Fitch: Industrial Development Bank of India unaffected

Fitch Ratings said the Industrial Development Bank of India's proposed acquisition of the troubled United Western Bank is unlikely to adversely affect its credit profile, given United Western's small size (total assets of Rs. 70 billion) compared to Industrial Development Bank (Rs. 880 billion asset base).

The addition of United Western Bank's 230 branches would in fact double Industrial Development Bank's distribution capability and add small and medium enterprises and agricultural lending to its product portfolio. Fitch noted however, that a number of United Western's branches are in rural and semi-urban locations in Maharashtra, which could limit their business potential unless some are relocated.

The initial offer price of Rs. 28 per share of United Western would result in a cash consideration of Rs. 1.5 billion. The agency the impact on Industrial Development Bank's equity would depend on the final consideration paid and the resultant goodwill, which is likely to crystallize over the next few months. Nonetheless, adjusting Industrial Development Bank's equity by the indicated purchase price and adding United Western's assets to Industrial Development Bank's balance sheet would reduce the latter's equity-to-assets ratio in 2006 by about 70 basis points to an adequate 6.5%.

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