Icici To Offload 25 Per Cent Stake In Banking Arm

ICICI Ltd is planning to offload 25 per cent of its stake in ICICI Bank via a public offer for sale. The issue is likely to hit the market before September-end.

The pricing has not been decided, though sources at ICICI Securities, the advisors to the issue, said merchant bankers have indicated a price in the range of Rs 30-45 per share.

So far, nine merchant bankers are vying for the mandate. These include JM Financial, DSP Merill Lynch, Kotak Mahindra Capital Company, SBI Capital Markets, Jardine Fleming, ANZ Grindlays, Enam Financial and Bank of India. At a price of Rs 35 per share (representing a premium of Rs 25 per share), the total size of the issue will be Rs 131.25 crore.

This price is 10 times the earnings projected for the bank in 1997-98. If a higher price earnings multiple of 12 is taken, then it is at the higher end of the recommendations at Rs 42. Subsequently, the issue size also goes up to Rs 157.50 crore. The decision to go in for a offer for sale by the promoters ICICI, instead of a fresh issue of capital or a combination of the two, was made because of the healthy capital adequacy ratio of ICICI Bank which stood at 13.4 per cent as on March 31 1997.

Merchant bankers said the offer for sale will help establish a benchmark for the scrip, which will help the bank to raise capital at a higher premium later on.

At present in the secondary market, new private sector banks like Global Trust Bank trade at PE multiples of 6.5, while Bank of Punjab's PE multiple is 8.5. HDFC Bank enjoys a much higher PE multiple at 41.4.

Public sector banks like the State Bank of India trade at a PE multiple of 13, while the Oriental Bank of Commerce trades at a PE multiple of nine.

Apart from ICICI Bank, the other bank issues to hit the market in the first half of this fiscal include Corporation Bank, IndusInd Bank, UTI Bank, Times Bank and Canara Bank.

The pricing has not been decided, though sources at I-Sec, advisors to the issue, said merchant bankers have indicated a range of Rs 30-45 per share.