is based on the financial
statements prepared in accordance with Indian GAAP. ICICI Bank's total
capital adequacy ratio computed under the applicable Reserve Bank of India
guidelines and based on the financial statements prepared in accordance
with US GAAP was 11.69% at March 31, 2001. Using the same basis of
computation, its Tier 1 capital adequacy ratio was 10.60% and its Tier 2
capital adequacy ratio was 1.09% at March 31, 2001.
(11) Figures for fiscal 2000 have been regrouped and reclassified.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
134. The Board of Directors of ICICI and ICICI Bank at their meetings held on
October 25, 2001 approved the amalgamation of ICICI with ICICI Bank. The
Effective Date i.e. the actual date on which the vesting of the
undertaking and business of ICICI shall take place, shall be the date on
which all filings and required permits and consents for the Scheme
included elsewhere in this Information Statement, are obtained including
the approval of the shareholders of ICICI and ICICI Bank, approval of the
High Court of Judicature at Bombay (in the case of ICICI) and High Court
of Gujarat at Ahmedabad (in the case of ICICI Bank) and the approval of
the Reserve Bank of India.
The Boards of Directors of ICICI and ICICI Bank respectively, have
approved the issue and allotment of equity shares of ICICI Bank to the
shareholders of ICICI in the ratio of one ICICI Bank equity share of the
face value of Rs. 10/- each, fully paid-up, for every two ICICI equity
shares of the face value of Rs. 10/- each, fully paid up.
As per provisions of SFAS 141, the acquisition is a reverse merger wherein
ICICI is the accounting acquirer and ICICI Bank is the accounting
acquiree. ICICI holds 46% of the outstanding common stock of ICICI Bank.
The balance 54% of the outstanding common stock is held by others. This
acquisition of 54% of the outstanding common stock of ICICI Bank will be
accounted for as a step acquisition and accordingly, 54% of the assets and
liabilities of ICICI Bank would be recorded at fair value and the
operations of ICICI Bank would be reflected in the operations of the
combined enterprise from the date of acquisition.
The unaudited pro forma condensed consolidated balance sheet and
statements of income have been prepared to illustrate the acquisition of
ICICI Bank by ICICI which is being accounted for, under US GAAP, as a step
acquisition.
The following unaudited pro forma condensed consolidated balance sheet and
statements of income are based, in part, on information obtained from the
audited historical statement of income of ICICI and the unaudited interim
condensed consolidated balance sheet and statements of income of ICICI and
ICICI Bank, which are included elsewhere in this Information Statement.
The unaudited pro forma adjustments are based upon available information
and certain assumptions believed to be reasonable.
These unaudited pro forma condensed consolidated balance sheet and
statements of income and accompanying notes should be read in conjunction
with the following sections of this Information Statement entitled
"Amalgamation", "Risk Factors", Financial Information - US GAAP -
"Selected Historical Financial Data for ICICI" and Financial Information -
US GAAP - "Selected Historical Financial Data for ICICI Bank" and the
notes thereto included elsewhere in this Information Statement.
The unaudited pro forma condensed consolidated balance sheet has been
prepared to give effect to the acquisition transaction, which includes the
issuance of shares, described in this Information Statement as though such
transaction had occurred as of September 30, 2001.
The unaudited pro forma condensed consolidated statements of income have
been prepared to give effect to the acquisition transaction, which
includes the issuance of shares, described in this Information Statement
as though such transaction had occurred as of April 1, 2000 for both the
unaudited pro forma condensed consolidated statement of income for the
year ended March 31, 2001 and the unaudited pro forma condensed
consolidated statement of income for the six months ended September 30,
2001.
The excess of the cost over 54% of the fair value of the net assets
acquired is accounted for as goodwill, pending allocation of values to
intangible assets. The allocation of values to intangible assets is
expected to be completed by the Effective Date. As a result, the
allocation of purchase price used in preparing the unaudited pro forma
condensed consolidated balance sheet and statements of income is
preliminary, and may change as a result of finalisation of the allocation
of values to intangible assets.
ICICI has adopted the provisions of SFAS 141 and SFAS 142, effective April
1, 2001, therefore amortization of goodwill and intangibles with
indefinite lives has ceased, and such assets will be tested for impairment
annually (or more frequently if impairment indicators arise).
The unaudited pro forma condensed consolidated balance sheet and
statements of income do not purport to be indicative of either future
results or results of operations, including the issuance of shares, as
completed on or as of the indicated date.
36
Unaudited Pro Forma Condensed Consolidated Balance Sheet at September 30, 2001
Rs. million
-------------------------------------------------------------------------
Historical Pro Forma Adjustments Pro Forma
Combined
-------------------------------------------------------------------------
ICICI ICICI Elimination Step
Bank of equity acquisition
method and other
adjustments
-------------------------------------------------------------------------
Assets
Cash and cash, equivalents..................... Rs. 15,300 Rs. 31,431 Rs. - Rs. (7,337) (a) Rs. 39,394
Securities .................................... 53,507 76,124 - 690 (b) 130,321
Investment in affiliate........................ 8,293 - (7,966) (e) - 327
Loans, net of allowance for loan losses........ 617,926 93,459 - (51) (b) 711,334
Goodwill and other Intangible assets net....... 1,559 2,519 - 5,219 (c) 7,937
(1,360) (c)
Other assets. ................................. 59,298 27,867 - (271) (a) 87,068
174 (b)
Total assets................................... 755,883 231,400 (7,966) (2,936) 976,381
Liabilities
Deposits ...................................... 7,136 175,336 - (7,337) (a) 176,028
893 (b)
Borrowings .................................... 614,457 8,768 - 190 (b) 623,415
Other ......................................... 56,488 29,978 - (271) (a) 86,195
Total liabilities ............................. 678,081 214,082 - (6,525) 885,638
Minority interest ............................. 890 - - - 890
Stockholders' equity
Common stock at Rs. 10 par value .............. 7,848 2,203 - (3,924) (d) 6,127
Additional paid-in capital .................... 38,110 10,927 - 7,513 (d) 60,738
4,188 (d)
Retained earnings ............................. 34,447 3,622 - (3,622) (d) 34,447
Deferred stock compensation ................... (17) (12) - 12 (d) (17)
Accumulated other comprehensive income......... (3,476) 578 - (578) (d) (3,476)
Treasury Stock ................................ - - (7,966) (e) - (7,966)
Total stockholders' equity .................... 76,912 17,318 (7,966) 3,589 89,853
Total liabilities and stockholders' equity .... Rs. 755,883 Rs. 231,400 Rs. (7,966) Rs. (2,936) Rs. 976,381
See accompanying notes to the unaudited pro forma condensed consolidated
financial statements
37
Unaudited Pro Forma Condensed Consolidated Statements of Income for the six
months ended September 30, 2001
Rs. million
-----------------------------------------------------------------------------
Historical Pro Forma Adjustments Pro Forma
Combined
-----------------------------------------------------------------------------
ICICI ICICI Elimination Step
Bank of equity acquisition
method and other
adjustments
-----------------------------------------------------------------------------
Interest income ............................... Rs. 42,990 Rs. 9,295 Rs. - Rs. (298) (a) Rs. 51,953
(34) (k)
Interest expense .............................. 36,525 6,271 - (298) (a) 42,169
(329) (k)
Net interest income ........................... 6,465 3,024 - 295 9,784
Provision for loan losses ..................... 3,294 872 - - 4,166
Net interest income after provision
for loan losses ............................. 3,171 2,152 - 295 5,618
Non-interest income
Fees, commission and brokerage .............. 3,645 687 - (30) (a) 4,302
Other non-interest income ................... 1,381 (j) 1,544 - (420) (a) 2,505
Total non-interest income ..................... 5,026 2,231 - (450) 6,807
Non-interest expense .......................... 3,368 2,792 - (450) (a) 5,602
(108) (f)
Earnings in equity of affiliates .............. 551 - (518) - 33
Income before income taxes .................... 5,380 1,591 (518) 403 6,856
Income tax expense ............................ 1,261 456 - - 1,717
Net income from continuing operations ......... Rs. 4,119 Rs. 1,135 Rs. (518) Rs. 403 Rs. 5,139
See accompanying notes to the unaudited pro forma condensed consolidated
financial statements
Unaudited Pro Forma Condensed Consolidated Statements of income for the year
ended March 31, 2001
Rs. million
-----------------------------------------------------------------------------
Historical Pro Forma Adjustments Pro Forma
Combined
-----------------------------------------------------------------------------
ICICI ICICI Elimination Step
Bank of equity acquisition
method and other
adjustments
-----------------------------------------------------------------------------
Interest income ............................... Rs. 81,486 Rs. 12,406 Rs. - Rs. (366) (a) Rs. 93,457
(69) (k)
Interest expense .............................. 67,961 8,408 - (366) (a) 75,344
(659) (k)
Net interest income ........................... 13,525 3,998 - 590 18,113
Provision for loan losses ..................... 9,892 1,082 - - 10,974
Net interest income after provision
for loan losses ............................. 3,633 2,916 - 590 7,139
Non-interest income
Fees, commission and brokerage .............. 5,317 1,125 - (58) (a) 6,384
Other non-interest income ................... 2,717 (j) 629 - (505) (a) 2,841
Total non-interest income ..................... 8,034 1,754 - (563) 9,225
Non-interest expense .......................... 5,774 3,104 - (563) (a) 8,315
Earnings in equity of affiliates .............. 856 - (814) - 42
Income before income taxes .................... 6,749 1,566 (814) 590 8,091
Income tax expense ............................ 119 258 - (108) (i) 269
Net income from continuing operations ......... Rs. 6,630 Rs. 1,308 Rs. (814) Rs. 698 Rs. 7,822
See accompanying notes to the unaudited pro forma condensed consolidated
financial statements.
38
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
The unaudited pro forma condensed consolidated balance sheet and statements of
income reflect the accounting impact of the acquisition transaction, which
includes issuance of shares described in this Information Statement as though
they had occurred on September 30, 2001 and April 1, 2000, respectively.
Accordingly, the unaudited pro forma condensed consolidated statement of income
for the year ended March 31, 2001 include ICICI's results of operations for the
year ended March 31, 2001 and ICICI Bank's results of operations for the year
ended March 31, 2001 and the pro forma adjustments discussed below and the
unaudited pro forma condensed consolidated statement of income for the six
months ended September 30, 2001 include ICICI Bank's results of operations for
the six month period ended September 30, 2001 and ICICI's results of operations
for the six month period ended September 30, 2001, as well as the pro forma
adjustments discussed below.
Purchase consideration
The purchase consideration for the reverse merger has been determined based on
the average market price of ICICI Bank shares, prevailing at the date of
announcement of the reverse merger and two days before and after that date. The
purchase consideration is determined based on the step acquisition of 54% of
the common stock of ICICI Bank shares held by other than ICICI and is as
follows:
Rs. million (except share data)
Particulars
(1) Number of share held other than by ICICI
(54% of 220 million shares) ......................... 119
(2) Value per share ..................................... 101.4
Purchase consideration (1)*(2) .......................... 12,066
Add: Merger costs (g) ................................... 847
Fair value of ICICI Bank stock options (h) ......... 27
Total purchase consideration ............................ 12,940
Preliminary allocation of fair valuation of net assets
The preliminary allocation of fair value of net assets of ICICI Bank at
September 30, 2001 is as follows:
Rs. million
-----------------------------------------------------------------------------------------
Particulars Book Value Fair Value Difference Adjustments to
reflect step
acquisition of 54%
-----------------------------------------------------------------------------------------
Cash and cash equivalents .......... 31,431 31,431 - -
Securities ......................... 76,124 77,401 1,277 690
Loans............................... 93,459 93,365 (94) (51)
Goodwill and other intangibles ..... 2,519 - (2,519) (1,360)
Other assets ....................... 27,867 28,188 321 174
Total assets ....................... 231,400 230,385 (1,015) (547)
Deposits ........................... 175,336 176,990 1,654 893
Borrowings ......................... 8,768 9,119 351 190
Other liabilities .................. 29,978 29,978 - -
Total liabilities .................. 214,082 216,087 2,005 1,083
Net assets ......................... 17,318 14,298 (3,020) (1,630)
Goodwill and other intangible assets
The resulting excess of the cost over the fair value of the net assets acquired
is accounted for as goodwill, pending allocation of values to intangible
assets. The goodwill is determined as follows:
Rs. million
Particulars
(X) Purchase consideration ............................................. 12,940
(Y) Net assets taken over (54%) ........................................ 7,721
Goodwill (X)-(Y) ....................................................... 5,219
39
The purchase price allocation is preliminary and subject to adjustments, since
the valuations of acquired assets and liabilities assumed is at September 30,
2001. Further, no value has been currently ascribed towards intangible assets
pending a detailed exercise. As a result, pro forma income from continuing
operations could differ due to amortization of intangibles.
These unaudited pro forma condensed consolidated balance sheet and statements
of income include adjustments to reflect the impact of the above preliminary
purchase price allocations to the fair value of the acquired net assets of
ICICI Bank. However, they do not reflect any adjustments resulting from
benefits or synergies, resulting from the operations of the combined
enterprise.
Pro forma adjustments
a) reflects elimination of all inter-company transactions and balances
between ICICI and ICICI Bank.
b) reflects fair value adjustments on net assets (inclusive of tax impact) of
ICICI Bank to the extent of 54% of common stock.
c) reflects goodwill of Rs. 5,219 million on step acquisition of 54% of ICICI
Bank common stock and write- down of historical goodwill of ICICI Bank to
the extent of 54% (Rs. 1,360 million).
d) reflects adjustments to the capital of ICICI to reflect the par value of
the outstanding stock of ICICI Bank post amalgamation. The difference
between the capital stock of ICICI and the capital stock of ICICI Bank is
recorded as an adjustment to the additional paid-in capital of the
combined enterprise. Also reflects changes to stockholders' equity to
account for the step acquisition.
e) reflects elimination of investment in equity affiliate by transfer to
treasury stock at carrying value.
f) reflects reversal of amortization of goodwill of ICICI Bank of Rs. 108
million for the six month period ended September 30, 2001, due to adoption
of SFAS 141 and SFAS 142 by ICICI, with effect from April 1, 2001. This
goodwill is non-deductible for tax purposes.
g) transaction costs to be incurred by ICICI in connection with the
acquisition transaction described in the unaudited interim condensed
consolidated financial statements are estimated at Rs. 847 million. These
costs are considered as part of the purchase price allocation. Transaction
costs to be incurred by ICICI Bank have not been considered as part of the
purchase price allocation.
h) stock options of ICICI Bank have been assumed by ICICI. Consequently, the
fair value of the options of ICICI Bank have been included as part of the
purchase consideration. Based on the intrinsic value of the options on the
Effective Date and the unvested period of service required to vest in
these options, a portion of the purchase price will be allocated to
unearned compensation and will be amortized to income over such remaining
vesting period. Currently the intrinsic value of all such outstanding
options is zero as the exercise price is greater than current market
price.
i) reflects the reversal of the deferred tax charge created with respect to
undistributed earnings of ICICI Bank as subsequent to the acquisition,
this would not represent taxable temporary difference.
j) includes gain on sale of stock of ICICI Bank amounting to Rs. 57 million
and Rs.1,996 million during the six months ended September 30, 2001 and
the year ended March 31, 2001 respectively.
k) reflects accretion and amortization of fair value adjustments on loans,
securities, deposits and borrowings. Pro forma earnings per share:
-----------------------------------------------------------------------------------------------------
Year ended Six-month ended
March 31, 2001 September 30, 2001
-----------------------------------------------------------------------------------------------------
Fully Fully
Particulars Basic diluted Basic diluted
-----------------------------------------------------------------------------------------------------
Pro forma earnings
Income from continuing operations .................... 7,822 7,822 5,139 5,139
Contingent issuances of subsidiaries/affiliates ...... - (25) - -
Income (adjusted for full dilution) .................. 7,822 7,797 5,139 5,139
Common stock
Common stock of legal acquirer ....................... 613 613 613 613
Dilutive effect of employee stock option
(as they are anti dilutive) ........................ - - - -
Total ................................................ 613 613 613 613
Pro forma earnings per share
Income from continuing operations (Rs.) .............. 12.76 12.72 8.38 8.38
40
ACCOUNTING TREATMENT FOR THE AMALGAMATION
135. Under Indian GAAP, ICICI Bank would adopt the "purchase method" of
accounting to account for the amalgamation, in accordance with the
Accounting Standard AS-14. Under this method, the assets and liabilities
of the acquired entity are accounted for at fair values in the books of
the acquirer and the difference between the purchase consideration and the
fair values of the assets taken over and liabilities assumed are accounted
for as goodwill or capital reserve. Accordingly, under Indian GAAP, the
assets and liabilities of the Transferor Companies shall be accounted for
at fair values in the books of ICICI Bank.
136. Under US GAAP, the amalgamation is required to be accounted for under the
purchase method. However, under US GAAP, according to the criteria
specified in SFAS 141 for identification of the acquirer and acquiree,
ICICI would be the acquirer and ICICI Bank would be the accounting
acquiree, although ICICI Bank would be the surviving legal entity in the
amalgamation. Accordingly, under US GAAP, the assets and liabilities of
ICICI Bank shall be accounted for at their fair values, and the assets and
liabilities of ICICI shall be accounted for at their historical values, in
the books of the merged entity. Further, under US GAAP, the shares of
ICICI Bank held by ICICI, which are proposed to be held by the Trust for
the benefit of the merged entity, would be disclosed separately as
treasury stock.
41
GLOSSARY OF TERMS
ADRs American Depositary Receipts
ADSs American Depositary Shares
Appointed Date The date which is the later of (i) March 30,
2002 and (ii) thedate on which the approval of the
Reserve Bank of India for the Scheme becomes
effective
BSE The Stock Exchange, Mumbai
Code The United States Internal Revenue Code of 1986,
as amended
Companies Transferee Company and Transferor Companies
Depositary Bankers Trust Company
DSP Merrill Lynch DSP Merrill Lynch Limited
Effective Date The last of the dates on which all conditions,
matters and filings referred to in Clause 26 of
the Scheme have been fulfilled and necessary
orders, approvals and consents referred to
therein have been obtained
GDRs Global Depositary Receipts
ICICI ICICI Limited
ICICI Bank ICICI Bank Limited
CICI Bank Board The Board of Directors of ICICI Bank
ICICI Board The Board of Directors of ICICI
ICICI Capital ICICI Capital Services Limited
ICICI PFS ICICI Personal Financial Services Limited
JM Morgan Stanley JM Morgan Stanley Private Limited
NSE The National Stock Exchange of India Limited
NYSE The New York Stock Exchange
PFIC Passive Foreign Investment Company
Proposed Regulations The proposed US Treasury Regulations
Section 1.1291-6
Record Date The date fixed by the ICICI Bank Board of
Directors for determining the registered ICICI
equity shareholders to receive ICICI Bank equity
shares under the Scheme
SEC The United States Securities and Exchange
Commission
Share Exchange Ratio The ratio in accordance with which ICICI Bank
shares will be allotted to ICICI shareholders,
being a ratio of 1 (one) ICICI Bank equity share
of face value of Rs. 10/- (Rupees ten only) each,
credited as fully paid-up, for every 2 (two)
ICICI equity shares of face value of Rs. 10/-
(Rupees ten only) each, credited as fully paid-up
Scheme The Scheme of Amalgamation of ICICI, ICICI Capital
and ICICI PFS with ICICI Bank
Transferee Company ICICI Bank
Transferor Companies ICICI, ICICI Capital and ICICI PFS
Trust The trust to which, on the Appointed Date, ICICI's
equity holding in ICICI Bank would be transferred
to be held exclusively for the benefit of ICICI
and its successors
Trustees The individual trustee or the board of trustees
(including the survivors or survivor of any of
the trustees comprising such board of trustees)
or the corporate trustee of the Trust
US/United States United States of America
42
ANNEXURE A
FAIRNESS OPINIONS
(1) Fairness Opinion of ICICI's Financial Advisor
October 25, 2001
The Board of Directors
ICICI Limited
Bandra Kurla Complex
Mumbai
Ladies and Gentlemen:
We understand that, subject to the receipt of the final approval of the Reserve
Bank of India and approval from each of the High Court of Judicature at Mumbai
and the High Court of Gujarat at Ahmedabad, it is proposed that pursuant to a
scheme of arrangement, substantially in the form of the draft dated October 24,
2001 (the "Scheme of Arrangement"), among ICICI Limited, ICICI Capital Services
Limited, ICICI Personal Financial Services Limited with ICICI Bank Limited,
which provides, among other things, for the merger (the "Merger") of ICICI
Limited ("ICICI") with and into ICICI Bank Limited ("ICICI Bank"). Pursuant to
the Merger, the holders of outstanding equity shares of ICICI will receive one
(1) fully paid up equity share of ICICI Bank with a face value of Rs. ten (10)
each for every two (2) fully paid up equity shares of ICICI with a face value
of Rs. ten (10) each (such exchange ratio, the "Exchange Ratio"). Both ICICI
and ICICI Bank have offered certain American Depositary Shares outside India,
including in the United States. As each ICICI American Depositary Share ("ADS")
represents 5 underlying equity shares of ICICI of face value of Rs. 10 each and
each ICICI Bank ADS represents 2 underlying equity shares of ICICI Bank of face
value of Rs. 10 each, pursuant to the Merger, the holders of ADS of ICICI will
receive five (5) ADS of ICICI Bank for every four (4) ADS of ICICI held by them
as per the Exchange Ratio. The appointed date of the Merger is March 31, 2002
or the date from which final approval of the Reserve Bank of India for the
transactions contemplated by the Scheme of Arrangement takes effect, whichever
is later. The detailed terms and conditions of the Merger are more fully set
forth in the Scheme of Arrangement.
In connection with the Merger, you have requested our opinion as to the
fairness, from a financial point of view to current holders of outstanding
equity shares of ICICI, of the Exchange Ratio set forth in the Scheme of
Arrangement.
In arriving at the opinion set forth below, we have:
i) reviewed certain publicly available business and financial information
relating to ICICI and ICICI Bank that we deemed to be relevant;
ii) reviewed certain financial forecasts and projections concerning ICICI and
ICICI Bank prepared by or on behalf of the managements of ICICI and ICICI
Bank respectively and provided to us for purposes of our analysis and
discussed these financial projections and related materials with the
managements of ICICI and ICICI Bank respectively;
iii) discussed the past and current operations and financial conditions and the
future prospects of ICICI and ICICI Bank with executives designated by
ICICI and ICICI Bank, respectively, including their senior executives;
iv) performed valuation analyses on ICICI and ICICI Bank on a stand alone
basis;
v) reviewed the reported market prices and valuation multiples for the equity
shares of ICICI and the equity shares of ICICI Bank and compared them with
market prices and valuation multiples of certain other publicly-traded
companies that we deemed to be relevant and comparable;
vi) reviewed the financial terms, to the extent publicly available, of certain
comparable transactions;
vii) participated in certain discussions and negotiations among representatives
of ICICI and ICICI Bank and their respective financial advisors in
connection with the transactions contemplated by the Scheme of
Arrangement; and
viii) considered such other factors and performed such other analyses as we
have deemed appropriate or necessary.
We have assumed and relied upon, without independent verification, the accuracy
and completeness of all information that was publicly available or provided or
otherwise made available to us by ICICI or ICICI Bank for the purposes of this
opinion. With respect to the financial projections and forecasts provided to us
by the managements of ICICI and ICICI Bank, we have assumed that such
projections and forecasts were reasonably prepared in good faith and reflect
the best currently available estimates and judgments by the managements of
ICICI and ICICI Bank with respect to the future financial performance of ICICI
and ICICI Bank, respectively. We express no opinion and accordingly accept no
responsibility with respect to or for such projections, forecasts and analyses
or the assumptions on which they are based. We have not reviewed any books and
records of ICICI and ICICI Bank (other than those provided or made available to
us). We have not assumed any obligation to conduct, nor have we conducted any
physical inspection of the properties or facilities of ICICI and ICICI Bank and
neither express any opinion with respect thereto nor accept any responsibility
therefore. We have not made any independent valuation or appraisal of the
assets or liabilities of
43
ICICI or ICICI Bank, nor have we been furnished with any such appraisals. We
have not reviewed any internal management information statements or any
non-public reports, and, instead, with your consent, we have relied upon
information that was publicly available or provided or otherwise made available
to us by ICICI or ICICI Bank for the purposes of this opinion. We wish to
clarify that we are not experts in the evaluation of the sufficiency of the
securities or assets that either ICICI or ICICI Bank may hold in respect of
loans and advances made by them, and allowances for loan losses, and we have
not made an independent evaluation of the adequacy of the securities in respect
of loans and advances and allowances for loan losses of ICICI or ICICI Bank,
nor reviewed any individual credit files relating to ICICI and ICICI Bank. In
addition, we are not experts in the evaluation of litigation or other actual or
threatened claims. We have assumed that the allowances or other reserves of
ICICI and ICICI Bank established to cover losses in connection with any loan
losses, litigation or other claims will be adequate to cover all such losses.
We express no opinion and accordingly accept no responsibility for or with
respect to such allowances or reserves or the assumptions upon which they are
based. In addition, we have assumed that the Scheme of Arrangement will be
approved by the courts and by regulatory authorities and that the Merger will
be consummated substantially in accordance with the terms set forth in the
Scheme of Arrangement.
We have assumed that in the course of obtaining necessary regulatory or other
consents or approvals for the Scheme of Arrangement, no restrictions will be
imposed that will have a material adverse effect on the benefits of the Merger
that ICICI and ICICI Bank may have contemplated. Our opinion is necessarily
based on financial, economic, market and other conditions as they currently
exist and can be reasonably evaluated on, and on the information made available
to us as of, the date hereof. It should be understood that although subsequent
developments may affect this opinion, we do not have an obligation to update,
revise or reaffirm this opinion. In arriving at our opinion, we were not
authorized to solicit, and did not solicit, interest from any party with
respect to the acquisition, business combination or other extraordinary
transaction involving ICICI or any of its assets, nor did we negotiate with any
party other than ICICI Bank, which expressed their interest in entering into a
business combination with ICICI.
We have acted as financial advisor to ICICI in connection with this transaction
and will receive a fee for our services. In the past, J M Morgan Stanley
Private Limited and its affiliates (together, the "JMMS Group") have provided
financial advisory and financing services to ICICI and ICICI Bank and have
received fees for the rendering of these services. In the ordinary course of
business, the JMMS Group is engaged in securities trading, securities brokerage
and investment activities, as well as providing investment banking and
investment advisory services.
In the ordinary course of its trading, brokerage and financing activities, any
member of the JMMS Group may at any time hold long or short positions, and may
trade or otherwise effect transactions, for its own account or the accounts of
customers, in debt or equity securities or senior loans of any company that may
be involved in the Merger.
It is understood that this letter is for the benefit of and confidential use by
the Board of Directors of ICICI and may not be relied upon by any other person
and may not be used or disclosed for any other purpose without our prior
written consent.
We express no opinion whatever and make no recommendation at all as to ICICI
and ICICI Bank's underlying decision to effect the Merger or as to how the
holders of equity shares or preference shares or secured or unsecured creditors
of ICICI should vote at their respective meetings held in connection with the
Merger. We do not express and should not be deemed to have expressed any views
on any other terms of the Merger. We also express no opinion and accordingly
accept no responsibility for or as to the prices at which the equity shares of
ICICI or ICICI Bank will trade following the announcement of the Merger or as
to the financial performance of ICICI Bank following the consummation of the
Merger.
Based on and subject to the foregoing, we are of the opinion, as of the date
hereof, that the Exchange Ratio pursuant to the Scheme of Arrangement is fair
from a financial point of view to the holders of equity shares of ICICI.
Very truly yours,
J M MORGAN STANLEY PRIVATE LIMITED
By: /s/ P. Krishnamurthy
---------------------------------
P. Krishnamurthy
44
(2) Fairness Opinion of ICICI Bank's Financial Advisor
CONFIDENTIAL - NOT TO BE DISTRIBUTED
This opinion was delivered solely for the use and benefit of the Directors of
ICICI Bank Limited and does not constitute, and should not be relied on as a
recommendation to any shareholder as to how such shareholder should vote on the
proposed Merger Scheme or Business combination (each as defined herein) or any
matter related thereto.
October 25, 2001
The Board of Directors
ICICI Bank Limited
ICICI Towers, 4th Floor
Bandra Kurla Complex
Bandra (East)
Mumbai 400051
Members of the Board of Directors:
We understand that ICICI Limited ("ICICI Limited") and ICICI Bank Limited
("ICICI Bank") propose to enter into an amalgamation and merger scheme to be
approved by their respective members and the respective High Courts ("Merger
Scheme") pursuant to which ICICI Limited will transfer its assets and
liabilities (including those assets and liabilities of two wholly-owned
subsidiaries of ICICI Limited, namely ICICI Capital Services Limited and ICICI
Personal Financial Services Limited) into ICICI Bank. Upon effectiveness of the
Merger Scheme, ICICI Bank will issue, in exchange of the shares of par value
Rs. 10.00 per share of ICICI Limited, shares of par value Rs. 10.00 per share
of ICICI Bank (the "Business Combination"). The American Depositary Shares of
ICICI Limited and ICICI Bank will also be exchanged, such exchange to reflect
the number of shares underlying ICICI Limited's and ICICI Bank's respective
American Depositary Shares. Under the terms of the Business Combination, 0.5
shares of ICICI Bank are to be issued as consideration for each ICICI Limited
share (the "Exchange Ratio").
You have asked us to express in writing to the Board of Directors whether, in
our opinion, as of the date hereof, the Exchange Ratio is fair from a financial
point of view to the holders of ICICI Bank shares.
In arriving at the opinion set forth below, we have, among other
things:
(1) Reviewed certain publicly available business and financial information
relating to ICICI Limited and ICICI Bank that we deemed to be relevant;
(2) Reviewed certain internal financial information, including financial
forecasts and projections, relating to the business, earnings, cash flow,
assets, liabilities and prospects of ICICI Limited and ICICI Bank,
prepared by and furnished to us by the management of ICICI Limited and
ICICI Bank, respectively;
(3) Conducted discussions with members of senior management of ICICI Limited
and ICICI Bank concerning the matters described in clauses 1 and 2 above,
as well as their respective businesses and prospects before and after
giving effect to the Business Combination including certain synergies and
cost savings expected to result from the Business Combination and the
amount and timing of the related expenses resulting from the business
combination;
(4) Reviewed current and historical market prices, trading volumes and
valuation multiples for ICICI Limited shares and ICICI Bank shares;
(5) Reviewed the financial results of operations of ICICI Limited and ICICI
Bank, including the audited financial statements for the fiscal year ended
March 31, 2001 and the quarter ended June 30, 2001; (
6) Reviewed publicly available valuation multiples with respect to certain
companies we believe to be generally comparable to those of ICICI Bank and
ICICI Limited;
(7) Compared certain financial terms of the Business Combination with publicly
available financial terms of certain other transactions which we believe
to be generally relevant;
(8) Reviewed the draft of the Merger Scheme dated October 24, 2001; and
(9) Considered such other information as we deemed necessary or appropriate.
In preparing our opinion, we have, with your consent, assumed and relied on the
accuracy and completeness of all information supplied or otherwise made
available to us, discussed with or reviewed by or for us, or available
publicly, and we have not assumed any responsibility for independently
verifying such information or undertaken an independent evaluation or appraisal
of any of the assets or liabilities of ICICI Limited or ICICI Bank or been
furnished with any such evaluation or appraisal. In addition, we have not
assumed any obligation to conduct any physical inspection of the assets,
properties or facilities of ICICI Limited or ICICI Bank. We are not experts in
the evaluation of allowances for loan losses, and we did not make an
independent evaluation of the adequacy of the allowances for loan losses of
ICICI Bank or ICICI Limited, and were not requested to, and did not, conduct a
review of any individual credit files of ICICI Bank or ICICI Limited. In
addition, with your consent, we have not evaluated the likelihood of certain
material contingent liabilities crystallising, including with respect to
certain tax matters.
45
With respect to the financial forecast information furnished to and/or
discussed with us by ICICI Limited or ICICI Bank, we have assumed, with your
consent, that they have been reasonably prepared and reflect the best currently
available estimates and judgment of ICICI Limited's or ICICI Bank's management
as to the expected future financial performance of ICICI Limited or ICICI Bank,
as the case may be. With respect to the potential cost savings and other
synergies anticipated by the management of ICICI Bank and ICICI Limited to
result from the Business Combination, we have assumed with your consent that
management expects cost savings to exceed expenses and such expectations on
cost savings and synergies reasonably reflect the best currently available
information and judgment of the management of ICICI Bank and ICICI Limited
(including the achievability thereof). We have further assumed that the
Business Combination will be accounted for as a purchase transaction under
generally accepted accounting principles in India and that, after the Business
Combination, ICICI Bank will continue to exist as a banking company under the
Banking Regulations Act. We have also assumed that the final form of the Merger
Scheme will be similar in all material respects to the draft dated October 24,
2001 reviewed by us.
Our opinion is necessarily based upon market, economic, regulatory and other
conditions as they exist and can be evaluated on, and on the information made
available to us by ICICI Bank and ICICI Limited as of the date hereof. We have
assumed at your direction that ICICI Bank and ICICI Limited will comply with
all applicable legal and regulatory requirements (including, without
limitation, applicable securities laws) and in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Business Combination, no restrictions, including any divestiture
requirements or amendments or modifications, will be imposed that will have a
material adverse effect on the contemplated benefits of the Business
Combination. This includes, but is not limited to, an assumption that ICICI
Bank will not be materially adversely affected by any capital adequacy
requirements or such other requirements which may or may not be prescribed by
the Reserve Bank of India, Ministry of Finance or other regulatory bodies for
banking companies. We have also based our opinion on the assumption that if the
necessary regulatory and shareholder approvals under applicable law in India or
otherwise are obtained, ICICI Bank will not be requested by any of its
shareholders or by any of the shareholders of ICICI Limited to buy back any of
their shares pursuant to applicable Indian laws or regulations. In rendering
this opinion, we also have assumed at your direction that each of ICICI Bank
and ICICI Limited will comply with all material covenants and agreements set
forth in, and other material terms of, the Merger Scheme and that the Business
Combination will be consummated in accordance with its terms without waiver,
modification or amendment of any material term, condition or agreement.
We are acting as financial advisor to ICICI Bank in connection with the
Business Combination and will receive a fee from ICICI Bank for our services,
payable upon delivery of this opinion. In addition, ICICI Bank has agreed to
indemnify us for certain liabilities arising out of our engagement. We have
provided services to ICICI Bank and ICICI Limited in the past unrelated to the
proposed Business Combination and have received customary compensation for such
services.
We may also provide financial advisory and financing services in the future to
ICICI Limited and ICICI Bank and may receive fees for the rendering of such
services. In addition, in the ordinary course of our business, we may actively
trade ICICI Limited and ICICI Bank shares and other securities of ICICI Limited
and ICICI Bank for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
We note, however, that the information in respect of ICICI Limited and ICICI
Bank is and will be used and kept for the sole purpose of providing this
opinion and, in accordance with DSP Merrill Lynch policies relating to
so-called 'Chinese walls' or information barriers, is not and will not be
available to other DSP Merrill Lynch employees.
This opinion is for the use and benefit solely of the Board of Directors of
ICICI Bank and should not be passed on or otherwise shared with any other
person without our prior written consent. Our opinion does not address the
merits of the underlying decision by ICICI Bank to engage in the Business
Combination and does not constitute a recommendation to any shareholder as to
how such shareholder should vote on the proposed Business Combination or any
matter related thereto. In addition, our opinion is based on events as known by
us, assumptions as aforesaid and documents and other information shared with us
and the financial, regulatory and legal environment as of the date hereof. We
do not assume any responsibility for events occurring or information passed to
us after its date and we do not assume responsibility for updating the opinion
or the statements made herein.
We are not expressing any opinion herein as to the prices at which ICICI
Limited or ICICI Bank shares will trade following the announcement of the
Exchange Ratio or as to the price at which ICICI Bank shares will trade
following consummation of the Business Combination.
On the basis of and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Exchange Ratio is fair from a financial point of view to
the holders of ICICI Bank shares.
Very truly yours,
DSP MERRILL LYNCH LIMITED
Name: Rajeev Gupta
Title: Executive Vice President
46
(3) Fairness Opinion of Independent Accounting Firm
Ref:G/2193 (O)/P-188 25th October 2001
The Board of Directors, The Board of Directors,
ICICI Limited, ICICI Bank Limited,
ICICI Towers, Bandra Kurla Complex, ICICI Towers, Bandra Kurla Complex,
Bandra (East), Mumbai - 400 051 Bandra (East), Mumbai - 400 051
Dear Sirs,
Re: Amalgamation of ICICI Limited with ICICI Bank Limited ICICI Ltd.
("ICICI") is a premier financial institution. ICICI is one of the largest of
all Indian financial institutions, banks and finance companies in terms of
assets. It was set up as a development financial institution but has
diversified to provide different forms of finance as also a wide range of
financial services. ICICI's subsidiaries and group companies conduct commercial
banking, investment banking, venture capital funding, information technology
related services, Internet-based stock trading and retail banking activities.
ICICI Bank Ltd. ("IB") is a leading private sector bank in India. IB was
originally incorporated on 5th January 1994 as ICICI Banking Corporation
Limited with the Registrar of Companies, Gujarat, Dadra and Nagar Haveli. The
name of the company was changed to its present name on 10th September 1999. The
bank was formed in 1994 as a part of the ICICI group of Companies.
It is proposed to merge ICICI with IB so as to consolidate the businesses and
reap the resulting synergistic benefits. The proposal also includes the
amalgamation of ICICI Capital Services Limited ("ICICI Capital") and ICICI
Personal Financial Services Limited ("ICICI PFS") which are wholly owned
subsidiaries of ICICI, with IB. In this connection we have been requested by
the managements of both ICICI and IB to submit a report on the fair basis of
amalgamation of ICICI with IB for the consideration of the Boards of both the
companies. The appointed date for amalgamation of ICICI with IB would, subject
to the approval of the Board of Directors and shareholders of both the
companies be, the later of 31st March 2002 or the date on which the approval of
the scheme by the Reserve Bank of India becomes effective.
Where the proposal is of amalgamation of two or more companies, what is
relevant is not the determination of the individual value of the shares of the
companies separately, but the determination of the values of the shares of one
company in terms of the value of the shares of the other company. It is similar
to a barter transaction.
In view of the fact that ICICI Capital and ICICI PFS are wholly owned
subsidiaries of ICICI, their value is considered alongwith that of ICICI and on
amalgamation with IB their share capital would stand cancelled. The shares to
be issued by IB to shareholders of ICICI would also reflect the value of the
two subsidiaries.
The value of the shares of the two companies have been evaluated considering
the book value/intrinsic worth of their net assets, dividend discount method
reflecting free cash flows available to the shareholders and the market prices
of their equity shares.
The share exchange ratio has been arrived on the basis of a relative valuation
of the shares of both the companies based on the various methodologies referred
to earlier and various qualitative factors relevant to each company and
business dynamics, growth potential, synergies of the businesses of the
companies, having regard to information base, management representations and
perceptions, key underlying assumptions and limitations. One of the significant
issues in determining the fair exchange ratio is the fact that ICICI holds
46.01% of the equity share capital of IB. It is proposed that this shareholding
will be transferred to a special purpose vehicle as part of the scheme and held
for the benefit of the merged entity.
On a consideration of all the relevant factors and circumstances, in our
opinion, the fair basis for the amalgamation of ICICI with IB would be 1 (One)
equity share of IB of Rs 10/ each fully paid up for every existing 2 (Two)
equity share of ICICI of Rs. 10/ - each fully paid up.
Our detailed report on the fair basis of amalgamation of ICICI with IB shall be
furnished in due course.
Thanking you,
Yours faithfully,
Deloitte Haskins & Sells
47
ANNEXURE B
RISK FACTORS
Risks Relating to India
A slowdown in economic growth in India could cause the business of the merged
entity to suffer.
The performance and the quality and growth of the merged entity's assets would
necessarily be dependent on the health of the Indian economy. The Indian
economy has shown sustained growth over the five years ended fiscal 2001 with
an average real GDP growth rate of approximately 6.2%, compared to the average
real GDP growth rate of 5.8% achieved in the 1980s. However, industrial
production in India witnessed lower growth during the years 1997, 1998 and 1999
primarily due to the global downturn in commodity prices, particularly in the
man-made fibers, iron and steel and textile sectors. There was a moderate
improvement in industrial growth in fiscal 2000. However, industrial growth
again declined in fiscal 2001 due to a slowdown in the manufacturing and
electricity sectors. Any future slowdown in the Indian economy or future
volatility of global commodity prices, in particular oil and steel prices,
could adversely affect the borrowers and contractual counterparties of the
merged entity. This in turn could adversely affect the business of the merged
entity, including its ability to grow the asset portfolio, the quality of its
assets, its financial performance, its stockholders' equity, its ability to
implement its strategy and the price of its equity shares and ADRs.
A significant increase in the price of crude oil could adversely affect the
Indian economy, which could adversely affect the business of the merged entity.
India imports approximately 59.0% of its requirements of crude oil. The sharp
increase in global crude oil prices during fiscal 2001 adversely affected the
Indian economy in terms of volatile interest and exchange rates. This adversely
affected the overall state of liquidity in the banking system leading to
intervention by the Reserve Bank of India. Any significant increase in crude
oil prices could affect the Indian economy and the Indian banking and financial
system. This could adversely affect the business of the merged entity including
its ability to grow, the quality of its assets, its financial performance, its
stockholders' equity, its ability to implement its strategy and the price of
its equity shares and ADRs.
A significant change in the Indian government's economic liberalization and
deregulation policies could disrupt the business of the merged entity and cause
the price of equity shares and ADRs of the merged entity to go down.
The merged entity would be an Indian group and almost all of its assets and
customers would be located in India. The Indian government has traditionally
exercised and continues to exercise a dominant influence over many aspects of
the economy. Its economic policies have had and could continue to have a
significant effect on private-sector entities, including the merged entity, and
on market conditions and prices of Indian securities, including equity shares
and ADRs of the merged entity.
Since 1996, the government of India has changed four times. The most recent
parliamentary elections were completed in October 1999. A coalition government
led by the Bhartiya Janata Party was formed with Mr. A.B. Vajpayee as the Prime
Minister of India. Although the Vajpayee government has continued India's
current economic liberalization and deregulation policies, a significant change
in the government's policies could adversely affect business and economic
conditions in India in general as well as the business of the merged entity,
its future financial performance, its stockholders' equity and the price of its
equity shares and ADRs.
Financial instability in other countries, particularly emerging market
countries in Asia, could disrupt the business of the merged entity and cause
the price of its equity shares and ADRs to go down.
The Indian market and the Indian economy are influenced by economic and market
conditions in other countries, particularly emerging market countries in Asia.
Financial turmoil in Asia, Russia and elsewhere in the world in past years has
affected the Indian economy even though India was relatively unaffected by the
financial and liquidity crisis experienced elsewhere. Although economic
conditions are different in each country, investors' reactions to developments
in one country can have adverse effects on the securities of companies in other
countries, including India. A loss of investor confidence in the financial
systems of other emerging markets may cause increased volatility in Indian
financial markets and indirectly, in the Indian economy in general. Any
world-wide financial instability could also have a negative impact on the
Indian economy. For example, the terrorist attacks in the US in September 2001
are likely to have an adverse effect on the US economy, which could adversely
affect the Indian economy. This in turn could negatively impact upon the
movement of exchange rates and interest rates in India, which could adversely
affect the Indian financial sector, including the merged entity. Any financial
disruption could have an adverse effect on the business of the merged entity,
its future financial performance, its stockholders' equity and the price of its
equity shares and ADRs.
If regional hostilities or terrorist attacks increase, the business of the
merged entity could suffer and the price of its equity shares and ADRs could go
down.
India has from time to time experienced social and civil unrest and hostilities
with neighboring countries. In recent years, there have been military
confrontations between India and Pakistan in the Kashmir region. Currently,
there are tensions involving Afghanistan, a neighbor of Pakistan. These
hostilities and tensions could lead to political or economic instability in
India or South Asia and a possible adverse effect on business of the merged
entity, its future financial performance and the price of its equity shares and
ADRs. This is important in the current context, as the terrorist attacks in the
US in September 2001 have affected the markets all over the world. The possible
prolonged battle against terrorism by the US could lengthen and deepen these
regional hostilities and tensions, thereby affecting the Indian economy as well
as the business of the merged entity, its financial performance, its
stockholders' equity and the price of its equity shares and ADRs.
48
Trade deficits could cause the business of the merged entity to suffer and the
price of its equity shares and ADRs to go down.
India's trade relationships with other countries can also influence Indian
economic conditions. In fiscal 2001, India experienced a trade deficit of Rs.
653.8 billion (US$ 14.4 billion). If trade deficits increase or are no longer
manageable, the Indian economy, and therefore the business of the merged
entity, its financial performance, its stockholders' equity and the price of
its equity shares and ADRs, could be adversely affected.
A significant change in the composition of the Indian economy may affect the
business of the merged entity.
The Indian economy is in a state of transition. The share of the services
sector of total GDP is rising while that of the agricultural sector is
declining. The share of the services sector of total GDP increased to 54.2% in
fiscal 2001 from 48.7% in fiscal 1997 and the share of the agricultural sector
of total GDP declined to 24.0% in fiscal 2001 from 28.6% in fiscal 1997. It is
difficult to gauge the impact of such fundamental economic changes on the
business of the merged entity. There cannot be any certainty that these changes
will not have a material adverse effect on the business of the merged entity.
Financial difficulty and other problems in certain long-term lending
institutions and investment institutions in India could cause the business of
the merged entity to suffer and the price of its equity shares and ADRs could
go down.
Unit Trust of India, a large investment institution in India with substantial
exposure to equity investments, is currently facing problems due to a
significant decline in the market value of its securities portfolio caused by
depressed equity capital markets. IFCI Limited, a long-term lending institution
in India, is facing financial difficulty due to inadequate capitalization,
asset-liability mismatch and deteriorating asset quality. These developments
could create adverse market perception about other financial institutions and
banks which in turn could adversely affect the business of the merged entity,
its future financial performance, its stockholders' equity and the price of its
equity shares and ADRs.
Any down-grading of the sovereign rating of India could cause the business of
the merged entity to suffer and the price of its equity shares and ADRs could
go down.
Standard and Poor's, an international rating agency, had in August 2001
adversely revised its outlook from stable to negative on India's "BB-"
long-term foreign currency rating. It has also adversely revised its rating
from "BBB" to "BBB-" on India's long-term local currency rating. Another
international rating agency, Moody's, had also in August 2001 adversely revised
its outlook from positive to stable on India's "Ba2" long-term foreign currency
rating. Moody's has also adversely revised its outlook from positive to
negative on India's "Ba2" long-term domestic currency rating. Although the
revision in the sovereign rating may not affect the business of the merged
entity, there can be no assurance that any further adverse revisions in the
sovereign rating will not adversely affect the business of the merged entity,
its future financial performance, its stockholders' equity and the price of its
equity shares and ADRs.
Any down-grading of credit rating of ICICI prior to the amalgamation or of the
merged entity subsequent to the amalgamation by an international rating agency
could cause the business of the merged entity to suffer and the price of its
equity shares and ADRs could go down.
Standard and Poor's, an international rating agency, had in September 2001
adversely revised its outlook from stable to negative on ICICI's "BB-"
long-term foreign currency rating. Although the revision in ICICI's credit
rating may not affect ICICI's business, it cannot be assured that any further
adverse revisions in ICICI's credit rating by international and domestic rating
agencies will not adversely affect the business of the merged entity, its
future financial performance, its stockholders' equity and the price of its
equity shares and ADRs.
Risks Relating to the Business of the Merged Entity
The merged entity is likely to classify and reserve against impaired loans
significantly later than its counterparts in more developed countries, such as
the US.
ICICI and ICICI Bank identify a commercial loan as a "troubled debt
restructuring" or an "other impaired loan" (collectively referred to as an
impaired loan) and place it on a non-accrual basis (that is, ICICI and ICICI
Bank no longer recognize interest accrued or due unless and until payments are
actually received) when it is probable that ICICI and ICICI Bank will be unable
to collect the scheduled payments of principal and interest due under the
contractual terms of the loan agreement. In the case of ICICI and ICICI Bank, a
commercial loan is considered to be impaired and placed on a non-accrual basis,
when interest or principal is overdue for more than 180 days (typically two
payments). The merged entity shall also consider a commercial loan to be
impaired and place it on a non-accrual basis, when interest or principal is
overdue for more than 180 days (typically two payments).
Delays or shortfalls in loan payments are evaluated along with other factors to
determine if a loan should be classified as impaired. The time period of 180
days is much longer than in more developed countries, like the United States
where loans are generally placed on a non-accrual basis when any payment,
including any periodic principal payment, is not paid for a 90-day period. In
India, payments on most loans are on a quarterly basis unlike in more developed
countries, like the United States, where payments on most loans are on a
monthly basis. As a result, ICICI and ICICI Bank obtain information later than
they would in developed countries and this delay in receiving current
information may impact the classification of, and reserving against, impaired
loans. Consequently, the merged entity is likely to classify and reserve
against impaired loans significantly later than its counterparts in more
developed countries.
49
A large proportion of loans of the merged entity would be project finance
assistance, a substantial portion of which is particularly vulnerable to
completion risk.
Long-term project finance assistance is a significant proportion of ICICI's
asset portfolio, and it will be a significant proportion of the asset portfolio
of the merged entity. The viability of these projects depends upon a number of
factors, including implementation risk, market demand, government policies and
the overall economic environment in India and international markets. It cannot
be guaranteed that these projects will perform as anticipated. Over the last
several years, ICICI has experienced a high level of impaired loans in the
project finance loan portfolio to manufacturing companies as a result of the
downturn in certain global commodity markets and increased competition in
India. In addition, a significant portion of infrastructure projects financed
by ICICI are still under implementation and present risks such as delays in the
commencement of operations and breach of contractual obligations by
counterparties involved and therefore delays in the project's ability to
generate revenues. ICICI has provided project assistance to a large private
sector power generation project in the state of Maharashtra. On account of a
dispute between the power project and the purchaser, the state electricity
board, the project implementation is currently suspended. The matter is
currently pending before the Indian courts, while parallel efforts are
continuing for an out of court settlement. However, it cannot be assured that
any future impairment of this assistance and such other assistances would not
have a materially adverse effect on the quality of the loan portfolio of the
merged entity. ICICI's infrastructure project finance loans are largely recent
loans and, as a result, asset quality problems may not appear until the future.
If a substantial portion of these loans were to become impaired, the quality of
the loan portfolio of the merged entity could be adversely affected.
The merged entity will have high concentrations of loans to certain customers
and to certain sectors and if a substantial portion of these loans were to
become impaired, the quality of loan portfolio of the merged entity could be
adversely affected.
On September 30, 2001, ICICI's 20 largest net loans, based on outstanding
balances, totaled approximately Rs. 167.4 billion (US$ 3.5 billion), which
represented approximately 27.2% of ICICI's total net loans outstanding. ICICI's
largest single loan outstanding at that date was approximately Rs. 26.5 billion
(US$ 552 million), which represented approximately 4.3% of the total net loans
outstanding. The largest group of companies under the same management control
accounted for approximately 3.8% of the total net loans outstanding.
On September 30, 2001, ICICI Bank's 10 largest loans, based on outstanding
balances, totaled approximately Rs. 23.6 billion (US$ 492 million), which
represented approximately 25.3% of its total net loans outstanding. ICICI
Bank's largest single loan exposure, based on outstanding balances at that
date, was Rs. 3.3 billion (US$ 69 million), which represented approximately
3.5% of its total net loans outstanding. The largest group of companies under
the same management control accounted for approximately 3.1% of the total net
loans outstanding.
At year-end fiscal 2001, ICICI had extended loans to several industrial sectors
in India. At that date, approximately 55.5% of ICICI's gross restructured loan
portfolio was concentrated in three sectors: textiles (28.5%), iron and steel
(16.6%) and man-made fibers (10.4%). At that date, approximately 35.7% of
ICICI's gross other impaired loan portfolio was concentrated in three sectors:
textiles (14.5%), iron and steel (14.1%) and metal products (7.1%). ICICI's
total loan portfolio also has a significant concentration of loans in these
sectors. These sectors have been adversely affected by economic conditions over
the last few years in varying degrees.
At year-end fiscal 2001, ICICI Bank extended loans to several industrial sector
in India. At that date, approximately 23.5% of ICICI Bank's impaired loan
portfolio, based on outstanding principal balance, was concentrated in four
sectors: finance (9.7%), light manufacturing (7.0%), textiles (3.7%) and
agriculture (3.1%). These sectors have been adversely affected by economic
conditions over the last few years in varying degrees. Although ICICI's and
ICICI Bank's portfolio contains loans to a wide variety of businesses,
financial difficulties in these sectors could increase the merged entity's
level of impaired loans and adversely affect its business, its future financial
performance, its stockholders' equity and the price of its equity shares and
ADRs.
If the merged entity is not able to control or reduce the level of impaired
loans, its business will suffer.
ICICI's gross restructured loans represented 11.1% of its gross loan portfolio
at September 30, 2001 compared to 6.9% at yearend fiscal 2001 (3.1% in fiscal
2000). ICICI's gross other impaired loans represented 5.8% of its gross loan
portfolio at September 30, 2001 compared to 6.6% at year-end fiscal 2001 (8.5%
in fiscal 2000) and its net restructured loans represented 9.2% of its net
loans at September 30, 2001 compared to 5.4% at year-end fiscal 2001 (1.9% in
fiscal 2000). ICICI's net other impaired loans represented 3.2% of its net
loans on September 30, 2001 compared to 3.3% at year-end fiscal 2001 (4.3% in
fiscal 2000). Although ICICI believes that its allowance for loan losses is
adequate to cover all known losses in its portfolio of assets, the level of its
impaired loans is higher than the average percentage of impaired loans in the
portfolios of banks in more developed countries. In addition, in absolute
terms, ICICI's gross impaired loans grew by 29.1% in the half year ended
September 30, 2001, compared to 23.6% in fiscal 2001, 18.2% in fiscal 2000 and
29.6% in fiscal 1999.
ICICI Bank's gross impaired loans represented 5.2% of its gross loan portfolio
at September 30, 2001 compared to 5.5% at yearend fiscal 2001 and to 3.0% at
year-end fiscal 2000. At September 30, 2001, restructured loans represented
0.6% of its gross loan portfolio and other impaired loans represented 4.6% of
its gross loan portfolio. ICICI Bank's net impaired loans represented 2.3% of
its net loans at September 30, 2001 compared to 2.6% at year-end fiscal 2001
and 1.4% at year-end fiscal 2000. In absolute terms, ICICI Bank's gross
impaired loans actually decreased by Rs. 242 million (US$ 5 million) or 4.6% in
the half year ended September 30, 2001 whereas the same had increased by Rs.
3.9 billion (US$ 83 million) or 273.0% in fiscal 2001 and decreased by Rs. 195
million (US$ 4 million) or 12.1% in fiscal 2000. However, the figures are not
comparable since impaired loans aggregating Rs. 2.2 billion (US$ 47 million)
were added consequent to ICICI Bank's merger with Bank of Madura Limited.
50
The growth in impaired loans can be attributed to several factors, including
increased competition arising from economic liberalization in India, a slowdown
in industrial growth, a sharp decline in commodity prices, which reduced
profitability for certain of ICICI and ICICI Bank's borrowers, and the
restructuring of certain Indian companies in sectors such as textiles, iron and
steel and man-made fibers. Further, ICICI and ICICI Bank's growth-oriented
strategy has involved a significant increase in the loan portfolio. It cannot
be assured that there will be no additional impaired loans on account of these
new loans.
A number of factors will affect the merged entity's ability to control and
reduce impaired loans. Some of these, including developments in the Indian
economy, movements in global commodity markets, global competition, interest
rates and exchange rates, would not be within the control of the merged entity.
Although the merged entity would increase its efforts to improve collections
and to foreclose on existing impaired loans, it cannot be assured that success
would be achieved in the efforts or that the overall quality of the loan
portfolio will not deteriorate in the future. If the merged entity is not able
to control and reduce its impaired loans, its business, its future financial
performance, its stockholders' equity and the price of its equity shares and
ADRs could be adversely affected.
A significant increase in the level of restructured loans forming part of
impaired loans in the merged entity's portfolio could affect its business.
ICICI's gross restructured loans increased by 66.1% to Rs. 72.5 billion (US$
1.5 billion) from Rs. 18.5 billion (US$ 396 million) at year-end fiscal 2000
and by 135.5% to Rs. 43.7 billion (US$ 932 million) at year-end fiscal 2001.
ICICI Bank's restructured loans decreased to Rs. 586 million (US$ 12 million)
at half year ended September 30, 2001 from Rs. 890 million (US$ 19 million) at
year-end fiscal 2001. As a result of the impact of the economic environment on
the industrial sector, certain Indian corporations are gradually undergoing a
process of restructuring and repositioning. This restructuring process is
taking place in several industries such as textiles, iron and steel and
man-made fibres. As a result, the level of restructured loans in ICICI's
portfolio has increased substantially in fiscal 2001. Any further significant
increase in restructured loans could cause the business of the merged entity to
suffer and its future financial performance, its stockholders' equity and the
price of its equity shares and ADRs could be adversely affected.
If the merged entity is not able to improve its allowance for loan losses as a
percentage of impaired loans, the price of its equity shares and ADRs could go
down.
ICICI's allowance for loan losses on restructured loans represented 22.0% of
its gross restructured loans at September 30, 2001. ICICI's allowance for loan
losses on other impaired loans represented 48.3% of its gross other impaired
loans at September 30, 2001. ICICI Bank's allowance for loan losses represented
56.8% of its gross impaired loans at September 30, 2001 as against 54.1% at
year-end fiscal 2001.
Although ICICI and ICICI Bank believe that the allowance for loan losses is
adequate to cover all known losses in their asset portfolio, it cannot be
assured that there will be no further deterioration in the allowance for loan
losses as a percentage of gross impaired loans or otherwise. In the event of
any further deterioration in the impaired loan portfolio of the merged entity,
there could be an adverse impact on business of the merged entity, its future
financial performance, its stockholders' equity and the price of its equity
shares and ADRs.
The merged entity may experience delays in enforcing its collateral when
borrowers default on their obligations which may result in failure to recover
the expected value of collateral security exposing the merged entity to a
potential loss.
A substantial portion of ICICI's loans are secured by real property and other
plant and equipment. Although it is ICICI's practice to lend between 60.0% and
80.0% of the appraised value of this type of collateral, an economic downturn
could result in a fall in relevant collateral values.
ICICI Bank's loan portfolio consists primarily of working capital credit
facility that are typically secured by a first lien on inventory, receivables
and other current assets. In some cases, it may take further security of a
first or second lien on fixed assets, a pledge of financial assets like
marketable securities, corporate guarantees and personal guarantees.
In India, foreclosure on collateral generally requires a written petition to an
Indian court. An application, when made, may be subject to delays and
administrative requirements that may result, or be accompanied by, a decrease
in the value of the collateral. These delays can last for several years. In the
event a borrower makes a reference to a specialized quasi-judicial authority
called the Board for Industrial and Financial Reconstruction, foreclosure and
enforceability of collateral is stayed. It cannot be guaranteed that the full
value of collateral will be realized, as a result of, among other factors,
delays in bankruptcy, foreclosure proceedings, defects in the perfection of
collateral and fraudulent transfers by borrowers. A delay in recovery of the
expected value of collateral could expose the merged entity to a potential
loss. Any unexpected losses could adversely affect the business of the merged
entity, its future financial performance, its stockholders' equity and the
price of its equity shares and ADRs.
ICICI is involved in a legal proceeding concerning one of its borrowers, which
if adversely determined, may have an adverse effect on the results of the
merged entity's operations, financial condition, liquidity and the price of its
equity shares and ADRs.
In January 2001, the Bank of Nova Scotia Asia Limited and Commerzbank AG filed
a claim against ICICI before the English courts in London challenging certain
transactions between ICICI and Arvind Mills Limited, a borrower to whom both
ICICI and the plaintiffs are lenders. These transactions relate to certain
lease, brand-financing and investment agreements between ICICI and Arvind Mills
Limited. Such transactions aggregate approximately Rs. 5.7 billion (US$ 122
million). The litigation is in its early stages
51
and as the claims are unparticularized, no estimate of the interest, damages
and costs claimed can be quantified currently. ICICI has denied all claims of
the plaintiffs and is contesting the jurisdiction of the English courts to hear
the matter. The same transaction is also the subject matter of a criminal
complaint filed by Commerzbank AG against ICICI and its executive directors
(including the former deputy managing director) before the Indian courts. The
Indian courts have granted an ad-interim stay of the complaint and the matter
has been posted for further hearing.
ICICI's management believes, based on consultation with its counsel, that the
ultimate resolution of these legal proceedings will not have a material adverse
effect on ICICI's results of operations, financial condition, or liquidity.
However, the final outcome of these legal proceedings cannot be predicted with
certainty and it cannot be guaranteed that the ultimate resolution of these
legal proceedings will not have a material adverse effect on the results of the
merged entity's operations, financial condition, liquidity and the price of its
equity shares and ADRs.
The merged entity would face greater credit risks than banks in developed
countries.
The merged entity's principal business would be providing financing to its
clients, virtually all of whom would likely be based in India. In the past,
ICICI has focused its activities on large-scale project finance projects.
Increasingly, ICICI and ICICI Bank are focusing on large corporate customers,
many of whom have strong credit ratings, as well as on select middle market
companies and individuals. The loans given by ICICI and ICICI Bank to middle
market companies can be expected to be more severely affected by adverse
developments in the Indian economy than loans to large corporations. In all of
these cases, both ICICI and ICICI Bank are subject to the credit risk that
their borrowers may not pay in a timely fashion or at all. The credit risk of
all its borrowers is higher than in more developed countries due to the higher
uncertainty in India's regulatory, political, economic and industrial
environment and difficulties that many of the borrowers face in adapting to
instability in world markets and technological advances taking place across the
world. In fiscal 2001, India experienced a slowdown in overall growth, which
reduced the profitability of certain of the borrowers. Higher credit risk may
expose the merged entity to a potential loss which would adversely affect its
business, its future financial performance, its stockholders' equity and the
price of its equity shares and ADRs.
If the merged entity is not able to succeed in the new business areas recently
undertaken by ICICI and ICICI Bank, the merged entity may not be able to meet
its projected earnings and growth targets.
Throughout ICICI's existence, ICICI has primarily been in the business of
providing project financing. In recent periods, ICICI has been developing its
corporate finance businesses. These businesses are different from ICICI's
historical project finance business and require new skills in order to succeed.
ICICI has also sought to develop its retail banking business with the creation
of ICICI Bank in 1994 and ICICI's personal financial services group in fiscal
1999. Retail banking is a substantially different business than corporate
banking and requires very different personnel, skills and infrastructure.
Growing ICICI's and ICICI Bank's corporate finance and retail businesses is a
critical component of the merged entity's future growth strategy and its
projections of earnings.
It cannot be assured that the relevant demand for new banking products has been
accurately estimated. In particular, the merged entity would be a relatively
new entrant in the retail banking market and existing competition may impede
its ability to penetrate this sector. Retail banking could expose the merged
entity to the risk of financial irregularities by various intermediaries and
investors. The merged entity cannot assure you that it will be able to master
and deliver the skills and management information systems necessary to
successfully manage these new businesses. ICICI is also looking at business
opportunities in certain sectors of the economy with which it has not
traditionally been involved, including the public sector, the agri-business
sector and the information technology sector. In addition, both ICICI and ICICI
Bank have launched several Internet-based products for retail
and corporate customers including online brokering services. ICICI Bank has
launched several Internet banking products for its retail and corporate
customers including online bill payments and online account opening. ICICI Bank
has also entered the Indian credit card market and started offering mobile
phone banking services. ICICI has also recently entered the life insurance
business and the non-life insurance business. The life insurance and non-life
insurance businesses are expected to require substantial capital in the initial
period. ICICI is also exploring the possibility of international expansion by
leveraging on our home country links and technology competencies in financial
services. ICICI is a new entrant in international business and the skills
required for this business are different from those for our domestic
businesses. It cannot be assured that these new businesses will perform as
anticipated. The inability to grow in new business areas may adversely affect
the business of the merged entity, its future financial performance, its
stockholders' equity and the price of its equity shares and ADRs.
The success of the Internet banking strategy will depend, in part, on the
development of the new and evolving market for Internet banking in India.
ICICI Bank have offered Internet banking services to its customers since
October 1997, although there are currently low volumes of such transactions
being conducted in India. At March 31, 2001, ICICI Bank had approximately
550,000 Internet accounts. The demand and market acceptance for Internet
banking are subject to a high level of uncertainty and are substantially
dependent upon the adoption of the Internet for general commerce and financial
services transactions in India. The International Data Corporation predicted in
1999 that the number of Internet users in India will grow from approximately
0.8 million in 1999 to 4.5 million in 2002 and 12.3 million by 2005. At
present, there are 1.8 million Internet subscribers in India.
Many of the existing customers and potential customers have only a very limited
experience with the Internet as a communications medium. In order to realize
significant revenue from the Internet based Infinity Services, customers will
have to be persuaded to conduct banking and financial transactions through the
Internet. In addition, the cost to Indian consumers of obtaining the hardware,
software and communications links necessary to connect to the Internet is too
high to enable many people in India
52
to afford to use these services at this time. Although relevant legislation has
been introduced by the government of India, critical issues concerning the
commercial use of the Internet, such as security, legal recognition of
electronic records and validity of contracts entered into online, remain
unresolved and may inhibit growth. If Internet banking does not continue to
grow or grows slower than expected, the merged entity will not be able to meet
its projected earnings and growth strategy related to its Internet banking
business.
The success of Internet-related strategy will depend, in part, on the
development of adequate infrastructure for the Internet in India.
The Internet may not be accepted as a viable commercial marketplace in India
for a number of reasons, including inadequate development of the necessary
network infrastructure. There can be no assurance that the Internet
infrastructure will be able to support the demands of its anticipated growth.
Inadequate infrastructure could result in slower response times and adversely
affect usage of the Internet generally. If the infrastructure for the Internet
does not effectively support growth that may occur, the merged entity will not
be able to execute our growth strategy for its Internet-related businesses. The
inability of the merged entity to grow in this business area may adversely
affect its business, its future financial performance, its stockholders' equity
and the price of its equity shares and ADRs.
The business of the merged entity is very competitive and its growth strategy
depends on its ability to compete effectively.
Interest rate deregulation and other liberalization measures affecting the
financial sector have increased the merged entity's exposure to competition.
The liberalization process has led to increased access for customers to
alternative sources of funds, such as domestic and foreign commercial banks and
the domestic and international capital markets. The corporate banking business
of the merged entity will continue to face competition from Indian and foreign
commercial banks. The merged entity will also face competition from Indian and
foreign commercial banks and non-banking finance companies in the development
of its retail business. In addition, the merged entity will face increasing
competition for resource raising. The Indian banking sector may experience
further consolidation, resulting in fewer banks, some of which may have greater
resources than the merged entity. The future success of the merged entity will
depend upon its ability to compete effectively. Due to competitive pressures,
the merged entity may be unable to successfully execute its growth strategy and
offer products and services at reasonable returns and this may adversely impact
business of the merged entity, its future financial performance, its
stockholders' equity and the price of its equity shares and ADRs.
If the merged entity is not able to integrate ICICI and ICICI Bank's recent
acquisitions or if it is not able to integrate any future acquisitions, its
business could be disrupted and the price of its equity shares and ADRs could
go down.
In the last four years, ICICI acquired two non-bank finance companies, ITC
Classic Finance Limited and Anagram Finance Limited. In fiscal 2001,
subsidiaries of ICICI acquired the following software development and service
companies based in the United States: Ivory International Inc., Objects Xperts
Inc. and Command Systems Inc. An ICICI subsidiary also acquired Ajax Software
Solutions Limited, a software development company based in India. In the
current fiscal year, an ICICI subsidiary also acquired Insyst Technologies
Limited, a software development company based in India. ICICI Bank acquired
Bank of Madura Limited, an old private sector bank in India in fiscal 2001.
The merged entity has no understanding, commitment or agreement with respect to
any material future acquisition or investment, though the merged entity may
seek opportunities for growth through future acquisitions. Any future
acquisitions may involve a number of risks, including deterioration of asset
quality, diversion of attention of the management of the merged entity,
attention required to integrate the acquired business and the failure to retain
key acquired personnel and clients, some or all of which could have an adverse
effect on the business of the merged entity, its future financial performance,
its stockholders' equity and the price of its equity shares and ADRs.
Material changes in the regulations which govern the merged entity could cause
its business to suffer and the price of its equity shares and ADRs to go down.
Banks and financial institutions in India operate in a highly regulated
environment. The Reserve Bank of India extensively supervises and regulates
banks and financial institutions. In addition, these institutions are subject
generally to changes in Indian law, as well as to changes in regulation and
government policies, income tax laws and accounting principles. The laws and
regulations governing the banking sector and financial institutions could
change in the future and any such changes could adversely affect the business
of the merged entity, its future financial performance and the price of its
equity shares and ADRs.
Significant security breaches could adversely impact the business of the merged
entity.
ICICI and ICICI Bank seek to protect computer systems and network
infrastructure from physical break-ins as well as security breaches and other
disruptive problems caused by their increased use of the Internet. Computer
break-ins and power disruptions could affect the security of information stored
in and transmitted through these computer systems and network infrastructure.
ICICI and ICICI Bank employ security systems, including firewalls and password
encryption, designed to minimize the risk of security breaches. Though the
merged entity intends to continue to implement security technology and
establish operational procedures to prevent break-ins, damage and failures,
there can be no assurance that these security measures will be successful. A
significant failure in security measures could have a material adverse effect
on the business of the merged entity, its future financial performance and the
price of its equity shares and ADRs.
53
Risks Relating to the ADRs and Equity Shares
ADR holders will not be able to vote their ADRs.
ADR holders have no voting rights unlike holders of the equity shares who have
voting rights. The depositary will exercise its right to vote on the equity
shares represented by the ADRs as directed by ICICI and ICICI Bank's board of
directors. Equity shares underlying the ADRs may be withdrawn to seek to vote
the equity shares so withdrawn. However, for foreign investors, this withdrawal
process may be subject to delays.
ADR holders' ability to withdraw equity shares from the depositary facility is
uncertain and may be subject to delays.
India's restrictions on foreign ownership of Indian companies limit the number
of shares that may be owned by foreign investors and generally require
government approval for foreign ownership. Investors who withdraw equity shares
from the depositary facility will be subject to Indian regulatory restrictions
on foreign ownership upon withdrawal. It is possible that this withdrawal
process may be subject to delays.
ADR holders' ability to sell in India any equity shares withdrawn from the
depositary facility may be subject to delays if specific government approval is
required.
ADR holders seeking to sell in India any equity shares withdrawn upon surrender
of an ADR will require Reserve Bank of India approval for each such transaction
unless the sale of such equity shares is made on a stock exchange or in
connection with an offer made under the regulations regarding takeovers. It
cannot be guaranteed that any approval will be obtained in a timely manner or
at all. Because of possible delays in obtaining requisite approvals, investors
in equity shares may be prevented from realizing gains during periods of price
increases or limiting losses during periods of price declines.
Restrictions on the withdrawal of ADRs from the depositary facility and
redeposit of equity shares in the depositary facility could adversely affect
the price of the ADRs.
An ADR holder who surrenders an ADR and withdraws equity shares may be able to
redeposit those equity shares in the depositary facility in exchange for ADRs.
In addition, an investor who has purchased equity shares in the Indian market
may be able to deposit them in the ADR program. However, in either case, the
deposit or redeposit of equity shares may be limited by securities law
restrictions and will be restricted so that the cumulative aggregate number of
equity shares that can be deposited or redeposited as of any time cannot exceed
the cumulative aggregate number represented by ADRs converted into underlying
equity shares as of such time. An investor who has purchased equity shares in
the Indian market could therefore face restrictions in depositing them in the
ADR program. This increases the risk that the market price of the ADRs will be
below that of the equity shares.
Certain shareholders may own a large percentage of equity shares of the merged
entity. Their actions could adversely affect the price of the equity shares and
the ADRs of the merged entity.
ICICI's principal shareholders are the Life Insurance Corporation of India, the
General Insurance Corporation of India and its subsidiaries and the Unit Trust
of India, each of which is controlled by the Indian government. In addition to
a governmentnominated director, ICICI has traditionally invited a
representative of the Ministry of Industry to be one of its directors.
Following the resignation of Mr. Piyush Mankad in June 2001, there is no
representative of the Ministry of Industry on the ICICI Board at present. ICICI
also has a director representing the Life Insurance Corporation of India and
another director representing the General Insurance Corporation of India. At
year-end fiscal 2001, government-controlled entities owned approximately 33.6%
of ICICI's outstanding equity shares and about 3.9% of ICICI Bank's outstanding
equity. On a proforma basis, on September 30, 2001, the government-controlled
entities would own about 22.6% of the outstanding equity shares of the merged
entity. As a result of such share ownership, the Indian government may continue
to have the ability to exercise influence over most matters requiring approval
of the merged entity's shareholders, including the election and removal of
directors and significant corporate actions. At September 30, 2001, the Unit
Trust of India held 6.3% of ICICI's outstanding equity shares. The Unit Trust
of India is currently facing problems due to a significant decline in the
market value of its securities portfolio. Any substantial sale of ICICI's
equity shares prior to amalgamation and the merged entity's shares subsequent
to the amalgamation by the Unit Trust of India could adversely affect the price
of equity shares and ADRs of the merged entity.
Conditions in the Indian securities market may affect the price or liquidity of
the equity shares and the ADRs.
The Indian securities markets are smaller and more volatile than securities
markets in developed economies. The Indian stock exchanges have in the past
experienced substantial fluctuations in the prices of listed securities.
Indian stock exchanges have also experienced problems
that have affected the market price and liquidity of the securities of Indian
companies. These problems have included temporary exchange closures, broker
defaults, settlement delays and strikes by brokers. The BSE was closed for
three days in March 1995 following a default by a broker. In March 2001, the
BSE dropped 667 points, or 15.6%. ICICI's stock price on the BSE dropped 15.4%
from Rs.104.00 (US$ 2.22) per equity share on March 1, 2001 to Rs. 87.95 (US$
1.88) per equity share on March 30, 2001. On September 21, 2001, ICICI's stock
price on the BSE was Rs. 48.10 (US$ 1.03) per equity share. In March 2001,
there were also rumors of insider trading in the BSE leading to the resignation
of the BSE president and several other members of the governing board. In the
same month, the Kolkata Stock Exchange suffered a payment crisis when several
brokers defaulted and the exchange invoked guarantees provided by various
Indian banks. In addition, the governing bodies of the Indian stock exchanges
have from time to time imposed restrictions on trading in certain
54
securities, limitations on price movements and margin requirements. Further,
from time to time, disputes have occurred between listed companies and stock
exchanges and other regulatory bodies, which in some cases may have had a
negative effect on market sentiment. Similar problems could happen in the
future and, if they did, they could affect the market price and liquidity of
the equity shares and ADRs of the merged entity.
Settlement of trades of equity shares on Indian stock exchanges may be subject
to delays.
The settlement on the stock exchanges where the equity shares of
ICICI and ICICI Bank are listed and traded may be subject to delays and an
investor in such equity shares withdrawn from the depositary facility upon
surrender of ADRs may not be able to settle trades on such stock exchanges in a
timely manner.
As a result of Indian government regulation of foreign ownership, the price of
the merged entity's ADRs could go down.
Foreign ownership of Indian securities is heavily regulated and is generally
restricted. ADRs issued by companies in certain emerging markets, including
India, may trade at a discount or premium to the underlying equity shares, in
part because of the restrictions on foreign ownership of the underlying equity
shares. One of the conditions set by the Ministry of Finance in its approval to
ICICI's ADR offering in September 1999 was that the total foreign equity
shareholding in ICICI, by all possible routes, should not exceed 49.0% of the
equity share capital of ICICI including existing foreign direct investors,
non-resident Indian and overseas corporate body investors, the existing GDR
investors, the existing investors in the foreign currency corporate borrowings
of ICICI, foreign institutional investors and the holders of the ADRs issued in
the offering. As a result of Indian government regulation of foreign ownership,
the price of the merged entity's ADRs could go down.
ADR holders may be unable to exercise preemptive rights available to other
shareholders.
A company incorporated in India must offer its holders of equity shares
preemptive rights to subscribe and pay for a proportionate number of shares to
maintain their existing ownership percentages prior to the issuance of any new
equity shares, unless these rights have been waived by at least 75.0% of the
company's shareholders present and voting at a shareholders' general meeting.
US investors in ADRs may be unable to exercise preemptive rights for equity
shares underlying ADRs unless a registration statement under the US Securities
Act of 1933 is effective with respect to such rights or an exemption from the
registration requirements of the US Securities Act of 1933 is available. The
decision to file a registration statement will depend on the costs and
potential liabilities associated with any such registration statement as well
as the perceived benefits of enabling US investors in ADRs to exercise their
preemptive rights and any other factors considered appropriate at the time. It
cannot be guaranteed that a registration statement would be filed under these
circumstances. If ICICI issues any such securities in the future, such
securities may be issued to the Depositary, which may sell such securities in
the securities markets in India for the benefit of the investors in the ADRs.
There can be no assurance as to the value, if any, the Depositary would receive
upon the sale of these securities. To the extent that investors in ADRs are
unable to exercise preemptive rights, their proportional interests in ICICI
would be reduced.
Because the equity shares underlying the ADRs are quoted in rupees in India,
ADR holders may be subject to potential losses arising out of exchange rate
risk on the Indian rupee and risks associated with the conversion of rupee
proceeds into foreign currency.
Investors that purchase ADRs are required to pay for the ADRs in US dollars.
Investors are subject to currency fluctuation risk and convertibility risks
since the equity shares are quoted in rupees on the Indian stock exchanges on
which they are listed. Dividends on the equity shares will also be paid in
rupees, and then converted into US dollars for distribution to ADR investors.
Investors that seek to convert the rupee proceeds of a sale of equity shares
withdrawn upon surrender of ADRs into foreign currency and export the foreign
currency will need to obtain the approval of the Reserve Bank of India for each
such transaction. In addition, investors that seek to sell equity shares
withdrawn from the depositary facility will have to obtain approval from the
Reserve Bank of India, unless the sale is made on a stock exchange or in
connection with an offer made under the regulations regarding takeovers.
Holders of rupees in India may also generally not purchase foreign currency
without general or special approval from the Reserve Bank of India. However,
dividends received by the depositary in rupees and, subject to approval by the
Reserve Bank of India, rupee proceeds arising from the sale on an Indian stock
exchange of equity shares which have been withdrawn from the depositary
facility, may be converted into US dollars at the market rate.
On an average annual basis, the rupee has declined against the US dollar since
1980. As measured by the Reserve Bank of India's reference rate, the rupee lost
approximately 30.8% of its value against the US dollar in the last four years,
depreciating from Rs. 36.46 per US$ 1.00 on September 15, 1997 to Rs. 47.70 per
US$ 1.00 on September 14, 2001. In addition, in the past, the Indian economy
has experienced severe foreign exchange shortages. India's foreign exchange
reserves have since increased to US$ 45.4 billion at August 31, 2001.
ADR holders may be subject to Indian taxes arising out of capital gains.
Generally, capital gains, whether short-term or long-term, arising on the sale
of the underlying equity shares in India are subject to Indian capital gains
tax. For the purpose of computing the amount of capital gains subject to tax,
Indian law specifies that the cost of acquisition of the equity shares will be
deemed to be the share price prevailing on the BSE or the NSE on the date the
depositary advises the custodian to redeem receipts in exchange for underlying
equity shares. The period of holding of such equity shares, for determining
whether the gain is long-term or short-term, commences on the date of the
giving of such notice by the depositary to the custodian. Investors are advised
to consult their own tax advisors and to consider carefully the potential tax
consequences of an investment in the ADRs.
55
There may be less company information available in Indian securities markets
than securities markets in developed countries.
There is a difference between the level of regulation and monitoring of the
Indian securities markets and the activities of investors, brokers and other
participants and that of markets in the United States and other developed
economies. The Securities and Exchange Board of India is responsible for
improving disclosure and other regulatory standards for the Indian securities
markets. The Securities and Exchange Board of India has issued regulations and
guidelines on disclosure requirements, insider trading and other matters. There
may, however, be less publicly available information about Indian companies
than is regularly made available by public companies in developed economies.
The existence of outstanding stock options may adversely affect the market
price of equity shares and ADRs of the merged entity.
Up to 5.0% of ICICI's issued equity shares may be issued in accordance with
ICICI's employee stock option scheme to eligible employees of ICICI and its
subsidiaries. Accordingly, ICICI had granted 8,531,250 share options at August
31, 2001. During fiscal 2001, 32,500 share options were exercised and 120,400
share options were forfeited. At year-end fiscal 2001, 462,350 vested share
options were exercisable which increased to 1,748,175 share options at August
31, 2001.
In the case of ICICI Bank, from the inception of its stock option plan in
February 2000 through August 31, 2001, ICICI Bank had granted a total of
3,293,200 stock options or 1.5% of its equity shares on March 31, 2001, of
which none have been exercised and 341,425 have vested but have not yet been
exercised. The vested portion of stock options represented 0.2% of ICICI Bank's
equity shares on March 31, 2001. On April 1, 2002, 801,178 additional stock
options will vest, representing a further 0.4% of ICICI Bank's equity shares on
March 31, 2001. Once vested, each stock option may be exercised for one equity
share.
The issuances of such stock options, and any future issuance of equity shares
in consequence thereto, will dilute the positions of the holders of the shares
or ADRs of the merged entity and could adversely affect the market price of the
merged entity's ADRs.
56
ANNEXURE C
PROCEDURE FOR SHAREHOLDERS, ADR HOLDERS AND INTERESTED PARTIES TO
APPEAR AT THE COURT HEARING TO SANCTION THE SCHEME
Court Hearing - Information in relation to the date of the hearing
1. If the shareholders of both ICICI and ICICI Bank approve the Scheme with
the requisite majority required under the Companies Act, 1956 of India
i.e. by a majority of the shareholders representing three-fourths in value
of the shareholding of each company, present and voting in person or by
proxy, then the Transferor Companies would petition the High Court of
Judicature at Bombay and ICICI Bank would petition the High Court of
Gujarat at Ahmedabad for sanction of the Scheme.
2. ICICI Capital and ICICI PFS are wholly-owned subsidiaries of ICICI and all
equity shareholders of ICICI Capital and ICICI PFS have given their
approval to the Scheme. Russel Credit Limited is the sole preference
shareholder of ICICI and its approval for the Scheme will be obtained in
writing. Hence, there is no requirement for convening the meetings of the
equity shareholders of ICICI Capital and ICICI PFS and the preference
shareholders of ICICI.
3. Upon filing of the petition by each of the Transferor Companies and ICICI
Bank with the respective High Courts, the courts would fix the date for
the hearing of the petition. ICICI and ICICI Bank would each give notice
of the hearing of the petition by the respective High Courts to the
shareholders of ICICI and ICICI Bank respectively, including each of the
Depositary of ADRs of ICICI and ICICI Bank and the NYSE, by way of
publication of an advertisement in two newspapers, i.e. Business Standard
and Sakal for ICICI and Business Standard and Sandesh for ICICI Bank, or
in such other papers as the court may direct, at least 21 days before the
date of the respective hearing.
4. Each Depositary of ADRs of ICICI and ICICI Bank would in turn notify the
holders of ADRs of the date of the hearing of the petition by the
respective High Courts.
Right to Appear at the Court Hearing
5. The ICICI and ICICI Bank shareholders and ADR holders, the respective
creditors and any other party interested in the Scheme would have the
right to appear at the said hearings. Under the Companies (Court) Rules,
1959 every person who intends to appear at the hearing of the petition to
sanction the Scheme, whether to support or to oppose the petition, is
required to serve on the petitioner (i.e. ICICI at ICICI Towers, Bandra
Kurla Complex, Mumbai 400 051 or ICICI Bank at Landmark, Race Course
Circle, Vadodara 390 007, as the case may be) at its registered office or
its advocate (i.e. M/s Amarchand & Mangaldas & Suresh A. Shroff & Company,
Advocates for ICICI having their office at Lentin Chambers, Dalal Street,
Fort, Mumbai 400 023 and M/s Amarchand & Mangaldas & Suresh A. Shroff &
Company, Advocates for ICICI Bank having office at Apartment No. 4B,
Premchand House Annexe, High Court Way, Ashram Road, Ahmedabad 380 009),
notice of his/her intention (the "Notice to Appear at the Hearing").
6. The Notice to Appear at the Hearing is required to contain the address of
such person, and be signed by him/her or his/ her advocate, and should be
served in person or by post on ICICI or ICICI Bank, as the case may be,
such that it reaches the respective company or its advocates not later
than two days prior to the date of the hearing in the court as notified by
ICICI or ICICI Bank, as the case may be.
7. Any such party may give his/her intention to support/oppose the Scheme in
the form attached herewith as Appendix A and the grounds of such support/
opposition by an affidavit in the form attached herewith as Appendix B to
reach the respective company or its advocates not later than two days
prior to the date of the hearing as mentioned above.
8. As indicated above, there is no requirement for a shareholder or any other
party interested in the court proceedings to personally file the Notice to
Appear at the Hearing and he/she can do so through his/her legal counsel
or even mail the Notice to Appear at the Hearing to reach the relevant
company or its advocates in the required time frame. In so far as the
submissions at the court hearing relating to the sanction of the Scheme is
concerned, the shareholder or other party interested in the court
proceedings may make the submissions in person or through his/her legal
counsel. In addition, several shareholders or other parties interested in
the court proceeding may retain a single counsel to represent them in
court.
9. The shareholder or any other person making an appearance at the hearing to
sanction the Scheme would have to bear any costs for instructing a legal
counsel.
Additional Information for non-resident shareholders and holders of ADRs of
ICICI and ICICI Bank
10. A non-resident shareholder of ICICI or ICICI Bank or holder of ICICI or
ICICI Bank ADRs would also have the right to appear at the hearing of the
respective High Courts for sanctioning the Scheme. The provisions as
detailed above are applicable in their case as well and the Notice to
Appear at the Hearing and an affidavit specifying the grounds of
support/objection is required to be filed for this purpose.
11. Also, as indicated above, there is no requirement for a non-resident ICICI
or ICICI Bank shareholder or ADR holder to personally file the Notice to
Appear at the Hearing in India and this can be done by mailing the Notice
to Appear at the Hearing in India or by instructing legal counsel in
India. Similarly, a non-resident ICICI or ICICI Bank shareholder or ADR
holder can present its/his/her/their case and make submissions before the
court through a legal counsel in India.
57
APPENDIX A
FORMAT OF NOTICE OF INTENTION TO APPEAR AT THE HEARING OF THE COURT
[IN THE HIGH COURT OF JUDICATURE AT BOMBAY][HIGH COURT OF GUJARAT AT AHMEDABAD]
COMPANY APPLICATION NO. ___ OF ________
In the matter of the Companies Act, 1956;
-And-
In the matter of Sections 391 to 394 of the Companies Act, 1956;
-And-
[In the matter of ICICI Limited, a company incorporated under
the Indian Companies Act, 1913 and having its registered office
at ICICI Towers, Bandra Kurla Complex, Mumbai 400 051,
Maharashtra][In the matter of ICICI Bank Limited, a company
incorporated under the Companies Act, 1956 and having its
registered office at Landmark, Race Course Circle, Vadodara 390
007, Gujarat]
-And-
In the matter of Scheme of Amalgamation of ICICI Limited, ICICI
Capital Services Limited and ICICI Personal Financial Services
Limited with ICICI Bank Limited.
COMPANY PETITION NO. ___ OF ________
Notice of Intention to Appear
To,
[ICICI Limited][ICICI Bank Limited],
[Address to be filled in as indicated in theadvertisement of the hearing]
Take notice that __________________ intends to appear at the hearing of the
petition advertised to be heard on the ____ day of _____,
_______ and to oppose/support such petition.
(Name): ________________________
(Sd.): _________________________
Address: _______________________
Dated: __________
58
APPENDIX B
FORMAT OF AFFIDAVIT LISTING THE GROUNDS OF SUPPORT/OBJECTION
[IN THE HIGH COURT OF JUDICATURE AT BOMBAY][HIGH COURT OF GUJARAT AT AHMEDABAD]
COMPANY APPLICATION NO. ___ OF ________
In the matter of the Companies Act, 1956;
-And-
In the matter of Sections 391 to 394 of the Companies Act, 1956;
-And-
[In the matter of ICICI Limited, a company incorporated under
the Indian Companies Act, 1913 and having its registered office
at ICICI Towers, Bandra Kurla Complex, Mumbai 400 051,
Maharashtra][In the matter of ICICI Bank Limited, a company
incorporated under the Companies Act, 1956 and having its
registered office at Landmark, Race Course Circle, Vadodara 390
007, Gujarat]
-And-
In the matter of Scheme of Amalgamation of ICICI Limited, ICICI
Capital Services Limited and ICICI Personal Financial Services
Limited with ICICI Bank Limited.
COMPANY PETITION NO. ___ OF ________
Affidavit in support/objection of Notice of Intention to Appear
I ___________ (name) of ______ (city), _______ (country) inhabitant, do hereby
swear and state as follows:-
[To insert grounds of support/objection to the Scheme]
Solemnly affirmed at __________
aforesaid this ___ day of ___________
Before me,
(Name and address of legal counsel/notary before which affidavit is sworn)
50