ICICI Bank has planned to tap the US stock market with an American Depository Receipt (ADR) issue of US$125 m (Rs 5.45 bn). Though the bank is keen on an ADR issue, they are also looking at other routes like a Global Depository Receipts issue to raise funds.
ICICI Bank, a subsidiary of ICICI reported a turnover of Rs 6.3 bn as at March'99. Ina span of five years of operations its branch network has expanded to 55. Its capital adequacy ratio was 11.06% as at March'99.
ICICI Banks' decision to raise funds stems from the fact that in order to expand and maintain their capital adequacy ratio they need to raise equity. Since the bank has been growing at a rate of 45% in the last nine months it will need fresh capital to meet the target of 9% capital adequacy by March' 2000. ICICI Bank has also announced its plans to issue equity in the domestic market and increase its current equity base of Rs 1.65 bn. It was expected to announce this offering along with a rights issue once they get the board's approval. However the final decision on the domestic issue depends on the ADR issue.
ICICI Ltd will not partake in the rights issue and reduce its stake from the current 75% to eventually 40% as per the RBI guidelines. After the ADR issue alone ICICI stake will come down to around 60% levels.
If this issue plans get finalised, ICICI Bank will be the first Indian Bank to raise funds through an ADR issue and if it taps the GDR market will be the first private sector Indian bank to do so. State Bank of India (SBI), India's largest public sector bank had tapped the GDR market in 1996 and raised US$ 369.95 m the largest amount raised till today by any Indian bank. The new private sector banks are expanding at a very fast pace and hence, to grow and maintain their capital adequacy ratios they require funds, which currently may not be met by internal generations. This issue could trigger confidence among other private sector banks to tap the international markets and we could see a spate of issues in the banking industry in the future.
ICICI Bank has good growth prospects and is a technology savvy bank. Its on the "BUY" list of many analysts.
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