Mumbai, Oct. 13: ICICI Bank today unveiled plans for a Rs 7000-crore ($1.6 billion) public issue ' the second largest in Indian corporate history after Oil and Natural Gas Corporation’s mammoth Rs 10,694-crore capital raising in March last year when the government offloaded 10 per cent of its stakeholding.
The board of directors of the country’s largest private sector bank decided on the flotation of the shares on the domestic and overseas markets. The two flotations may not be made simultaneously, but taken together they will raise more than the Rs 5420.49 crore that TCS raised in August 2004, which is the largest capital flotation by a private company till date.
The new flotation comes on top of the Rs 3246 crore that ICICI Bank raised in April 2004 and signals its desire to scale up its operations and prepare for the challenges ahead as the banking sector gets ready for a round of consolidation.
The bank could raise as much as Rs 8000 crore, sources said, if the issue is oversubscribed and the bank decides to exercise the 15 per cent greenshoe option.
The Indian public holds just 6.23 per cent (or just over 4.6 crore shares) of the 73.9 crore shares issued by the bank till date.
The bank has hired two heavyweight merchant bankers ' JM Morgan Stanley and DSP Merrill Lynch ' to market the issue. This will be a tough assignment as the merchant bankers, who will be assisted by I-Sec, will have to sell about 74 per cent of the shares in the local market and only 26 per cent on the overseas ADR market.
“Looking at the overall growth in the Indian economy and the corresponding rapid growth of our bank assets, we have decided to arm ourselves with more capital for the future,” said Kalpana Morparia, deputy managing director of ICICI Bank.
Morparia indicated that ICICI Bank was looking to ramp up its assets. It has been making big strides in the retail loan segment even as it focuses on lending to small and medium enterprises and continues to increase its overall exposure to large companies.
Profit rises 31%
The bank also unveiled a 31 per cent increase in second quarter profits at Rs 580.5 crore (Rs 442 crore in the year-ago period) beating analysts’ expectations. The bank’s net customer assets increased 45 per cent to Rs 111,514 crore on September 30, 2005 compared with Rs 76,659 crore a year ago.
The bank maintained its growth momentum and market leadership in the retail segment. Its retail disbursements amounted to Rs 25,900 crore, including home loan disbursements of about Rs 10,600 crore. Retail assets constituted 64 per cent of the total advances and 61 per cent of customer assets.
Analysts say the bank is planning to raise capital both domestically and internationally to augment its capital adequacy ratio, which is required to fuel its aggressive growth plans. The bank’s capital adequacy ratio stood at 12.04 per cent on June 30, 2005.
In three months ended September 30, the capital adequacy ratio fell to 11.5 per cent. This need not be a worry as the RBI has specified a capital adequacy of 9 per cent.
“It will help ICICI Bank grow faster in the coming days,” said Jignesh Shah, head of equity, ABN Amro Private Equity.
The ICICI Bank shares fell by Rs 12.60 to Rs 525.60 from its Tuesday close of Rs 538.20. The fall occurred before it told bourses about the offer. The stock peaked at Rs 551.25.