ICICI Bank to raise fresh equity

After a gap of four years, ICICI Bank plans to enter the equity market to raise fresh capital.

The board of directors of the private sector bank will meet today to formalise the fund raising plan.

Sources said the size of the issue could be as big as around Rs 3,000 crore, inclusive of the premium. The bank may go for a domestic equity issue as its foreign holding is already around 72 per cent, close to the permitted level of 74 per cent. After the equity issue, the foreign holding in the bank may come down to less than 65 per cent, offering the foreign institutional investors (FIIs) leeway to play in the secondary market.

At the same time, the rise in equity capital will also fence ring the bank against possible take-over threats by any overseas entity.

The bank may issue fresh equity shares of around 100 million, taking its total shares to 715 million. The bank could claim a premium of close to Rs 300 for its share of Rs 10, analysts said. The ICICI Bank scrip closed on BSE at Rs 333.30, up by 3.3 per cent. Its 52-week high is Rs 336 and low is Rs 119.

Sources said the issue could be floated in April. It could even hit the market before the ONGC public float.

ICICI Bank plans to raise fresh capital to support its retail lending which is growing fast. Its capital adequacy ratio is now pegged at around 11.2 per cent. However, the core Tier I capital is about 7 per cent. The plan it to push that up to around 9 per cent, sources said.

The bank has seen almost 100 per cent growth in its retail book over the last one year, and anticipates massive growth in this sector.

Its retail book has grown from Rs 15,400 crore in December 2002 to Rs 28,265 crore as on December 2003.

Fresh capital will also help the bank's global operations. The bank's subsidiaries are functioning in Canada and the UK. They need capital to fulfil local regulatory norms. Besides, they also plan acquisitions in due course for which fund infusion is essential.

Another reason for capital raising is the bank's plan to infuse fresh capital in its life insurance venture. In the life insurance business, ICICI Bank and its global partner UK-based Prudential have been increasing the share capital base consistently with the growth in the life business. With the private sector bank having 74 per cent stake in the venture as per domestic regulations, it needs to put in far more than its global partner.

In September 1999, ICICI raised equity of about Rs 2,000 crore through a combination of a domestic and international issues. In March 2000, ICICI Bank raised funds through American Depository Shares (ADS).