News: ICICI Bank to acquire Sangli Bank for Rs 300 cr

(BL 10/12/2006) Mumbai - ICICI Bank is to snap up Maharashtra-based Sangli Bank through an all-stock amalgamation deal costing Rs 230-300 crore. The share exchange ratio has been fixed at 100 shares of ICICI Bank for every 925 shares of Sangli Bank. "The board of directors of ICICI Bank Ltd and Sangli Bank Ltd at their respective meetings held on Friday, have approved an all-stock amalgamation of Sangli Bank with ICICI Bank. The amalgamation is subject to the approval of the shareholders of both the banks, the RBI and such other approvals as may be required," said a press release from ICICI Bank.

Rural Penetration

For the proposed amalgamation, ICICI Bank will additionally issue approximately 34.5 lakh shares, which work out to about 0.4 per cent of its existing equity capital. Going by ICICI Bank's average share price in the last six months, the cost of the deal works out to Rs 230 crore. At the current share price (Rs 876 on Friday), it will be more expensive at Rs 302 crore. Sangli Bank will discuss the merger at its annual general meeting on December 18. Sangli Bank will offer ICICI Bank the fast lane to achieve its rural strategy, said Vishakha Mulye, Chief Financial Officer, ICICI Bank.

The merger will contribute to the bank's penetration in rural areas. "At one go, ICICI Bank will get nearly 100 branches in rural and semi-urban areas. Significantly, ICICI Bank will have a large number of experienced employees with exposure in rural areas," said Mulye. Sangli Bank has 198 branches (of which 158 are in Maharashtra) and extension counters to give the merged entity a network of 830 branches.

ICICI Bank will absorb the 1,850 employees of Sangli Bank to lift its total staff strength to 33,350, said. Sangli Bank has 3,500 shareholders of which the Bhate family of Sangli is one of the largest shareholders with seats on the board.

Financials

The Maharashtra-based bank has deposits of Rs 2,004 crore and advances of Rs 888 crore. Sangli Bank has a net NPA ratio of 2.3 per cent and capital adequacy of 1.6 per cent as of March 31,2006. The minimum requirement mandated by the RBI for capital adequacy is 9 per cent. The bank has incurred a loss of Rs 29 crore in the same period.

The merger has, however, found a dissident in the All India Bank Employees Association (AIBEA), which has strongly opposed the merger. It has sought the merger of Sangli Bank with a public sector bank. "The RBI should impose a moratorium on Sangli Bank," said Vishwas Utagi, President, AIBEA.