Q3

ICICIS GLOBAL EXPANSIONAshutosh Kedawat | Krittika Adhikary | Rohit Singh Sahani | Vishal Kedia

Opportunity sizing: Domestic retail market (1/3)ICICIs contribution in Housing loans to reach $70 mn in 2006Domestic Retail (Exhibit 6a)YearBase year20022003200420052006Housing Loans2001 Market sizeMarket Size ($ bn) 6.38 8.46 11.20 14.85 19.67 26.06 Annual Growth Rate32.50%32.50%32.50%32.50%32.50%32.50%Incremental Market Size ($ bn)- 2.07 2.75 3.64 4.82 6.39 Share in Incremental Loans11%11%11%11%11%ICICI's Share3%3%3%3%3%3%ICICI's Loan Size ($ bn) 0.42 0.72 1.12 1.65 2.36 ICICI's Incremental Loans ($ bn) 0.23 0.30 0.40 0.53 0.70 Spread1.80%1.80%1.80%1.80%1.80%1.80%Fees4%4%4%4%4%4%Contribution ($ mn) 10.33 16.68 25.09 36.23 50.99 70.55 Assumption:Annual growth rate assumed to be 32.5%; given to vary between 30-35% in Case

Opportunity sizing: Domestic retail market (2/3)Contribution from Auto finance will also close in on $50 Mn in 2006Domestic Retail (Exhibit 6a)YearBase year20022003200420052006Auto FinanceMarket Size ($ bn) 1.81 2.31 2.94 3.75 4.78 6.10 Annual Growth Rate27.50%27.50%27.50%27.50%27.50%27.50%Incremental Market Size ($ bn) 0.50 0.63 0.81 1.03 1.31 Share in Incremental Loans20%20%20%20%20%20%ICICI's Share16%16%16%16%16%16%ICICI's Loan Size ($ bn) 0.39 0.52 0.68 0.88 1.15 ICICI's Incremental Loans ($bn) 0.10 0.13 0.16 0.21 0.26 Spread3.50%3.50%3.50%3.50%3.50%3.50%Fees2.50%2.50%2.50%2.50%2.50%2.50%Contribution ($ mn) 12.79 16.10 21.22 27.76 36.09 46.71 Assumption:Annual growth rate assumed to be 27.5%; given to vary between 25-30% in Case

Opportunity sizing: Domestic retail market (3/3)Contribution from Credit cards to sky rocket to $170 MnDomestic Retail (Exhibit 6a)YearBase year20022003200420052006Credit CardsMarket Size (mn cards) 5.00 6.13 7.50 9.19 11.26 13.79 Annual Growth Rate22.50%22.50%22.50%22.50%22.50%22.50%ICICI's Current Share5%5%5%5%5%5%Incremental Size (mn) 1.13 1.38 1.69 2.07 2.53 Share in Incremental Size15%15%15%15%15%15%Number of ICICI cards (mn) 0.42 0.63 0.88 1.19 1.57 Income per card ($)31.9131.9131.9131.9131.9131.91Contribution ($ mn) 7.98 13.36 19.96 28.04 37.94 50.06 Total Contribution ($ mn) 31.10 46.14 66.27 92.02 125.01 167.32 Assumption:Annual growth rate assumed to be 22.5%; given to vary between 20-25% in Case

Following the Indian diasporaHistorically, banks have expanded abroad by first going to customers with strong ties to the home country e.g. HSBCNRI depositsYearTotal NRI DepositsICICI's shareIncome ($mn)200123.070.50%0.72200223.801.50%2.23200324.562.00%3.07200425.342.50%3.96200526.143.00%4.90200626.973.50%5.90Remittances have the highest potential; NRI deposits smaller but significantDifferent market segments, geographies- blue collar vs white collar; US/UK vs GCCCan use technology to reduce branch investmentAssumptions: 1. Growth rate of NRI desposits (overall) =3% 2. Margins are between 0.5-0.75% (assumed 0.625%)3. ICICIs share increases to 3.5% in 5 years

Opportunity Sizing: Remittances marketYear200120022003200420052006Total Remittances Market ($ bn) 15.00 16.50 18.15 19.97 21.96 24.16 Market Growth10%10%10%10%10%10%Share Capture by ICICI3%5%7%9%10%Average Transaction Size ($)250250250250250Number of Transactions (mn) 1.98 3.63 5.59 7.91 9.66 Revenue per Transaction ($) (@5%) 12.50 12.50 12.50 12.50 12.50 Income ($ mn) 24.75 45.38 69.88 98.83 120.79 Opportunity sizing: Corporate lending and trade financing

Treasury and corporate lending

Income from trade financeFollow the Indian corporate ?Large Indian corporate houses expanding abroad require loans to subsidiaries, trade finance, non-fund based business such as letters of credit

Require:Existing relationshipTechnologyInternational expansion decisionICICI should go ahead with International expansion due to following reasons:

High Growth potentialBoth NRI services and BPO services have large potential market size and growth rate

Early mover advantageICICI could pre-empt competition in foreign locations by attaining large market share in early years

Leverage technological capabilitiesICICI could leverage its technological capabilities to gain competitive advantage in this space

Diversification opportunityInternational expansion through either of NRI or BPO services provided ICICI with an opportunity to diversify its businessPotential success factors in International expansionTechnological advancementICICI has superior technology than other banks who tried abroad stintTechnology is critical in most International locations to provide good service

Organization structure and cultureLean organization with quick credit decision taking ability

Optimal pricingFrom the lessons learnt, ICICI could price the products better for high market share capture

MarketingUnlike other banks who had limited success in International expansion, ICICI can market its products aggressively to form large customer base

Product innovationBacked by technology and its quick decision taking abilities, ICICI could come up with innovative products, say in NRI services

Alliance with local partnersICICI could enter into partnership with local banks for Better understanding of customers and their requirementsReduction of regulatory riskThird-party BPO platform

Estimated revenues from third-party BPO unit

Countries we would like to invest inUSUKGCC

Thrust AreasRemittances It is a lucrative market as seen from the PV of cash flowsWe can concentrate on US and GCC for starting off its remittances offeringIn GCC, especially competency is needed in terms of physical presence and branches from where money can be deposited to be transferred to IndiaICICI can look to partner with Gulf companies for money collection on that side and leverage its domestic circuit for delivery here.

NRI Deposits With a growing India diaspora (10%) and a high GDP growth in India, higher interest rates in India (12.5%) as compared to the low interest rates in the west (2-3%), the market can be captured quicklyFurther, with ICICIs core competency in technology, it can make platforms for tech-savvy white collared NRIs and workers to transfer money electronically into their ICICI INR accountsNRI Deposits have a huge potential and can act as a cheap source of funding by (benefit of 0.5% to other sources) the booming domestic loan market.

Corporate Finance With large volume of trade with US and UK, corporate banking is another lucrative option to be looked at. This is true for the non-oil sector.Thank You