The Hindu Business Line : `High global interest in funding Indian M&As'

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Chennai Feb. 20 Mr K.V. Kamath, 59-year-old Managing Director and Chief Executive Officer, ICICI Bank, is no stranger to the Indian public.

Over the past decade that he has been at the helm, his energetic leadership in the transformation of ICICI from a waning financial institution into a strong and powerful universal bank has been well catalogued.

A little over a year ago, he played a significant behind-the-scenes role in mediating the Ambani brothers' conflict.

He has carried out a number of structural changes in ICICI, which he has termed "gut-wrenching", while putting through mergers, joint ventures and new acquisitions — consolidating and reshaping the organisation simultaneously.

This Formula-1 racing fan has carried some bit of the speed in his favourite pastime, into his profession. Detractors, stunned by the speed of operations, have felt that he was "over speeding".

But there is no denying the catalytic part he has played in changing the culture of the organisation and making ICICI Bank a leader in technology or the impact he has had on the banking sector in India.

He says without a trace of irony, when asked about his bank's recent interest hiking moves, "I respond to signals in the market... ".

It's another matter that the rest of the market seems to look at what ICICI Bank is doing — and that is a true acknowledgement of the importance of the bank and the man heading it.

Mr Kamath shared a few thoughts, on some banking issues, in this chat with Business Line.

What are your views on the recent cross border acquisitions by Indian companies?

All these acquisitions are on the back of some significant competitive advantage that the Indian enterprise has got. It is either the ability to use the technology that the target company has or a much larger market where they know they can scale up and which they can do at a cheaper cost.

There are two themes that I see, running parallel in all these things. One is the ability to back-end and then scale it up in India.

Two, the companies that are acquiring, have already proved themselves in terms of being a very low-cost competitor in their field.

How much are Indian banks funding in these acquisitions?

These are all done through global banks. Even if Indian banks participate, it will be on their global books. The exposure will be very little in an Indian bank's local balance sheet.

These deals are all syndicated out. So the arranging bank keeps a very small part on its books. But there is an enormous global interest in funding Indian companies in these activities.

Your bank raised $2 billion recently and your UK branch has raised another $500 million recently. Why are you raising this money?

These are routine exercises. This keeps going on. Do I have the capital to support these borrowings? Indeed I have. We have capital adequacy that is significantly higher than the norm. So we have the ability.

Do we have the demand? Yes, we have it. The money is going to three parts of our business — domestic lending, lending to Indian businesses going into these domain abroad and to retail, treasury and other activities. We are finding great demand for Indian papers abroad.

What are your branch expansion plans now that the RBI has lifted the ban?

Our strategy has been to go about it in a measured way. We clearly don't need thousands of branches. We need a few hundred here and there and we'll do it. For our rural strategy, we may need some branches in some hubs — we'll request for those.

Your bank raised interest rates recently, almost immediately after the Finance Minister had asked the public sector banks to hold rates? What are your views on how interest rates are going to move?

I don't want to get into any controversy. I follow signals given in the market by authorities — and we do that after we have configured what the impact will be on our business and balance sheet. Thereafter, we take decisions.

If the signal is that inflation is there and interest rates have to go up, then we have to respond. We know interest rates will go up and we have to act and of course policy action follows. We never question it and we don't want to speculate. I am a bank and I have to work within the regulatory ambit and we will do that.

What are your views on the NPA build-up?

That is history. I honestly do not give it any bandwidth today. It is not of consequence.

What are your budget expectations?

I have no expectations.

More Stories on : Private Banks | Interview | Mergers & Acquisitions

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`High global interest in funding Indian M&As'