Jul 26, 1999|
ICICI: Losing focus
ICICI Ltd. is seeking permission from its shareholders to enter a wide range of businesses - related and unrelated to its current area of operations. The new businesses, which are unrelated to its current operations, include commodities trading, courier business and event management. The other businesses that the company plans to enter are e-commerce, housing loans, smart cards, leasing, trading in financial derivatives, managing off shore funds and insurance.
ICICI is India's second largest financial institution, with a major presence in almost all areas of financial services. The company has an asset base of Rs 585 bn.
The company's decision to venture into unrelated areas would involve substantial costs, as the infrastructure would have to be built from scratch. Moreover, as ICICI lacks any experience in these new fields it is uncertain whether it would be able to carry on such businesses profitably.
The other businesses into which ICICI plans to venture will take it a step closer to its aim of becoming a universal bank. Also, the company will be able to leverage on economies that will arise on expanding into these related businesses. This will help ICICI compete more effectively with its international peers.
The stock has been rated as a 'HOLD' as analysts are skeptical about the company's profitability growth on account of increased competition and rising provisions for non-performing loans and assets.
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