The Rs8,750 crore public issue of India’s largest commercial bank by market capitalization, ICICI Bank Ltd, was subscribed 2.74 times on the opening day, underscoring the serious appetite among institutional investors for what has become a bellwether firm.
It took all of the first 20 minutes for investors to fully subscribe to the ICICI offer. The sale compares with DLF Ltd’s $2.24 billion initial offering last week that took two days to attract enough bids and didn’t sell all shares on offer to individual investors.
According the website of the National Stock Exchange, the public issue has already received bids for 270.85 million shares against a total issue size of 98.87 million shares.
The most number of bids came in at the lower end of the price band of Rs 885 a share. The bank fixed the price band between Rs885 and Rs950 per share of Rs10 each. Retail individual investors have been offered a Rs50 discount to the final price that will be fixed after the issue closes.
Meanwhile, the currently listed shares of ICICI Bank, India’s largest private sector lender, closed at Rs944.40, up nearly 3% on a day when the Bombay Stock Exchange’s (BSE) benchmark Sensex index rose 1.53%. The strong response to ICICI Bank’s issue prompted investors in the secondary market to buy other banking stocks, most of which rose between 1% and 5%.
Bankex, the BSE’s banking index, rose to 7,681.51, up 2.7%. Shares of India’s largest commercial bank, State Bank of India, rose 4.10% to Rs1,372.40, while Punjab National Bank rose 3.02% to Rs504.30. In the private sector, HDFC Bank Ltd saw a gain of 1.10% to close at Rs1,099.90 while Kotak Mahindra Bank Ltd’s shares rose 4.60% to close at Rs589.10.
Investment bankers said large funds led the oversubscription on Day 1 of the ICICI issue.
According to the National Stock Exchange, qualified institutional buyers, consisting of foreign investors, banks and mutual funds, subscribed 5.4 times more than their allotted shares. Among them, foreign institutional investors put in bids for 25.7 crore shares against 46.96 crore shares reserved for this category.
Retail investors, who typically wait until the very last moment to part with their money, put in bids for 2.1 crore shares out of 32.8 crore shares reserved for them.
“ICICI Bank is one of the better plays on the Indian economy and has exposure to the rural economy, funding companies’ capital expenses, and international banking,” said Navneet Munot, who helps manage $6 billion at Birla Sun Life Asset Management Co. in Mumbai. “I’m not surprised at the speed of the sale.”
ICICI Bank, the biggest lender to Indian consumers, has doubled its profit during four years of at least 8% economic growth by lending more to India’s 300 million strong middle class.
The follow-on issue is for Rs8,750 crore and it carries a greenshoe option of Rs1,312.5 crore. The greenshoe option gives the right to underwriters of the issue to sell additional shares if the demand for the issue exceeds the original amount offered. The total sale by ICICI Bank, which is split equally between the domestic and the US offer, may be raised to $5 billion depending on demand. “The ICICI offering will be quite easily absorbed by overseas investors,” said Chakri Lokapriya, who manages $470 million of stocks at BNP Paribas Asset Management UK Ltd in London.
(Sumit Sharma of Bloomberg contributed to this story.)