| Queuing up for cash
Mumbai, Feb. 10: ICICI Bank plans to raise Rs 3,000-3,500 crore through an equity issue that will strengthen its capital base and help it tap opportunities in the fast-growing areas of retail credit and insurance.
The decision has, however, sparked speculation on the kind of response it will get from investors who will be swamped with mega-issues to be launched by Oil and Natural Gas Corporation (ONGC) and Gail.
However, ICICI Bank officials are confident that quality shares will not fail to lure investors. According to deputy managing director Kalpana Morparia, the completely book-built issue could hit the market by April, and the process completed by the first quarter of 2004-05. Foreign institutional investors (FIIs) will be offered a slice of the flotation, the size depending on the existing regulations.
Bank sources said money from the issue would help fuel growth plans for four years. Retail, infrastructure loans and insurance are areas where demand for funds is seen to grow rapidly in the coming months.
The demand for credit from the retail front is expected to increase with continued economic growth, rising household incomes and lower interest rates, the bank said. The clamour for credit from manufacturing is also expected to get louder.
Insurance promises to be a money-spinner too, given that the sector is highly untapped compared with those in the world’s developed economies, the bank said. Infrastructure development on sustainable public-private partnership model is seen as another big opportunity.
Bankers feel infrastructure funding will pick up in 2004-05 as various projects, led by power, are likely to attain financial closure. State Bank alone expects a core sector-driven jump of 16 per cent in loan disbursals.
While ICICI Bank will seek shareholders’ approval at an extraordinary general meeting on March 12, it will soon appoint lead book-managers and file the IPO prospectus with the Securities and Exchange Board of India (Sebi). After the issue, the capital adequacy ratio of the bank is expected to jump to over 14 per cent from 11.3 per cent.
The fund-raising plan added Rs 12.45 to the bank’s share price of Rs 345.75, making it one of the day’s best performers on Dalal Street. Analysts expect the issue to be priced at a small premium on its existing market price.
Foreign investors owned 71.4 per cent of the bank’s shares at the end of December. FIIs, including the Government of Singapore, held 45.25 per cent. Domestic banks and financial institutions controlled 14.98 per cent, while the Indian public had 7.76 per cent. The rest was with private corporate bodies.