ICICI Bank is entering the capital market on 19th June 07 with an issue of Rs.8,750 crores with net issue to public of Rs.8.312.50 crore after a reservation for existing retail shareholders of the Bank, of Rs.437.50 crores. The issue shall have a green-shoe option of 15% of Rs.1,312.50 crores. A similar, simultaneous overseas issue of same size is being made by the bank. The price band for issue would be announced on 18th June 07 and a 5% discount would be offered to retail category and reserved category of existing retail shareholders of the Bank. The payment facility has also been offered in the issue, whereby only Rs.250 may be paid on application by HNI, Retail and Reserved category.
The bank has been showing consistent growth year after year. For FY 07, the gross interest income was at Rs.22,994 crores while net interest income was Rs.6,636 crores. With other income of Rs.5,929 crores, the total net income was placed at Rs.12,565 crores, profit before tax was placed at Rs.3,648 crores while profit after tax at Rs.3,110 crores resulting in an EPS of Rs.34.84 crores on equity base of Rs.899.34 crores. For FY 06 PAT was Rs.2,540 crores, giving an EPS of Rs.28.55 on fully diluted equity of Rs.889.85 crores.
The working capital is the lifeline of any bank. ICICI Bank had advances of Rs.1,95,866 crores as at 31-03-07 on which interest income was Rs.16,096 crores yielding a return of 8.22%.Of the proposed domestic and overseas issue of Rs.20,125 crores (including green shoe option) and if issue is assumed at Rs.850 per share, this would add about Rs.235 crore to the equity while Rs.19,900 would get added to the reserves and surplus. This would vastly improve the net worth, EPS, book-value and capital adequacy ratio of the bank, which ultimately would improve the valuation..
If a yield of 8% is considered on Rs.18,000 crores, it would improve income by Rs.1,400 crores. On expanded equity base of about Rs.1,135 crores it will increase EPS by about Rs.10, net off taxes. EPS on extra increase in equity of Rs.235 crores works out at around Rs.48 per share. So, overall, issue is EPS accretive. For FY 08, bank may have an EPS of Rs.45, on fully diluted equity.
Since price band has not been announced it may be difficult to take a call on the issue. However, if issue has a band of Rs.825 - Rs.875 one can go ahead with an issue. Discount of 5% would be an added advantage to retail investors.