ICICI Bank plans to issue equity in the domestic market and increase its current equity base of Rs 1.65 bn. It is expected to announce this offering along with a rights issue once they get the board's approval.
ICICI Bank, a subsidiary of ICICI reported a turnover of Rs 6.3 bn as at March'99. Ina span of five years of operations its branch network has expanded to 55. Its capital adequacy ratio was 11.06% as at March'99.
The main reason for having this issue is to spruce up its capital adequacy ratio (CAR) that currently stands at 9%. As per the RBI guidelines banks are required to maintain a 9% capital adequacy ratio as at March'2000. Hence if ICICI Bank does not raise equity it will be unable to expand its asset base. ICICI Bank's business ( which includes deposits, advances, and credit like corporate debt instruments) has gone up by 71.5% for the first 9 months of FY2000, over the corresponding period of FY99. Hence to maintain the 9% CAR by March'2000, it has to raise equity.
It is planning a rights issue too, as its parent company ICICI Ltd wants to reduce its stake from the current 75% to eventually 40% as per the RBI guidelines. Hence ICICI Ltd will not partake in the rights issue. ICICI Bank's deposits were up by 83% for the first nine months of FY2000 to Rs 85 bn.
Since FY99 ICICI Bank's performance has been phenomenal and it has become an aggressive players. It is also on the prowl of a takeover target to keep up its expansion plans. With good growth prospects and a strong brand name raising equity should be easy for them.
ICICI Bank has good growth prospects and is a technology savvy bank. Its on the "BUY" list of many analysts.
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