ICICI hires 3 banks for bond sale

ICICI Bank Ltd, the country's largest by market value, hired Citigroup Inc, Deutsche Bank AG and Merrill Lynch & Co to sell at least $500 million of bonds to boost capital.

ICICI plans to meet investors in Singapore, London and the US between January 5 and January 8, according to a sale document.

The Mumbai-based financial services company will sell the bonds for between three and 15 years to boost its upper Tier-2 capital, a key measure of financial strength, and fund expansion, according to the document sent to investors.

Banks in India are raising funds to meet new central bank rules on capital adequacy. The central bank on July 21 permitted banks to raise capital by selling debt overseas.

Banks with overseas branches must meet the new, so-called Basel II requirement by March 31, 2008, the Reserve Bank of India said in October.

The nation's banks, which raised $2.3 billion from overseas debt sales in 2006, need more capital to meet growing credit demand from companies and individuals in an economy that expanded an average 8.2 per cent between 2003 and 2005.

Banks could need an additional Rs 42,000 ($9.5 billion) of capital by 2010, according to Finance Minister P Chidambaram.

ICICI's three-year floating-rate notes and the five-year fixed-rate securities are expected to be rated Baa2, two levels above non-investment grade, by Moody's Investors Service, and BB+, one rung below investment grade, by Standard & Poor's, according to the sale document. The amount to be sold of each will depend on market demand.

The bank's profit rose 30 per cent to Rs 755 crore in the quarter ended September 30, as the booming economy prompted consumers to take out more home and auto loans.

ICICI's loans expanded 47 per cent to 1.64 trillion rupees in the quarter from a year earlier while deposits rose 57 per cent to 1.89 trillion rupees.

ICICI sold $400 million of Baa2-rated five-year bonds in October, paying a coupon of 5.875 per cent. The bonds now yield 107 basis points more than the US Treasuries of similar maturities, down from a high of 127 basis points on October 25, according to Merrill Lynch data.

Deutsche Bank and Merrill also managed that sale. A basis point is 0.01 percentage point.

ICICI raised $1 billion to meet rising demand for credit last month, borrowing in yen in the biggest syndicated loan by a bank in India.