BackIssue size holds key to success, rather than per-share price
Issue size holds key to success, rather than per-share price
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ICICI Bank Ltd’s follow-on equity issue, likely to be priced at over Rs900 per share, will be the second most expensive issue in India’s capital market history.
Jet Airways Ltd’s initial public offer (IPO) price of Rs1,100 continues to be highest price at which any single company’s shares have been issued to Indian buyers. ICICI Bank’s issue price will likely outdo Sun TV Network Ltd, which issued shares at Rs875 in April 2006.
Despite their hefty per-share prices, most IPOs with high issue prices fared well when they closed their offers.
Sun TV Network, for instance, got oversubscribed by 47 times and listed at a 68% premium. Jet Airways, the most expensive equity offering in Indian market, got oversubscribed by 16 times, despite concerns that the issue was overvalued.
Tata Consultancy Services Ltd (TCS), which had its IPO priced at Rs850, was subscribed a modest 7.6 times while Oil & Natural Gas Corp. Ltd’s (ONGC) follow on offer, priced at Rs750, just managed 1.58 times subscription.
On an average, issues priced at over Rs500 per share got subscribed by 24 times.
Among these issues, the one that fared the worst on this count was ONGC. The reason for this seems to be its highissue size of Rs10,695 crore. The TCS issue raised Rs4,713 crore.
What appears to matter more is the issue size and whether the market is able to absorb that.
In ICICI Bank’s case, the huge issue will come days after DLF’s issue of Rs9,625 crore, if it is priced at the upper end of Rs550 of the price band. The initial public offering of DLF shares opened Monday and will close on 14 June.
ICICI is expected to raise about $5 billion (Rs20,500 crore) in the US and India.
India’s second largest bank, behind State Bank of India, ICICI has $79 billion in total assets and has large affiliates that carry its brokerage and insurance businesses, though not directly owned by the bank itself. It is also India’s largest private sector bank and has been on a bank branch opening spree in recent months.
ICICI has opened 273 branches this year alone, out of its 945 brick-and-mortar branches. Some 130 of ICICI’s new branches are in ruralareas.
ICICI stock closed Monday at Rs901.9 on the Bombay Stock Exchange, down Rs1.70. But the shares have traded as high as Rs1,006.90 in February and are trading well above their 52-week low of Rs440 on 13 June 2006.
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