After the euphoria, a setback for ICICI Bank

Just after successful completion of record $5 billion public offer, ICICI Bank has received a jolt for capital raising plans of its newly created insurance and AMC subsidiary, ICICI Financial Services.

Citing cap of 26% on foreign holding in insurance company, the government failed to give ICICI permission to make a placement of 5.9% stake of subsidiary to a clutch of investors. The bank initially was expected to raise Rs.2650 crore from this stake sale.

Now the bank has to terminate the purchase offers it entered into. This may not not only delay the plans of global investment banks but also pose problem for ICICI Bank in boosting capital strength and in expanding its operations.

This move may also set a precedence in fund raising plans for other insurance joint ventures in the country thus putting a break on the industry’s tremendous growth potential.