Banking on expansion

With India's tiger economy hungry for global opportunities, it should come as no surprise that footprints are appearing on the UK corporate landscape. M&A's Morag Dickson talks to executive director Sonjoy Chatterjee about internationalising ICICI Bank's offering

Sonjoy Chatterjee has played an instrumental role in the internationalisation of ICICI, India’s largest private sector bank. Formerly the managing director and chief executive officer of wholly-owned subsidiary, ICICI Bank UK, he was recently appointed an executive director of the group with responsibility for wholesale and international banking.

Tell us about yourself and what the move will mean in terms of your future focus.

The transition to board member was largely the result of a series of well-executed projects. I arrived in London five years ago tasked with establishing a UK presence. I single-handedly set up ICICI’s maiden London office in Knightsbridge and led the subsequent roll-out of offices in Wembley, Southall, Slough, Leicester, Manchester and Birmingham, growing the team to 300.

My responsibilities increased when I was asked to head up the bank’s international subsidiaries and manage the global clients group comprising ICICI’s top 50 clients, including those in India. With an enlarged role spanning the bank’s corporate and international business divisions, I was elevated to a main board position.

What will you bring to the board that will gear the group’s growth?

The transition to board member has essentially involved a transferral of skills. As we have managed to drive a fair share of overseas big-ticket acquisitions made by Indian corporates through the London office, I will be trying to replicate those successes across our other international domains. Secondly, we are looking to enhance our coverage across corporate India to create a more meaningful relationship with our domestic client base in order to augment the revenues accrued to the bank on its home turf. It is a large platform and as such represents a large revenue pool. We need to address that potential. And it’s these two elements that form the cornerstone of our growth agenda moving forwards.

How did ICICI Bank evolve to gain its current market standing as India’s largest bank by market cap and net worth, and the second largest by assets?

To give you a potted history, ICICI was formed in 1955 as a financial institution as part of an initiative led by the World Bank, the Government of India and representatives of Indian industry. The idea was to create a financial institution providing medium and long-term project financing to Indian businesses. By the 1990s, ICICI had evolved into a diversified financial services group, offering products and services directly and through a number of subsidiaries and affiliates, such as ICICI Bank. Following the Central Bank’s ruling in favour of private sector banks, ICICI Bank went private in 1994.

ICICI subsequently began to consider corporate structuring alternatives against a backdrop of rising competition in India’s banking sector. The merger of ICICI with ICICI Bank ensued in 2002, creating the optimal legal structure for the group’s global banking strategy and acting as a catalyst to rapid growth. That’s where the step change came in and ICICI Bank’s expansion into the UK has played its role in producing positive financials. As at 31 March 2007, we posted total assets of approximately INR3,447 billion (£42 billion) and profit after tax of INR31 billion (£0.4 billion).

Tell us about the high-profile deals that you have backed recently and have strengthened ICICI’s market presence.

We were sole arranger of acquisition finance on the £77.9 million purchase of Pinewood Laboratories made my Mumbai-based pharmaceuticals company Wockhardt last year.

More recently, ICICI Bank was corporate adviser to UB Group company United Spirits on its £600 million-plus purchase of Scottish whisky firm Whyte & Mackay, providing the acquisition finance together with Citibank. We arranged £325 million of debt on Whyte & Mackay, which was used in the refinancing of existing debt and the payment of the equity holders. We are also seeing good deal flow directed through our London office.

As part of the company’s international banking strategy, ICICI entered the UK market in 2003. How would you describe the rationale behind the venture and how successful has it been?

ICICI Bank set up its international banking group in order to meet the worldwide needs of its clients and to leverage its domestic banking strengths.

Initially there were two main drivers that underpinned our internationalisation programme. Firstly, we wanted to address the requirements of our customer, namely the global Indian. The global aspirations of India’s corporates are many as they seek to expand their presence outside India. Secondly, as an established player in India, there was a clear need for us to diversify our risks by including an element of global play.

ICICI Bank UK is the only banking subsidiary among Indian banks that is locally-incorporated in the UK. It was initially established in February 2003 as a private company. ICICI Bank UK went public in October 2006.

In order to accelerate our local reach in the UK, ICICI Bank UK forged a partnership with Lloyds TSB that would see our India-linked banking services to Non-Resident Indians (NRIs) being channelled through Lloyds’ existing branches. The Internet also provided us with a mainstream offering, enabling us to offer the best rate in business savings. Since our cost:income ratio is half that of British banks, we are able to pass those savings on to the customer, offering a market-leading rate.

These factors have increased our offering on the retail side, which currently accounts for almost 65 per cent of the liability side of the balance sheet.

The community dynamic of ICICI Bank UK has combined with our online offering to give us a mature balance sheet within a relatively short space of time.

Looking ahead, we are continuing to expand our UK operations in a selective manner. This will involve the roll-out of at least another five new branches over the next six months, targeting those key areas of high ethnicity we have not yet reached to expand our market share in the community.

And what of ICICI Bank UK’s European game plan?

ICICI Bank UK entered into mainland Europe in May 2006, opening a branch in the heart of the diamond district in Antwerp, Belgium. Considering the volume of business relating to the diamond trade, the operation there is

proving successful.

We’re looking at Germany right now. On the retail side, it’s the best market for savings in Europe. It’s also the best market for Internet savings. Wholesale wise, Germany has attracted a fair amount of Indian companies, particularly from the auto components and the pharmaceuticals sector – together a useful set of corporate revenues. We’ve already acted on these observations and are about to launch our services there.

What other geographies do you see as particularly attractive and why?

ICICI Bank has led most of the Indian acquisitions in the UK and Europe – and some in the US. We have just received the licence for our branch in New York. We are excited about our prospects there because of the size of the market.

And on the home front?

A lot of opportunities are surfacing in India too. We are witnessing something of a corporate revolution. Where you see a $1 trillion economy today, you can expect that figure to have doubled in eight or nine years’ time. The sheer multiple effect of this across industries is phenomenal.

Consumption and investment are driving it. Consumption rates follow demographics. With 65 per cent of India’s population under the age of 35, industry is reaping the benefits of a boom in industry-specific knowledge and expertise. Graduates are taking their fair share of the financial rewards with disposable incomes reaching unprecedented highs.

Then you’ve got the investment rate, which is where corporate India is playing its role. We are looking at a quantum of investment of about $500 billion in the next three to five years. And to put that number into context, $500 billion is equal to India’s investment total in the last 50 years. So a new India

is emerging.

Corporate India is well-positioned. The combination of huge capital surpluses in India’s equity markets leads me to predict that ICICI Bank in India will continue to perform well in the future. And I think we will see a lot more acquisitions overseas because while a large part of the Western world is currently grappling with market flux in the post-crunch period, India remains largely untouched. This will further create space for India’s corporates, led by Indian banks, to grow more aggressively overseas.

CV – Sonjoy Chatterjee

2007 Appointed executive director on the board of ICICI Bank, taking responsibility for corporate & investment banking, government banking and international banking

2003Moves to London to set up ICICI Bank’s first overseas subsidiary. Today ICICI Bank UK is the largest overseas Indian bank and the highest-rated Indian bank

2000-2002 Manages a number of ICICI’s key clients

1998-2000 Heads up strategic support during ICICI’s transformation from a development financial institution to a universal banking group with interests in banking, insurance, private equity and asset management

1994 Joins ICICI’s project finance business in Kolkata, India.

Sonjoy Chatterjee, group executive director – ICICI Bank


Marc Barber

Marc Barber

Marc was editor of GrowthBusiness from 2006 to 2010. He specialised in writing about entrepreneurs, private equity and venture capital, mid-market M&A, small caps and high-growth businesses.

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