ICICI currently has an equity base of Rs 514.63 crore (post-FCD conversion), which gives an earning per share of Rs 20.37 based on the first-quarter net profit of Rs 261.87 crore. Assuming the ADRs are priced on the basis of thecurrent market price, ICICI's post-ADR equity base would swell to Rs 793.51 crore. This means an annualised earning per share of Rs 13.2 compared with Rs 21 in the last fiscal.

Apart from the mega float, addition to equity (of around Rs 28.43 crore) may also come from the conversion of the 2.5 per cent US $ convertible bonds. When the dilution in earnings is factored in by the market, it will result in a further depreciation in the value of the stock. And, this will make the premium even less attractive. Besides, ICICI's huge equity also means a much higher dividend outflow. Even if the institution decides to maintain the dividend at last year's Rs 5.5 per share, it will have to shell out over Rs 400 crore.

Apart from the unattractive premium, ICICI's public issue could also face a problem as at present the market outlook for the banking and finance sector stocks is bearish. However, as ICICI does not have to conform to the minimum 90 per cent subscription clause (being a financial institution), thisshould not be a cause of concern. Officials have ruled out a private placement to a foreign institution prior to the ADR float. As operators had targeted the ICICI counter on rumours of a private placement, this is bound to come as a major disappointment.

As it is the market has been disappointed with ICICI's first-quarter result. A 44.8 per cent rise in write-offs and provisions for bad assets - from Rs 78 crore to Rs 113 crore - impacted net profit growth. Net profit stood at Rs 262 crore, only 1.6 per cent higher than the corresponding period last year. The Q1 net profit is marginally lower than the fourth-quarter profit of FY 1999. Although provisions and write-offs have risen, the net NPA ratio ratio of the institution has declined.

However, one area where ICICI differs from other financial institutions is its ability to adapt to the changing environment. With the economy yet to come out of the recession and in the era of sticky corporate loans, ICICI has been able to foray into other areas (apartfrom its traditional role as a term-lending institution).

Towards this end, ICICI has successfully tapped the retail market in areas like automobile financing, home finance, consumer durable finance. A look at the ICICI's disbursements last year reveal that leasing and, personal finance have started assuming a more significant role. Guarantees and underwriting have been brought down substantially. Similarly, foreign currency loans (for which demand was low) were brought down. This flexibility will stand ICICI is good stead in the future, especially when the line demarcating banks and FIs start getting blurred.