Filed by ICICI Bank Limited
Pursuant to Rule 165 and Rule 425
under the Securities Act of 1933
Subject Company: ICICI Limited
Commission File No. 001-14954
[Logo] [Logo]
[Graphic Omitted] [Graphic Omitted]
ICICI ICICI Bank
--------------------------------------------------------------------------------
News Release October 25, 2001
Boards of ICICI and ICICI Bank Approve Merger
The Board of Directors of ICICI Limited (NYSE: IC) and the Board of Directors
of ICICI Bank Limited (NYSE: IBN) in separate meetings today at Mumbai,
approved the merger of ICICI with ICICI Bank. The merger of two wholly-owned
subsidiaries of ICICI, ICICI Personal Financial Services Limited and ICICI
Capital Services Limited, with ICICI Bank was also approved by the respective
Boards. The proposal has been submitted to the Reserve Bank of India (RBI) for
its consideration and approval, and shall be subject to various other
approvals, including the approval of the shareholders of the respective
companies, the High Courts of Mumbai and Gujarat, and the Government of India
as may be required. Consequently, the Appointed Date of merger is proposed to
be March 31, 2002, or the date from which RBI's approval becomes effective,
whichever is later. The Scheme of Amalgamation ("the Scheme") approved by the
respective Boards envisages a share exchange ratio of one domestic equity share
of ICICI Bank for two domestic equity shares of ICICI. As each American
Depositary Share (ADS) of ICICI represents five domestic equity shares while
each ADS of ICICI Bank represents two domestic equity shares, the ADS holders
of ICICI would be issued five ADS of ICICI Bank in exchange for four ADS of
ICICI.
The share exchange ratio approved by the Boards of the two entities was based
on a valuation process incorporating international best practices in respect of
a merger of two affiliate companies. JM Morgan Stanley was appointed by ICICI
to advise it on a fair exchange ratio, while ICICI Bank appointed DSP Merrill
Lynch for the same purpose. Thereafter, ICICI and ICICI Bank jointly appointed
the leading accounting firm, Deloitte, Haskins & Sells to recommend the final
share exchange ratio to the Boards of the two entities. The share exchange
ratio has been determined in accordance with best practices in valuation, using
the relative market prices, discounted cash flows and book values. Davis Polk &
Wardwell are the international legal counsel and Amarchand & Mangaldas & Suresh
A. Shroff & Co. are the domestic legal counsel for the merger.
The Scheme will be filed before the High Courts of Mumbai and Gujarat and
subsequently placed for approval at the meetings of shareholders of the
respective companies. ICICI and ICICI Bank have submitted to RBI the proposal
for the merger and compliance with
1
regulatory norms applicable to banks, and would adhere to RBI's decision in the
matter.
The merged entity would be the second largest bank in India with total assets
of about Rs. 95,000 crore (proforma at September 30, 2001), 396 existing
branches/ extension counters of ICICI Bank, 140 existing retail finance offices
and centres of ICICI, and 8,275 employees. 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 retail segment
will be a key driver of growth for the merged entity, with respect to both
assets and liabilities. The merged entity's competitive edge in the financial
system is reflected in the combined cost-to-income ratio of 27 per cent
(proforma for the half-year ended September 30, 2001), which compares
favourably with that of other Indian banks of comparable size and scale of
operations.
The merger is expected to be beneficial to shareholders of both entities. The
merger would enhance value for shareholders of ICICI 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 merger would enhance value for
shareholders of ICICI Bank through the large capital base and scale of
operations, 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. The process of integration between
ICICI Bank and ICICI is expected to be smooth due to the strong synergies
between the two entities.
Consequent to the merger of ICICI with ICICI Bank, the Board of Directors of
ICICI Bank is proposed to be reconstituted in compliance with the Banking
Regulation Act, 1949 and in accordance with best practices in corporate
governance. It is proposed that the Board of Directors of the merged entity
would be headed by Mr. N. Vaghul as the non-executive Chairman. The executive
management at the Board level would comprise Mr. K. V. Kamath as Managing
Director and Chief Executive Officer, Mr. H. N. Sinor and Mrs. Lalita D. Gupte
as Joint Managing Directors and Mrs. Kalpana Morparia, Mr. S. Mukherji, Mrs.
Chanda D. Kochhar and Dr. Nachiket M. Mor as Executive Directors. The executive
management at the Board level would not constitute more than one-half of the
total strength of the Board.
2
ICICI currently holds 46% of the paid-up equity share capital of ICICI Bank.
This holding would not be cancelled under the scheme of amalgamation. It is
proposed to be held in trust for the benefit of the merged entity, and divested
through appropriate placement in fiscal 2003. The proceeds from the divestment
will accrue to the merged entity.
At the time of the merger, ICICI Bank would align the Indian GAAP accounting
policies of ICICI to those of ICICI Bank, including a higher general provision
against standard assets. Further, in accordance with international best
practices in accounting, ICICI Bank has decided to adopt the "purchase method"
of accounting, which is mandatory under US GAAP, to account for the merger
under Indian GAAP as well. ICICI's assets and liabilities will therefore be
fair valued for the purpose of incorporation in the accounts of ICICI Bank on
the Appointed Date.
Full compliance with the prudential norms applicable to banks on all of ICICI's
existing liabilities is likely to have some adverse impact on the overall
profitability of both entities in fiscal 2002.
In 1998, ICICI had set up the Special Asset Management Group for focus on
recovery and resolution of credit exposures, where the operations of the
borrower companies had been adversely impacted due to systemic or other
factors. This initiative has yielded significant benefits, due to the creation
of a focussed team of professionals and development of the specialised skill
sets essential for asset resolution. ICICI is exploring several options for the
creation of an asset reconstruction company, which would own and manage
non-performing loans. ICICI proposes to work actively with the Government of
India, RBI and other institutions and banks to create an enabling framework for
an industry-wide mechanism that would maximise the economic value of distressed
assets in the financial system.
About ICICI
ICICI is a diversified financial services provider, which along with its
various subsidiaries and affiliates, offers a range of products and services to
its corporate and retail customers, and operates as a virtual "universal bank".
At September 30, 2001, ICICI had total assets of Rs. 74,371 crore and
shareholders' equity of Rs. 8,777 crore. ICICI's shares are listed on the Stock
Exchanges at Mumbai, Kolkata,
3
New Delhi, Chennai, Vadodara, Mangalore, Bangalore and on the National Stock
Exchange. ICICI's ADSs are listed on the New York Stock Exchange.
About ICICI Bank
ICICI Bank is a leading technology-oriented private sector bank with assets of
Rs. 20,809 crore and shareholders' equity of Rs. 1,444 crore at September 30,
2001. At September 30, 2001, the Bank had a network of 396 branches and
extension counters, and India's largest ATM network with 601 ATMs. ICICI Bank's
shares are listed on the Stock Exchanges at Mumbai, Kolkata, New Delhi,
Chennai, Vadodara and on the National Stock Exchange. ICICI Bank's ADSs are
listed on the New York Stock Exchange.
About ICICI Personal Financial Services
ICICI Personal Financial Services is 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.
About ICICI Capital Services
ICICI Capital Services is a wholly-owned subsidiary of ICICI, and is the
largest distributor of financial and investment products in India. ICICI
Capital Services also provides front-office services to the retail and
semi-retail investors of ICICI, and undertakes the management of the various
ICICI Centres set up by ICICI.
For further press queries, contact:
Madhvendra Das at 91-22-653 6124 or email at das@icici.com
-------------
For investor queries, contact:
Rakesh Jha at 91-22-653 8902 or Sandeep Guhagarkar at 91-22-653 6157 or email at
ir@icici.com
------------
4
Additional Information and Where to Find It
ICICI Limited and ICICI Bank expect to make available Notice of the
Shareholders' Meeting, a copy of the Scheme of Amalgamation and an Information
Statement or Prospectus to shareholders of ICICI Limited and ICICI Bank and to
investors in each company's ADSs. These documents contain important information
about the merger. Shareholders and investors in the ADS are urged to read these
documents carefully when they are available.
Free copies of these documents may also be obtained from ICICI Limited and
ICICI Bank.
ICICI Limited's and ICICI Bank's filings with the Securities and Exchange
Commission (SEC) are also available to the public from commercial
document-retrieval services or from the website maintained by the SEC at
www.sec.gov
Forward-Looking Statements
This press release contains forward-looking statements based on the current
beliefs and expectations of ICICI Limited's and ICICI Bank's management and are
subject to significant risks and uncertainties. Forward-looking statements
include the information concerning possible or assumed future results of
operations and statements preceded by, followed by or that include the words
"expected", "would be", "would enhance", "would facilitate" or similar
expressions. Actual results may differ from those set forth in the
forward-looking statements. These uncertainties include: the ability to obtain
RBI, governmental and other approvals for the merger on the proposed terms and
schedule; the failure of ICICI Limited and ICICI Bank shareholders to approve
the merger or the failure of the High Courts of Mumbai or Gujarat to approve
the Scheme of Amalgamation; 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 consequent to the merger; the risk that the
businesses will not be integrated as swiftly as planned; the risk that the
revenue synergies and cost savings from the merger may not be fully realized or
may take longer to realize than expected; disruption of the merger 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. These uncertainties may have an adverse effect on the results of ICICI
Limited's and ICICI Bank's operations, financial condition, liquidity and the
price of ICICI Limited's and ICICI Bank's equity shares and ADS. Additional
factors that could cause ICICI Limited's and ICICI Bank's results to differ
materially from those described in the forward-looking statements can be found
in the 2001 Annual Reports on Form 20-F of ICICI Limited and ICICI
5
Bank, filed with the SEC and will be contained in the Information Statement or
Prospectus.
6