Industrial Credit and Investment Corporation of India (ICICI) has decided to issue preference shares worth up to Rs 1,000 crore, well above its equity capital of Rs 600 crore, to prevent a dilution of its earnings per share. The premier financial institution also plans to increase its debt liabilities by Rs 35,000 crore.
The rapid increase in ICICIs assets portfolio and its projected large-scale funding of infrastructure projects have made an expansion of its networth imperative. However, ICICI has gone through quite a few equity dilutions in the past and does not want to reduce shareholder value. Hence, the decision to increase networth through preference shares.
At present, ICICIs authorised capital is Rs 750 crore. Equity capital accounts for Rs 600 crore, preference capital for Rs 100 crore and unclassified share capital for Rs 50 crore. ICICI is now planning to more than double its authorised capital to Rs 1,600 crore through a special resolution at its annual general meeting, slated for September 12.
The explanatory statement to the resolutions states, Consequent to the increase in the business volume and sizes there is a need to increase networth in order to take larger exposures. In order to improve the networth without diluting the earnings per share, preference shares may be issued much in excess of the present authorised capital.
Hence, the ICICI board has decided to increase the companys authorised capital to Rs 1,600 crore. The authorised share capital will remain at Rs 600 crore, while preference share capital will account for Rs 1,000 crore. The board plans to issue preference shares as and when necessary within the overall limit of Rs 1,000 crore. ICICIs total paid-up share capital stands at Rs 550.52 crore, of which Rs 397 crore is the issued equity capital and Rs 78 crore is the equity share capital deemed to be issued on SCICI Ltds amalgamation with ICICI. This leaves room for ICICI to issue further equity at a hefty premium. ICICIs reserves and surplus amounts to Rs 3,900 crore.
ICICI is also increasing its borrowing limit by Rs 35,000 crore to Rs 75,000 crore. Before its merger with SCICI, the corporations limit was Rs 25,000 crore. After the merger, ICICIs aggregate limit increased to Rs 40,000 crore. ICICIs loan funds stand at Rs 29,393 crore at present, about Rs 10,000 crore less than its borrowing limit of Rs 40,000 crore.
With several large infrastructure projects in the pipeline, this limit is expected to be breached very soon. Therefore, the ICICI board has decided to increase the borrowing limit to Rs 75,000 crore.
