The Hindu Business Line : `Sangli has a strong brand pull in Maharashtra'

ICICI Bank's decision to take over Sangli Bank is a case of "one of the fastest growing banks with a hunger for further growth, and another bank which is groping for a `new growth script'," remarks Mr Robin Roy. He is the Principal Consultant, Banking & Financial Services, PricewaterhouseCoopers (P) Ltd, Mumbai. When Business Line caught up with Mr Roy, he was away in West Asia, on an assignment. He takes time off to answer a few questions about the deal.

First, about the pairing?

Within the constricted environment for M&A (merger and acquisition) among banks, you don't have many `choices'. ICICI Bank has been using Sangli Bank's branches (as per information on its Web site) for business origination. We have seen, in the not so long past, the PSBs (public sector banks) becoming the ipso facto suitor of many such small private banks, not necessarily triggered by the market. A leading private sector bank with a very successful banking franchise can take a more objective decision.

Takeaways for Sangli stakeholders, from the deal?

Many positives. Depending on the share exchange related details, going forward, participation in the robust growth story of ICICI. Taking a generation leap forward in terms of a strategic choice. Ability to participate in decision-making process of a large bank and thus creating more synergies. However, the deal is not clinched till regulatory approvals come!

What are the metrics that matter?

Some of the metrics could be: Ready and ripe base of customers for cross selling a bunch of retail products. Practically, no `set up' cost for branches that will come from the Sangli Bank fold. Much lower marginal cost of customer acquisition. Strong presence in Western India, practically contiguous to many of the industrial hubs and centres. Sangli Bank is also fairly high up on the `technology maturity continuum' making it amenable to link to ICICI's technology platform.

On the challenges in the deal.

First, whether ICICI is a fit and suitable bank for this acquisition as per extant regulations. Then, whether Sangli Bank can be clearly defined as a weak bank and thus on offer for a takeover under extant guidelines. It would be apt to see to what extent the Bank of Madura takeover has been successful. Also relevant are factors such as the value that the current dispersed shareholders are expecting to be unlocked post-deal; and the true extent of the capital requirements, for future growth, evolving credit losses, and required expenditure on information technology, business process reengineering, and retooling human resources.

Memories that Sangli Bank stirs up...

One of the historical crown jewels of Western India, it has a strong brand pull in Maharashtra. Sangli historically has been very important, with them being familiar with an inorganic growth model. They have taken over many small banks (as per the Web site) over the years, though for the last three decades and odd it has consolidated on its own.

What would ICICI need to focus on when Sangli gets merged?

Technological integration, re-skilling of staff on financial product distribution, and swift cultural integration.

More Stories on : Interview | Mergers & Acquisitions | Private Banks | ICICI Bank Ltd

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