Foreign banks, ICICI make an M&A killing

Mumbai, Nov 29 | Updated: Nov 30 2006, 08:31am hrs
A clutch of foreign banks and ICICI Bank have made a killing as India Inc goes on an overseas acquisition spree. Almost all overseas deals undertaken by Indian companies between April and November this year have been fundedICICI Bank apartby foreign banks, including Citibank, ABN Amro and Standard Chartered Bank.

In what is clearly bad news for the likes of State Bank of India, the country's largest bank with a sizeable overseas presence, public sector banks (PSBs) have virtually got no share of this lucrative and fast-growing business.

There are over 85 international deals (excluding the proposed Tata-Corus one) which have been closed by Indian companies, involving a hefty Rs 28,000 crore between April and November.

Confirming that ICICI Bank was the only private sector bank with a lions share of the debt funding for these deals, Kalpana Morparia, joint managing director of the bank, said, Out of the debt portion, which is almost 60% of the total amount, ICICI Banks share is estimated to be 50%. Foreign banks funded the balance. In fact, the Tata bid for Corus is also witnessing three foreign banksABN Amro, Deutsche and Standard Chartered Bank as key funding entities.

ICICI Bank, the countrys second largest, has both fund- and non-fund-based exposure in all the deals between April and November, Morparia said.

Most of the amount has been syndicated. We have also retained some small amount in our books, she explained. ICICI Banks London, Singapore and Canada operations have managed the funding of M&A deals of Indian companies.

Almost 40% of the funding has been generated by these companies themselves through a mix of instruments including equity. A majority of the dealsacross segments like pharma, IT and energyhave dollar funding.

ICICI Bank has seen a 100% jump in its overseas funding activities this fiscal. The banks fee-based income in its international operations is pegged at almost 50%, while in domestic operations, it is estimated to be at 35%.

Some of the major deals where ICICI Bank played a role in funding are Tata Groups takeover of Energy Brands of the US, Dr Reddys acquisition of German generic drug maker betapharm, and i-Flexs acquisition of US-based Mantas Inc for an all-cash deal of $122.6 million.