Mumbi(IndiaPRwire)
The forthcoming Follow-on Public Offer (FPO) of ICICI Bank Ltd., India’s first and only universal banking institution and the largest private sector bank with the largest market capitalisation amongst all banks, is expected to witness heavy demand from the retail investors as it offers a very attractive investment opportunity for retail investors due to its Rs. 50 discount to retail bidders as well as the existing inexpensive valuation. The price band has been fixed between Rs. 880 and Rs. 950. The Issue opens on June 19 and closeson June 22, 2007.
A retail marketing representative of Emkay Share Consultants says, “Considering the mammoth size of the FPO, the retail investors’ demand is pronounced because such an opportunity to be part of the ICICI Bank growth story will present it only after the 3-4 years.”
Research shows that the previous offering was in December 2005 and the issue price then was Rs. 525 per equity share. On June 15, 2007, the price was Rs. 908 (a gain of 158% over the price of Rs. 575.1 on December 20, 2007). This gain of 158% is higher than the comparative figures for HDFC Bank (150% gain for the same period) and The State Bank of India (142% gain for the same period). In the past, FPOs of ICICI Bank (April 2004 and December 2005) the retail investors have earned annualized returns of 48% till date.
The same research shows that this gain of 158% for the investors in ICICI Bank Ltd., who bought the shares in December 2005, is higher than the gain in the Sensex (152%) and the Bankex (146%) posted during the period between December 20, 2005, and June 15, 2007.
“Investors in the ICICI Bank Ltd. FPO will also benefit from the fact that the Bank has a residual stake of 94.1% in the proposed new subsidiary for insurance and asset management businesses, ICICI Financial Services (which has been valued at Rs. 44,600 crore on a post-issue basis). The 94.1% stake of the Bank in the holding company will be valued at Rs. 419.69 billion giving a per share value of Rs. 464.88,” says the retail marketing representative of Capital Fin Services.
“At the share price of Rs. 908 and the current number of shares outstanding at Rs. 90.3 crore and the book value per share as on March 31, 2007 of Rs. 269.8, the per share price of the core business of the Bank works out to Rs. 443.2. The current P/B of the core business is 1.64,” an analyst says.
Analyst research also indicates that while ICICI Bank’s core banking business is getting valued at 1.64 times its book value, its peers are trading at much much more expensive valuations: HDFC Bank (5.50), UTI Bank (4.95), Centurion Bank (4.89), Kotak Mahindra Bank (5.72), Yes Bank (5.45) and The State Bank of India (2.18).
The ICICI Bank scrip touched a high of Rs. 1,010 in February 2007. Full subscription in the 35% retail bucket (Rs. 42 billion) and 50% participation from FII investors in the QIB bucket will create headroom of ~Rs. 34 billion; i.e., 3.5% of the post issue market cap for FIIs
For the first time in the history of FPOs, existing retail investors can apply in the reserved category as well as the general category.
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