ICICI Bank has stated that it will use the proceeds from the issue of American Depository Shares (ADS) to buyout banks in India. The other purpose listed for the issue is to meet future growth requirements. ICICI Bank is raising US$ 125 m by issuing ADS.
The new private sector banks, of which ICICI Bank forms a part, are revolutionising the domestic banking industry by introducing new and better services like telephone and Internet banking. This has been made possible by investing large amounts of money in technology to make the banks 'fully computerised'.
The proceeds form the ADS issue will help ICICI Bank grab market share by buying out other banks in India. The other benefits pertain to better capital adequacy ratios that will support the banks current growth trajectory and more funds to invest in cutting edge technology. Furthermore, in view of the euphoria in the US markets, the company would be able to realise a better price as compared to a domestic pricing. A successful issue will also open a window for the bank to meet future funding requirements.
ICICI Bank however needs to work on expanding its market reach, especially in mini metros and smaller cities. This will help the bank in increasing its deposit base and increasing the size of its operations (thus generating economies).
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