ICICI Bank Ltd, India’s biggest finance company by market value, will increase the size of its share sale by 16% to $5 billion (Rs20,500 crore), a record for an Indian company, chief executive officer K.V. Kamath has said.
The additional amount will come from the so-called greenshoe option, where ICICI Bank had said that it may sell a further $644 million in stock. The company doesn’t plan to expand through mergers and acquisitions (M&As) and will grow organically, Kamath said. “Our intention is to raise the entire amount,” he said. “If you look at the Indian banking sector, it’s still very small. This will provide the foundation for us to grow,” he added.
The share sale by ICICI Bank, which has doubled its profit in four years of at least 8% economic growth, accounts for half the $10 billion India’s banks plan to raise in the year to the end of March 2008 to fund expansion of roads, ports and power plants. The bank expects to boost loans to companies expanding overseas and in a rural economy that’s home to more than 600 million of the country’s 1.1 billion people.
ICICI had said on Saturday it sold the Indian shares at Rs940 each, where demand was 11.5 times greater than the shares on offer. It sold American depositary shares (ADSs) at $49.25 each.
“The bank was bound to retain the greenshoe portion, seeing the huge appetite for its stock from institutional investors,” said R.K. Gupta, who manages $75 million at Credit Capital Asset Management in New Delhi. Gupta applied to buy shares in ICICI Bank.
Temasek Holdings Pte Ltd, Singapore’s state-run investment arm, and Government of Singapore Investment Corp., are likely to get the central bank approval to raise their stakes in ICICI Bank to 10% each. Their combined stake is 9.56% now, according to ICICI Bank’s share sale documents.
The local sale was fully subscribed in the first 20 minutes on 19 June. The Mumbai-based bank, which offered to sell half the shares to qualified institutional investors, received bids that were 21.6 times greater than the shares allotted to this category, it said. The Union government aims to raise the pace of growth in the world’s fastest-growing major economy after China to 10% by 2012, allowing ICICI Bank to lend more to the 300 million middle class.
ICICI’s Indian shares, which have more than tripled in the last three years, gained 4.9% to Rs953.75 on the Bombay Stock Exchange in the week ended 22 June. Its ADSs gained 6.3% to $49.64 in New York last week.
The market capitalization of India’s top four banks together is smaller than the fourth largest Chinese bank. Indian banks need to grow in size to be able to fund India’s future growth, Kamath had said earlier. The State Bank of India may raise as much as $1.5 billion selling shares this year, its chairman Om Prakash Bhatt had said last month.