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Finance, Accounting and Control Case Study

Case Title:

ICICI'S CDO

Publication Year : 2003

Authors:  Arti Jhuremalani & G Srikanth

Industry: Banking, Insurance and Financial Services

Region:India

Case Code: FAC0002

Teaching Note: Not Available

Structured Assignment: Not Available

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Abstract:
India's maiden Collateralised Debt Obligation (CDO) structured by Industrial Credit and Investment Corporation of India Ltd(ICICI). Under the ICICI Securities Fund was on similar lines to a close-ended mutual fund. The primary motive behind the introduction of this CDO was to fulfil the adequate reserve requirements as prescribed by the Reserve Bank of India before the reverse merger of ICICI Bank and ICICI. But the initiative taken by ICICI met with disastrous results. Investors felt that the risk involved was much more than the returns they would earn. The complexity involved in the investment procedure was also another factor adding fuel to the failure.

Pedagogical Objectives:

  • To understand the need for ICICI to introduce CDO
  • To discuss the reasons for the failure of the CDO.

Keywords : Development financial institution, Special purpose vehicle, Debentures and loans, Collateralised Debt Obligation, CDO, Asset management company, Asian CDO market, First CDO, Multiple tranched, Finance Case Study, Indian corporate CDO fund, Industrial Credit and Investment Corporation of India Ltd, ICICI, Mutual fund, Statutory liquid and cash reserve ratios, Reverse merger

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