Mumbai: After a lukewarm response from retail investors in the DLF initial public offer last week, investment bankers are hoping to catch their attention in ICICI Bank’s follow-on issue by offering sops like discounts and part-payment options.
The country’s largest private lender is aiming to raise about $5 billion (Rs20,000 crore) with its follow-on equity issue in India and the US. The domestic issue of Rs8,750 crore opens on 19 June and closes on 22 June.
The bank has reserved 5% of the domestic issue, or Rs437.5 crore, for existing retail shareholders.
While it has fixed the price band at Rs 885-950 a share, retail bidders, including existing shareholders, would be allotted shares at a discount of Rs50 a share to the issue price.
In addition, the issue is offering two payment options to the small investor. In the first method, he will need to pay the full bid amount less the discount at the time of application.
The second option allows retail bidders to pay Rs250 per share on application, Rs250 on allotment and the balance on a call by the bank within six months of allotment. The discount would be adjusted against the call amount.
According to an official of an investment banking firm, the issue offers a hedge against downside risk to retail investors even if the stock price on listing remains the same as the offer price.
For example, if the bank fixes the offer price at Rs900 and the stock lists at the same price, retail investors still stand to gain Rs50 a share due to the discount offered.
This means retail investors would be given shares at Rs850, and would pay Rs250 on application and another Rs250 on allotment.
The unpaid value would remain Rs 350, while the partly paid shares would be traded at a price equivalent to the market price of fully paid share of Rs900 less the unpaid value — Rs550 in this case.
If shares list above the issue price, the gains could be even more.
Besides, non-institutional bidders have also been given the option to pay Rs250 on application and the balance on allotment.
Qualified institutional bidders, who have to pay 10% of the bid amount at the time of application, have the option to pay Rs250 less the margin amount on confirmation of allocation and the balance on allotment. But non-resident bidders, including FIIs, would need prior RBI approval to subscribe to partly-paid shares.