ICICI Bank to reduce stake in 3i Infotech, Firstsource

ICICI Bank will reduce its stake in IT firm 3i Infotech and business process outsourcing company Firstsource to below 5% within a year, MD & CEO Chanda Kochhar told FE. Both the firms have substantial operations in the US.

The country’s second largest bank is required to cut its holding in these companies to comply with regulations of the US banking regulator, Federal Reserve.

Kochhar said 3i Infotech was set up as a division of ICICI Bank, which later blossomed into a separate company. However, she did not elaborate whether the bank will completely exit these companies or retain the minimum 5% as permitted under the US Fed regulations.

Though Kochhar did not disclose on how ICICI will cut its stakes in these companies, it is understood

that the bank is in talks with several buyout firms.

?The regulations treat our New York branch like a bank holding company. A bank holding company or its parent company cannot undertake non-banking business, other than certain financial services business like securities business. Thus, ICICI Bank cannot directly or indirectly own more than 5% of a non-banking company which has significant US operations,? ICICI Bank’s spokesperson told FE.

ICICI Bank has already reduced its stake in these companies over the past one year though it is yet to pare it below 5%. ?The combined holding of ICICI Bank and a fund managed by ICICI Venture in 3i Infotech has reduced from about 39% to about 23% over the last year. The holding in Firstsource has been reduced from about 25% to about 19.5%,? the spokesperson added.

The bank already has a full branch in New York and plans to expand its US operations for which it needs to pare its stakes in non-banking companies having business in the US. ?ICICI Bank already has a branch in New York, which is mainly permitted to undertake wholesale banking and banking for NRIs,? the spokesperson said.

The US contributes over 50% revenues to the country’s $50 billion software services export industry.

The ICICI Bank spokesperson that these are the only two companies in which the bank has to cut is stake. ?These are the only entities to which the licensing condition applies. None of ICICI Bank’s subsidiaries have operations in the US, other than ICICI Securities, whose US activities are permitted to continue under the regulations,? he said.