In an exclusive interview with The Financial Express

, Kamath for the first time admitted that there could be a capital float on the cards as "there is a window of opportunity to raise stock". The institution is seriously considering a float provided there is "no dilution in the earning per share".

About three weeks back, the term-lending institution had categorically ruled out any capital float and issued a release stating there is no plan for a capital float, "including ADR, before the ICICI board".

The sudden change in mind has been prompted by a combination of factors: a significant appetite for bank stocks in the globalmarkets, a re-rating of ICICI's stock following the institution's adoption of the US GAAP accounting practice and a fall in its capital adequacy ratio.

Going by the GAAP accounting practice, ICICI's capital adequacy ratio was pegged at 9.3 per cent in March 1999 out of which Tier-I capital accounts for 6.2 per cent. ICICI assets grew by 27 per cent in fiscal 1999 and if it wants to maintain this scorching pace of growth it has no choice but to raise the capital adequacy ratio by shoring up the capital base.

"The capital raising exercise is part of our regular exercise and this is a continuous process. We have taken a non-dilutive approach. The choice is between raising fresh capital and leveraging the existing capital base...we have seen a significant appetite for bank stocks globally...there is a window of opportunity," Kamath said.

ICICI may seize on the opportunity and finalise the plans for the float at its next board meeting on July 30. "Today there is a window...but the point is how long it willremain open," Kamath said, adding there is no concrete plan as of now to place the proposal at the next board meeting.

"If we decide to go for it, the entire process will take between 12 and 14 weeks to complete," Kamath said. The two primary considerations before the institution, according to him, are: the issue must be non-dilutive and the price has to be market-driven. The ICICI scrip closed at Rs 75.45 on the Bombay Stock Exchange on Tuesday while in the GDR market the price is ruling at about $10.75. "I personally think anything between Rs 75-85 will be the ideal price band when we think of going for the float," Kamath said.

ICICI floated its first global depository receipts (GDR) worth $200 million in July 1996. At that point of time the ICICI management had said it would not go for further dilution at least for the next two years. The timeframe was later extended to three years.

"There was substantial growth in the stock price after the GDR issue. In 1998, when bank and FIs' shares took abeating, the ICICI scrip was also affected and it was not feasible to go in for a capital float. Now the scrip is looking up...we are strategically evaluating all options before us incluing an ADR," Kamath said.

Change in valuation unlikelyO

It was expected that ICICI would have to go in for a capital raising exercise given the pace of growth in the last three years and the need for higher capital adequacy. The only doubt lingered over the manner of capital raising. The ADR issue would be the best bet for the FI. However, the ADR does not signify a major shift in valuation as the stock is still being priced roughly within three times its historic earnings, even at Rs 75-85 per share, a ridiculously low multiple.