ICICI bank’s mega follow-on issue expected to open on June 18

By Avadh Singh

It has come into the notice of The India Street that ICICI Bank’s mega follow-on issue is expected to open on June 18, a week after the opening of DLF’s IPO. The pivotal factor here is that ICICI Bank aims to raise at least Rs 10,000 crore from investors, on the other hand DLF is raising between Rs 8,750 crore and Rs 9,600 crore.

Experts are of the opinion that the bank’s offer will get a positive response even though the time gap with the DLF offer is less. “There is a demand for quality issues. ICICI Bank’s offering should, therefore, get a good response,” pointed out Mita Vashist, CEO of Mita investment.

No doubt, bank has witnessed a growth in its assets, particularly in the loan and investment segment, because of the growth in Indian economy. The fund will also help it fulfill the Basel II guidelines, which need banks to maintain higher capital for number of asset classes.

ICICI is also planning to use the funds for its overseas and rural operations. In addition, bank has also expanded the range of its commercial banking products for its international customers. The bank has subsidiaries in the UK, Canada and Russia. It has branches in Singapore, Dubai, Sri Lanka, Hong Kong and Bahrain.

Theoretically speaking, ICICI Bank’s domestic issue is part of a $5bn capital-raising programme. In addition to the local issue, ICICI Bank has a goal to raise another $2.5 bn from the issue of American Depository Receipts.

In addition to the equity issues, ICICI Bank is also raising money by selling shares of the holding company for its insurance businesses. The timing of the stake sale in the holding company would be judge by clearances from Reserve Bank of India and IRDA.

It is worth mentioning that this week, ICICI Bank gets permission from the Foreign Investment Promotion Board to sell up to 24% equity in ICICI Holdings. Though, the bank will be offering only 5% to international investors.

"The bank proposes to transfer its holdings in ICICI Prudential Life Insurance, ICICI Lombard General Insurance and ICICI Prudential Asset Management,” pointed out ICICI official. If experts are to be believed, bank could get up to $500 mn for a 5% stake in the holding company. Meanwhile, the bank is expected to price its share above Rs 900.

Though, it will give shares to retail investors at a discount. In my opinion, the main challenge for ICICI would be to generate interest among retail investors given the present market price of around Rs 903. In its earlier public issue, the retail portion get only 70% subscription.