MUMBAI, March 16: The Industrial Credit and Investment Corporation of India (ICICI) and JP Morgan have decided to part ways. JP Morgan will pull out of term-lending bank's investment banking arm-ICICI Securities and Finance Company Ltd (I-Sec)-in which it holds a 39.64 per cent stake. The decision was taken at a marathon six-hour meeting held at the ICICI headquarters on Monday. A formal announcement will be made on Tuesday after the I-Sec board meets in Mumbai.The meeting on Monday was attended by JP Morgan head of Asia-Pacific Peter Woicke, JP Morgan International Finance Corporation president Edmund Sutton and I-Sec deputy managing director Andrew MacCormack among others. ICICI managing director and CEO KV Kamath was present at the meeting with other senior executives. The modalities to facilitate ICICI buy back Morgan's stake will be finalised within three-four days, ICICI insiders told The Financial Express
."Nothing concrete can be said on the fate of I-Sec at this moment. It can be mergedwith ICICI. Two other possibilities are, a new joint venture partner replacing JP Morgan and I-Sec continuing as a wholly-owned subsidiary of ICICI," sources said.
JP Morgan's decision to pullout was prompted by the fact that the global investment bank was planning to move out of its equities business in Asia. It had earlier pulled out of the asset managment joint venture with ICICI. As per the memorandum of understanding between ICICI and JP Morgan, the foreign investment bank can pull out of the joint venture after five years of operations and the term-lending institution reserves the first right of refusal to buy out its (JP Morgan's) stake. I-Sec has an equity base of Rs 203 crore.
JP Morgan is holding 39.64 per cent stake through Morgan Guarantee International Finance Corporation in I-Sec. The balance stake is held by ICICI and its employees.
I-Sec had posted a half-yearly profit of Rs 36 crore on a total income of Rs 115 crore during 1997-98. The company earned an operating profit of Rs 15.68crore from its opearation on total income of Rs 127 crore.
There has been loss of Rs 65.90 crore, after treating the securities portfolio as stock in trade and valuing the same at lower of cost or market price and provisioning against non-performing assets.
While ICICI took new equity positions of Rs 2.22 crore on account of discharge of underwriting commitments during the year, the total erosion in the value of the equities portfolio, including outstanding position at the begining of the year, amounted to Rs 67.81 crore.
ICICI Brokerage and Services Ltd, an I-Sec subsidiary, holds a NSE card and is planning to acquire a BSE card shortly.
The company is involved in equity, fixed-income, gilts, equity and debt research and corpoarte finance advisory. It had not paid any dividend last year when it posted a loss.
JP Morgan unlikely to be missed
ICICI is strong enough to do without JP Morgan as its investment banking and trading arm. Given the domestic clout of the financial institution, I-Secshould not have much of a problem finding another international partner, if it wants one.
I-Sec has put its problems with the quality of its portfolio behind it, as reflected by decent half-yearly results, and its balance sheet is clean as a result of marking its portfolio to market. JP Morgan is unlikely to be missed.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
