ICICI's issue of American depository shares (ADS) has evoked a strong positive response from foreign investors. While the issue size was US$ 275 m, with a green shoe option of US$ 40 m, the total subscriptions topped US$ 1.6 bn. The strong interest in the stock was also reflected in the listing price, which was at a 12.2% premium to the issue price.
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.
ICICI's decision to tap the global markets is motivated by several considerations. The most important of these is the company’s declining capital adequacy ratio (CAR), which has begun to hinder its operations. With the CAR scheduled to increase to 9% by 31st March 2000, and further to 10% by 2002, institutions like ICICI have been compelled to raise tier I capital. Moreover, an infusion of foreign funds will enable the company to pursue its foreign currency lending operations more aggressively.
A listing at the New York Stock Exchange (NYSE) will give ICICI access to the world's largest financial market for sourcing its future capital needs. Moreover, as the company would now have to strictly adhere to US GAAP (generally accepted accounting principles), there will be a greater level of transparency in its statement of accounts. This will also benefit the domestic investors.
Analysts had rated the stock as a 'BUY' as they consider the stock to be undervalued even though the economic conditions are not conducive for growth.
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