Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
ICICI unlocking value - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Mar 16, 2001

    ICICI unlocking value

    Indiaís one of the largest financial institution, ICICI has finally unlocked the value of its stake in ICICI Bank. ICICI has divested a 4.99% of its equity stake in the bank to Prudential Assurance Company Ltd. for a consideration of Rs 170 per share.

    The objective of the divestment is to bring down the promoterís holding to around 40% from the current level of 55.7%, in accordance with the Reserve Bank of Indiaís licensing norms. After this strategic divestment, ICICIís stake in the bank will be reduced to 50.6%. ICICI plans to dilute the stake further to 47% before the end of current financial year (i.e. before March 2001) This would result in the bank ceasing to be a subsidiary of ICICI.

    Shareholding pattern of ICICI Bank
    ICICI 50.6%
    Others 23.9%
    ADR-Holders 14.4%
    FIIs 6.1%
    Prudential Assurance 5.0%
    Total 100.0%

    The sell off is likely to add a gross capital gain of Rs 1.7 billion to its profits in the current year. ICICI can use this gain in writing off its non-performing assets to show a better picture of its balance sheet. The institution is expected to post a flat growth in its profits for the year ended FY01. This is due to lower other income and higher provision on assets. Divestment of a strategic stake in its subsidiary is likely to move up its profits by 11%. If the institution dilutes the stake further to 47%, by selling 3.6% stake, it will result in a rise of 18% (cumulative) in its profits in FY01.

    (Rs m) Valuations
    5% stake (shares in m) 11.0
    Value of stake 1,869
    Cost price 110
    Capital Gain 1,759
    Tax on gain 202
    Net of tax gain 1,556
    Benefits to ICICI (Rs m)
    ICICI's FY01E profits 12,104
    Net profit including capital gain 13,660
    % addition to profits 11%
    Number of shares (m) 785
    EPS (Rs) 17.4

    At the current market price of Rs 94, ICICI is trading at a P/E multiple of 5 times its FY01 projected earnings and a Price/Book value ratio of 0.7 times. Its current valuations are comparatively lower than its global peers.

    Comparative Valuations
    Particulars ICICI ICICI Bank
    Market Price (Rs) 94.0 181.0
    P/E (x) 5.4 22.6
    Book Value (Rs) 133.0 63.0
    Price/Book value (x) 0.7 2.9



    Equitymaster requests your view! Post a comment on "ICICI unlocking value". Click here!


    More Views on News

    HDFC: Red Flag in Developer Loans (Quarterly Results Update - Detailed)

    Aug 10, 2017

    HDFC starts FY18 on robust loan growth but asset quality slips on increased exposure to developer loans.

    Shriram Trans Fin: FY17 Ends on a Tepid Note due to Regulatory Headwinds (Quarterly Results Update - Detailed)

    Jun 22, 2017

    Demonetisation led slowdown coupled with shift to stringent bad loan norms keep Shriram Transport Finance on a slow wicket.

    Power Finance Corp: Alignment with RBI Norms Knocks Down FY17 Earnings (Quarterly Results Update - Detailed)

    Jun 14, 2017

    Power Finance Corporation earnings hit by RBI mandated higher provision on state government power generation projects where the recovery continues to be 100%.

    IDFC: Ends FY17 on a Healthy Note (Quarterly Results Update - Detailed)

    May 30, 2017

    IDFC regains its tempo in FY17 post the demerger of the banking business.

    HDFC: Conservative Provisioning tempers down FY17 earnings (Quarterly Results Update - Detailed)

    May 9, 2017

    HDFC ends FY17 on a tepid note as it remains conservative on the asset quality front.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms