Bank of Rajasthan to merge with ICICI

The Bank Of Rajasthan Ltd. | Bank - Private | BFSI | BSE: 500019 | NSE: BANKRAJAS

19 May 2010 Evaluate

Bank of Rajasthan (BoR) promoter has decided to merge the bank with ICICI Bank. Both the bank boards have given an in-principle nod to the merger and have reached an indicative pricing with the promoters on a swap ratio of 118:25 (BoR:ICICI). The indicative price of Rs 188 according to the share swap would be a steep jump compared with the current market price.

The swap ratio is subject to due diligence which ICICI Bank has started from Tuesday. Acquisition would help ICICI bank to instantly build the current account and savings account relationships which typically takes 3 years. CASA (Current Account and Savings Account) is really going to be driven by branch network. The deal will give ICICI Bank another 500 branches and some of it are in locations where the bank is not present. This deal will help in improving its presence in north India.

The deal prices the market capitalisation per branch in the range of around Rs 6.5 crore, which is similar to other old private sector banks. Given ICICI Bank’s market capitalisation of Rs 99,125 crore, the bank will have to dilute its equity by less than 3%. ICICI Bank will propose a share-swap transaction with BoR.

The Tayals, promoters of BoR are believed to be under pressure to sell the old private bank amid regulatory action by Sebi and RBI. RBI has recently slapped a fine on BoR for a string of violations including deletion of records in the IT system, shady property deals and irregularities in a particular corporate group account. Sebi, on the other hand, has put a question mark on the shareholding of BoR. Though BoR promoters say they hold a 28.60% stake in the bank, Sebi has put the promoter shareholding at 55.01%. In March, Sebi had banned 100 entities allegedly holding BoR shares on behalf of the promoters from all stock market activities. Under the circumstances, Tayals may have to sort out the issues with Sebi to execute the deal with ICICI. crack crack

Bank of Raj Share Price

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Peers

Company Name	CMP
HDFC Bank	781.20
ICICI Bank	1264.80
Axis Bank	1269.40
Kotak Mahindra Bank	380.75
Indusind Bank	949.85
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