No retail worries seen for ICICI offer

ICICI Bank need not worry about the retail subscription of its Rs 10,062-crore domestic issue. All that Indian investors have to do is to invest only around Rs 3,000 crore to enable the bank to issue the rest of the shares to foreign investors, without breaching the 74% foreign investment limit post-issue.

In addition to the domestic issue, the bank is mobilising funds through the American depository receipt route, which will take the total mop-up to Rs 20,124 crore.

Overseas investors can hold up to 74% in a private sector bank. In case of ICICI Bank, foreign investors currently hold 71.13%. In the local market, ICICI Bank will raise Rs 8,750 crore. Around Rs 4,375 crore have been set aside for retail investors and non-institutional investors.

The issue also has a greenshoe option of Rs 1,312.5 crore. However, bankers are betting on domestic investors picking up at least around Rs 5,000 crore in the issue, primarily on the back of strong institution and corporate interest. This would give the bank enough leeway for foreign investors post issue.

Even in the last issue LIC and SBI were among the biggest Indian investors. This time around too, among the state-owned corporations LIC, SBI, and GIC are likely to subscribe to the issue. Some of the other bigger public sector banks are also expected to subscribe the issue. Currently, LIC holds a 7.63% stake, while GIC and other general insurance companies have another 3.86% stake. Domestic retail investors hold 6.55%.

Few corporate bigwigs are said to have shown commitment to the issue, including a large south Mumbai-based company. Currently, Bajaj Auto holds a 4.06% stake in the bank. Incidentally, Bajaj has increased its stake in the bank. As on June 2005, Bajaj’s stake was 3.12% while LIC’s had 9.86%.

The ICICI Bank scrip rose marginally on the BSE to close at Rs 917.85. Retail investors have been shying away from some of the bigger issues in recent times. In case of DLF too, retail investors had subscribed 0.97% of the issue.

The bank has offered sweeteners to retail investors including a discount of Rs 50 per share, options of partly paid-up shares and 5% reservations for existing shareholders. Under the partly paid share option, a retail investor will have to pay Rs 250 as on application and Rs 250 as on allotment. These shares will be also listed on the exchanges. This option is said to be attracting retail investors.