Morgan Stanley - ICICI Bank

Morgan Stanley in analyzing ICICI Bank's holdings say,

We also analyze the period for which US$5 bn will fund ICICI Bank’s growth. In the last two capital raisings, almost 50% of capital raised was used for investments in subsidiaries or higher risk weights. Going ahead, we expect the regulatory environment to be relatively benign and also no significant investment will be required in subsidiaries. We expect the current issue to fund ICICI Bank’s loan growth for the next 4-5 years. The key on profitability will be whether the bank increases capital consumption significantly or not – for example the bank’s return on risk-weighted assets has declined from 1.8% to 1.2% in the last two years. We expect average ROE for F2008 – F2011 at 13%

Raising fair value, maintain Equal-weight. We are incorporating the announced capital issuance in our numbers. This results in some increase in value for the banking business. This, coupled with higher value for ICICI Holdings, takes the fair value to Rs900. The stock is trading at 21x F2008e earnings on a core basis.