In 1999, the Mumbai-based Pantaloon Retail India consisted of five clothing stores in five cities. Revenue for the chain was Rs135 crore a year, about $30.57 million. Kishore Biyani, Pantaloon’s owner, had ambitions to grow much larger. All he needed, he said, was financing. Then a Mumbai firm called ICICI Venture came to him and, in exchange for a 7.5% stake in the company, invested Rs4.3 lakh.
Today, Pantaloon is India’s biggest publicly traded retailer, with 140 department stores and hypermarkets in 32 cities and revenue of Rs1,930 crore for the year ended 30 June.
Biyani, 45, calls ICICI’s investment a turning point.
“We were nobody at that time,” he says. ”If someone recognizes you, the outside world starts viewing you very differently. Your power to raise money increases.”
ICICI Venture and ICICI Bank, the financial institution of which it is part, have been Pantaloon’s corporate partners ever since.
Though ICICI sold its stake in the company in 2003—recouping five times its investment—the bank still lends Pantaloon money and issues co-branded credit cards to its shoppers. Last October, ICICI Venture invested Rs120 crore in Home Solutions Retail India, a new Pantaloon subsidiary.
India has emerged in the past decade as the world’s second-fastest-growing major economy; it expanded at a rate of 9.2% for the quarter ended on 30 September, trailing only China, at 10.6%. Middle-class consumers are driving the boom.
The bank for that middle class is ICICI. The bank says it accounted for a third of all new consumer debt in the country last year, including home, auto and credit card loans, which makes it No. 1 in all of those categories.
ICICI also serves more-affluent citizens as an investment bank, insurance company, brokerage and fund manager. ICICI Venture, which does both venture capital and private equity investing, has helped fund many start-ups such as Pantaloon.
“ICICI Bank represents the growth of the Indian economy in general and the Indian consumer in particular,” says Rajiv Anand, who manages $3 billion in Indian stocks and bonds at Standard Chartered Mutual Fund in Mumbai. “ICICI has taken consumer lending to the masses.”
ICICI has thrived in part because foreign consumer banks have not made much of a footprint in India; they control just 5% of bank deposits, according to a May 2006 study by the New York-based consultant, McKinsey. That will begin to change in 2009, when analysts expect the government to allow foreign investors to take over Indian private banks.
“Every guy and his uncle wants to be in India,” says Bala Swaminathan, a managing director for India and South Asia at London-based Standard Chartered.
ICICI may also suffer if India’s torrid growth slows, analysts say. Consumer finance in India has been expanding at 25% to 30% a year, says Ajay Bimbhet, head of retail banking for Deutsche Bank India, and so has ICICI’s loan business.
ICICI is everywhere in India, on billboards in every major city and along rural roads, on the phone to prospective customers with incessant calls offering loans, and in ads on television featuring the Bollywood star Shah Rukh Khan.
ICICI says it has 20 million customers and that its roster is growing 35% annually. The bank’s network of 670 branches is expanding by 50-100 every year, and it operates 2,680 automated teller machines.
The man behind ICICI’s fast growth is Kundapur Vaman Kamath, a six-foot-two banker who enjoys Formula One racing and Lagavulin single malt whiskey. Kamath, 59, has been chief executive since 1996.
“In the last three to four years, Kamath has delivered on whatever he has promised,” says Gulbir Madan, a fund manager at Neptune Capital Management in New York. Madan manages $300 million in Asian equities, including ICICI stock.
ICICI has been a growth machine in the past five years. For the year ended 31 March, the group held Rs2.77 lakh crore in assets, up from Rs1.78 lakh crore the previous year. Net income was Rs2,420 crore on revenue of Rs2,576 crore in 2006, up from Rs16,930 crore a year earlier.
ICICI’s shares, listed in Mumbai and on the New York Stock Exchange, jumped 52% in 2006 and, as of 7 February, had a market value of $19.9 billion.
“If you’re really bullish on the Indian market, then ICICI is a good pick,” says Pauli Laursen, who manages $700 million of emerging-market equities at Sydinvest Asset Management in Aabenraa, Denmark, including ICICI shares.