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Tayals of Bank of Rajasthan are having their Cake and eating it too in the Amalgamation with ICICI Bank!

Ostensilbly under great pressure to vacate the banking field,the Tayals of Bank of Rajasthan are having their Cake at eating it too!

The Board of Directors of the Bank at their meeting yesterday have given an in-principle approval to amalgamate the Bank with ICICI Bank

The important issue here was what would the swap ratio be….Mrs Chanda Kochar,MD of ICICI Bank announced yesterday that,subject to due diligence,the swap ratio would be 25:118….for every 118 shares of BOR,the shareholder would get 25 Shares of ICICI Bank

Reacting to this,from morning BOR is 20% up on upper circuit at Rs 119.40,while ICICI Bank has dipped to Rs 855 from Rs 890 levels….if ICICI Bank remains at these levels,the BOR Price has to move past Rs 180 to reflect this swap ratio….that’s another 50% up

Tayal,who were always under some cloud or the other will benefit immensely

They had declared they held 28.60 % of the BOR Equity of Rs 161.35 crs (FV Rs 10)…However SEBI under an ex parte order of March 8,2010 have declared that Tayals have a 55.01% stake in the Bank

P K Tayal,claimed on TV yesterday that they were not selling any stake and it was only a 100% swap….however,what will prevent them from selling their stake in ICICI Bank on the swap….Considering their declaration that they hold 28.60%,it amounts to holding 4.61 cr shares of BOR…this would give them 97.67 lakh shares of ICICI Bank…At The price of Rs 855 now,this stake has a value of Rs 835 crs !

And if you take SEBI declaration as correct,Tayals hold 55.01 % in BOR…This means 8.88 crs shares which would be swapped for 1.88 crs shares of ICICI Bank….current value of this is over Rs 1600 crs!   

View this Bonanza in context of the Share Price of BOR when normally traded in the range of Rs 70 thereabouts,the whole Market Cap of BOR was below Rs 1200 crs !….This is today at Rs 1745 crs with BOR at Rs 119.40….when it touches Rs 180,the Market Cap will be over Rs 2900 crs !

Has SEBI won out here or have the Tayals ! ?….Clearly the Tayals….They have extracted Maximum Value for exiting the Banking Sector….their stake in ICICI Bank will be below 2%…..they have the Option to Hold it or monetize it by exiting fully or partially

No wonder P K Tayal had a Cheshire Cat Grin on TV yesterday…he’s awaiting the lickings !….and with him,the other shareholders too will benefit

Going by the Valuation of this Deal,look for other banks that may be forced to amalgamate as the Process of Consolidation quickens in the Banking Space….ICICI Bank has defended this swap Ratio stating it would have taken them another three years to build the current account and saving account relationships that BOR has + the Deal prices the market cap at @ Rs 6.5 crs per Branch of BOR….HDFC Bank had paid a Market Cap of @ Rs 26 crs per Branch when it acquired Centurion Bank of Punjab 

The Moral is Stay Invested with some Exposure in the Small and Mid Cap Banking Space….the Valuations will Fly when Deals are announced at over three times Book !

Cheers !


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