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Price-volatility buffer key to ICICI Bank issue success

Mumbai, March 27: ICICI Bank today kicked off the roadshow for its forthcoming public issue that seeks to raise Rs 3,500 crore amid an optimism that its proposed investment protection mechanism and the option of part-payment upon application granted to the retail segment would lure investors.

The bank has appointed DSP Merrill Lynch as the agent that will look into the aspect of price stabilisation, post listing. ICICI Bank is the first domestic entity to experiment with such a plan. It is being done to ensure that any temporary volatility in share prices does not affect the shareholders.

Senior DSP Merrill Lynch officials said the stabilising process would not continue for a period exceeding 30 days from the date when trading permission is obtained from the Bombay Stock Exchange (BSE). The stabilising agent would borrow equity shares of the bank from Life Insurance Corporation to the extent of 15 per cent of the total issue.

Briefing newspersons here today, K. V. Kamath, managing director and CEO of ICICI Bank, said the economy had been witnessing an industrial revival in the past three months and this had encouraged the bank to come out with the public issue.

“Large companies are all talking of projects in various industries, including infrastructure,” he said.

Recent figures have revealed that the current growth rate of the country at 8.4 per cent is only next to China at 9.9 per cent. India is now the fourth-largest economy on the basis of purchasing power parity.

Kamath said capital is also required to serve the huge demand for consumer credit. While the bank’s international activity which was rolled out last year would need support, the capital-hungry insurance business necessitated fresh issue of capital. “We believed, we will get the issue done comfortably,” Kamath said.

ICICI Bank has already announced a price band of Rs 255-295 per share for its public offer. Up to 50 per cent of the issue will be available for institutional buyers on a discretionary basis and at least 25 per cent each will be available for allocation to retail bidders and non-institutional bidders.

Retail bidders have the option to pay only Rs 150 per share on application and the balance on call.

Kalpana Morparia, deputy managing director of ICICI Bank, pointed out that in corporate banking it would focus on structuring, syndication and active portfolio management while leveraging appropriate credit opportunities.

On the other hand, in retail banking where there is ample room for higher penetration, it would be leveraging scale benefits, distribution network and customer base.

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