ICICI Bank is the second largest bank and largest private sector bank in India in terms of assets. Highest market cap among financial services company at around Rs.80,000 crores. It is a leader in retail lending, with more than 30% market share in all consumer-finance segments, and now has shifted focus to international banking and rural operations as key focus areas.
Is it an IPO – No, its not the first time ICICI Bank is raising money from market, as such it is an FPO (Fresh Public Offering)
When is the issue open – From June 19 to June 22, 2007
Price range – To be decided on June 17, 2007, though expected to be on a marginal discount to closing of June 15, 2007. Price Band of Rs.885-950. Minimuum bid size is six shares.
Amount being raised - Rs. 8,750 crores in domestic market and Rs. 8,750 crores in the form of American depository shares, to be listed on NYSE. In addition, there is a greenshoe option under which the bank may allocate additional shares of up to Rs 1,312.5 crore in domestic market to have price stability post-listing.
Option for retail investors – Retail investors will be offered shares at a discount of Rs.50 per share, 35% of the issue is reserved for retail investor, out of which 5% is for existing retail shareholders. Retail bidders also have the option to pay Rs.250 per share on application, Rs.250 on allotment and the balance payable on a call within 6 months.
Other bidders – 50% of issue is reserved for qualified institutional bidders and 15% for non-institutional investors. Non-institutional bidders have the option to pay Rs 250 on application and the balance on allotment. Qualified institutional bidders to pay 10% margin on application, have the option to pay Rs 250 less the margin amount on confirmation of allocation and the balance on allotment. The partially paid shares would be traded on the exchanges.
Why is the bank raising money – To meet its capital-adequacy requirements and asset growth needs. It would use the funds to expand its consumer credit, corporate business, infrastructure sectors, international operations and rural agribusiness. It will also use this money to strengthen its insurance and asset management businesses.
Who will be major investors – In the domestic issue, ICICI Banks hopes to raise at least half from retail, HNI and institutional investors. Among foreign investors, Temasek and GIC may invest around Rs 2,000 crore to retain their stake. Among domestic investors, large subscribers are likely to be state-owned insurance companies.
Should you invest in ICICI Bank IPO?
Positives – Growing value of subsidiary business, good exposure and market leader in consumer finance and financial service business, good asset mix reducing risk and improving profitability and taking advantage of booming economy by lending to corporate and infrastructure sectors.
Negatives – Equity dilution could result in reduced return on equity and EPS; it has large NPA assets; interest-rate volatility and competition could affect margins; aggressive growth increases risk of failure and its international operations could face problems owing to lack of experience.