Mumbai, Sept. 26: ICICI Bank shares stashed away in a kitty when ICICI merged with it were sold today in a record block deal that made the bank richer by Rs 1,320 crore.
In all, 10.14 crore shares — representing 16.5 per cent of the equity — kept in a special purpose vehicle (SPV) went to a clutch of foreign investors who paid Rs 130 apiece, a discount to scrip’s close of Rs 134 on Dalal Street today.
The band of buyers included Lombard and Prudential, ICICI Bank’s partner in general insurance. There are reports suggesting Lombard and the Government of Singapore picked up over 5 per cent, but their holdings are below 8 per cent; LIC continues to be the single largest shareholder with 8.5 per cent.
At the time of the reverse merger, it was announced that ICICI’s holding in ICICI Bank — 46 per cent before and 16 per cent after the merger — would be retained in an SPV, called Western India Trustee and Executor Company.
Merchant bankers have given ICICI the credit for pioneering a strategy where an SPV holds shares to be sold later. This was done to avoid cancellation of ICICI Bank’s shares held by ICICI after the two coalesced into one. The idea is to leverage stakes, rather than see them set off under a scheme of merger, as is usually the case.
The law, which forbids firms from holding their own equity, also prompted Reliance to warehouse its shares after merger with Reliance Petroleum in an SPV.
The strategic and institutional investors who bought shares today were Hamblin Watsa Investment Counsel, Government of Singapore Investment Corporation, Lombard and Prudential Portfolio Managers, the bank said. Against Rs 130 they forked out, ICICI had spent only Rs 12.27 to buy the shares, valued at Rs 125 crore. That pile has now fetched Rs 1,320 crore.
ICICI Bank executive director Kalpana Morparia told The Telegraph that money raised from the deal will go towards provisioning for loans that passed on from ICICI, though the board would have the final say on it; a portion of the proceeds will be used for lending. The capital gains will help the bank cope with its gross non-performing assets, amounting to Rs 6,918 crore. The buyers were chosen on the basis of their “long-term interest in ICICI Bank or India,” Morparia indicated.
Merchant bankers say since the shares have gone to a clutch of foreign investors — with each holding under 8 per cent — the deal will not run afoul of the takeover code.
They feel the money will provide the bank with the resources to hedge against suspect assets and improve earnings growth.
The market, unaware of details, initially reacted negatively on fears that a major stakeholder had sold out. The share, a topper on BSE’s turnover table, dropped to Rs 130 after the deal was reported, but recovered to close at Rs 134 after peaking at Rs 142.80.