S&P votes in favour of ICICI's new initiatives - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

S&P votes in favour of ICICI's new initiatives

Sep 9, 1999

According to newspaper reports, Standard & Poor's, a leading credit rating agency, has revised its rating outlook on ICICI Ltd. to 'stable' from 'negative'. S & P has also reaffirmed the financial institution's long term rating of 'BB' and short term foreign currency rating of 'B'. ICICI is India's second largest financial institution, with a major presence in almost all areas of financial services. The company has an asset base of Rs 585 bn.

After this revision, ICICI's rating is at par with the sovereign rating and a grade above the ratings assigned to other Indian financial institutions. S & P has outlined various reasons for this upgradation in rating:

  • Steps taken towards universal banking, including retail franchise, that have helped in the diversification of risk
  • A stronger balance sheet (and the adoption of prudential accounting norms)
  • Lesser probability of significant deterioration in the asset quality
  • Leadership position in innovative and infrastructure financing

The credit rating agency has, however, cautioned against the following:

  • Project finance continued to account for a large chunk of the business
  • A high level of non performing assets by global standards

The revision in the rating outlook is likely to come as a shot in the arm for ICICI, which has just launched domestic public offering. The financial institution will also be launching an American Depository Receipts (ADRs) issue later in the year.

ICICI's operations are being constrained by the relatively lower levels of capital that it presently has. Its capital adequacy ratio (CAR), as on 31st March 1999, was at 8.3%, marginally higher than the minimum stipulated 8%. This has added a sense of urgency to the institution's plans to raise capital from domestic and overseas markets. The revision in the rating outlook will certainly improve the prospects of such exercises.

ICICI has been pursuing aggressively its goal of becoming a 'universal bank'. As a step towards this, the financial institution has acquired domestic retail finance companies, a segment where it did not have a presence till recently, and has also broadened its product portfolio to include loans for durables. ICICI has also been taking measures to rid its books of the high level of gross non-performing loans (FY99 11.4% of total assets). It has adopted the US-GAAP (Generally Accepted Accounting Principles) in order to comply with the global standards.

The revision in the ratings outlook is a reflection of ICICI's commitment in transforming the development finance institution into a universal bank, having a global presence.

Market View:

Analysts have rated the stock as a 'BUY' mainly on account of the improving economic conditions and a recovery in prices of commodities. ICICI has a large amount of non-performing loans on its books, which primarily are owed by companies operating in the commodities markets.

Equitymaster requests your view! Post a comment on "S&P votes in favour of ICICI's new initiatives". Click here!


More Views on News

HDFC Announces Quarterly Results (3QFY21); Net Profit Down 65.1% (Quarterly Result Update)

Feb 3, 2021 | Updated on Feb 3, 2021

For the quarter ended December 2020, HDFC has posted a net profit of Rs 29 bn (down 65.1% YoY). Sales on the other hand came in at Rs 116 bn (down 42.2% YoY). Read on for a complete analysis of HDFC's quarterly results.

HDFC Announces Quarterly Results (2QFY21); Net Profit Down 27.6% (Quarterly Result Update)

Nov 26, 2020 | Updated on Nov 26, 2020

For the quarter ended September 2020, HDFC has posted a net profit of Rs 29 bn (down 27.6% YoY). Sales on the other hand came in at Rs 115 bn (down 14.5% YoY). Read on for a complete analysis of HDFC's quarterly results.

Indian Railway Finance Corporation IPO: Should You Apply? (IPO)

Jan 18, 2021

Monopolistic railway financer with impeccable asset quality.

CAMS IPO: Should You Apply? (IPO)

Sep 18, 2020

Does the company having 70% market share of the mutual fund registrar business have sound prospects?

More Views on News

Most Popular

My Recent Recommendation Will Profit from the Global Supply Chain Crisis (Profit Hunter)

Mar 31, 2021

A tiny chemical company, started in the Licence Raj era, is a great example of a new wealth creating opportunity.

My Stock Trading Strategy (Fast Profits Daily)

Mar 31, 2021

In this video I'll show you exactly how I go about picking stocks for trading.

4 Stocks to Make Your Portfolio Immune to the Second Covid Wave (Profit Hunter)

Apr 6, 2021

Rather than predicting the market, successful investing is more about preparing well and placing your bets accordingly.

If the Market Falls, I Will Do This... (Fast Profits Daily)

Apr 1, 2021

What should you do if the market falls? In this video, I'll tell you what I will do.

India: Recovery Stalled by Vaccine Games? (The Honest Truth)

Apr 13, 2021

Ajit Dayal on how India's vaccine strategy will impact the markets.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


Apr 13, 2021 03:38 PM