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| ICICI Bank UT2 |
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| Summary of Proposed Investment |
| This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. |
| Project number | 25492 |
| Company name | ICICI Bank Limited |
| Country | India |
| Sector | Finance & Insurance |
| Environmental category | FI |
| Department | Global Financial Markets Group |
| Status | Active |
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| Date SPI disclosed | October 27, 2006 |
| Projected board date | December 7, 2006 |
| Previous Events | Invested: December 27, 2006
Signed: December 22, 2006
Approved: December 21, 2006 |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
The proposed project consists of a 15-year subordinated debt issue of up to $150 million to ICICI Bank Ltd. (ICICI Bank or the Bank), India’s largest private commercial bank with a market share of approximately 7.5% in terms of total assets. The project will support the Bank’s capital requirements to finance growth, especially in key areas such as rural banking and microfinance, insurance and international banking, as well as to meet the requirements of Basle II.
The proposed investment, which qualifies as Upper Tier II Capital (UT2), will be structured as per the guidelines recently issued by the Reserve Bank of India (RBI) permitting banks to raise subordinated debt in foreign currency from foreign investors.
ICICI Bank is a domestic AAA rated institution, which was incorporated in 1994 as a subsidiary of ICICI Limited. ICICI Limited was a development finance institution formed in 1955 at the initiative of the World Bank, the government of India and Indian industry representatives. ICICI Bank and ICICI Limited merged in 2002 to create to India’s largest private commercial bank. ICICI Bank is listed on the Mumbai and National Stock Exchanges as well as the NYSE. It has built up a formidable brand name and consumer banking franchise with a leadership position across the full range of consumer finance products. On March 31, 2006, the Bank had total assets of $56 billion and a net worth of approximately $5 billion. ICICI Bank provides a diversified range of financial services through its subsidiaries in life and general insurance, asset management, venture capital, and investment banking. Although ICICI Bank has been able to raise about $215 million equivalent UT2 in the domestic bond market in July 2006, it has approached IFC for an additional investment as it is desirous of diversifying its funding sources and investor base.
This investment provides a window of opportunity for IFC to play a key role in promoting new, innovative banking products in India, and in developing the subordinated debt market. |
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| Project sponsor and major shareholders of project company |
| ICICI Bank has a well-diversified shareholding structure. On September 23, 2006, Foreign investors (foreign institutional investors, ADR holders, foreign banks, foreign nationals and non-resident Indians) held 73.1% of the Bank’s shares, while Indian investors held 26.9%. Among the Indian investors, Life Insurance Corporation of India was the largest shareholder with 8.0%. The Bank’s shares are listed on the Bombay Stock Exchange and the National Stock Exchange and American Depository Shares are listed on the NYSE. On October 4, 2006, the Bank’s shares traded at approximately 2.7 times book value. |
| Total project cost and amount and nature of IFC's investment |
| IFC funding will consist of a subordinated loan of $150 million. |
| Location of project and description of site |
| ICICI Bank is headquartered in Mumbai and has 635 branches in India. The Bank has subsidiaries in UK, Canada and Russia, branches in Singapore, DIFC, Sri Lanka, Bahrain and Hong Kong and representative offices in the US, China, UAE, Bangladesh and South Africa. |
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| Anticipated development impact of the project |
The project is expected to have strong development impact by:
- Demonstration effect:
The proposed investment will have a strong demonstration effect in promoting new, innovative capital instruments such as UT2 and stimulating investor demand for the product.
- Strengthening the presence of the private sector banks in India:
The government-owned banks still dominate the banking industry, but ICICI Bank and a few other large private sector banks are poised to take the lead in India’s banking industry. The project will support the long-term growth strategy of ICICI Bank enabling it to consolidate its leadership position among Indian banks.
- Impact on Underserved Sectors:
The project will support ICICI Bank in becoming a forerunner among private banks to help improve access to finance for underserved markets i.e. rural banking and MSMEs. |
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| IFC's expected development contribution |
- Addressing the funding needs of a top performing bank:
IFC has quickly responded to ICICI Bank’s request for funding, which will help increase the Bank’s capitalization ratio and enable it to implement a more dynamic growth strategy.
- Diversify funding sources, reduce maturity mismatch:
The IFC subordinated financing will diversify the Bank’s funding base and reduce its asset/liability maturity mismatch. |
| Environmental and social issues - Category FI |
This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure.
During appraisal, IFC will analyze the FI portfolio for types of transactions, size, tenor and industry sectors and determine the Applicable Requirements if any, based on an analysis of the potential Environmental and Social risks associated with the FI portfolio. The Applicable Requirements would include a combination of:
- the IFC FI Exclusion List(s); and/or
- the applicable National Environmental and Social Laws and regulations; and/or
- the IFC Performance Standards.
IFC will also review, if required, the capacity of the FI to manage environmental and social risks and to establish and maintain the ESMS. IFC will suggest Supplemental Actions to address any gaps.
The FI has in place a process for S&E reviews of project finance activities. IFC has sought details and the presence of formal documents in this respect for review, and IFC will suggest Supplemental Actions, if any, to address any gaps. Based on the review, as mutually agreed between the FI and IFC, the project will be required to:
- Commit to formalize, if required, the Social and Environmental Management System (SEMS) and implement supplemental actions, if any, to the SEMS, prior to disbursement that is satisfactory to IFC, to ensure that its investments/activities are consistent with the Applicable Requirements.
- Identify responsible, qualified persons to manage and implement the SEMS.
- Commit to implement the SEMS and take action to remedy any gaps in SEMS implementation on an ongoing basis.
- Submit a periodic report to IFC as per a format to be provided by IFC. |
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| For inquiries about the project, contact: |
Ms. Vishakha Mulye, CFO & Treasurer
ICICI Bank Limited
ICICI Bank Towers
Bandra-Kurla Complex
Mumbai 400 051
India
Telephone: 91-22-2653 8903
Fax: 91-22-2653 1111
Website: www.icicibank.com |
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| For inquiries and comments about IFC, contact: |
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster |
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