The board has also approved the issue of up to 5 per cent of the bank's paid-up capital to its employees under an employee stock option scheme.

"Taking into account the current favourable conditions in the equity markets, the board has decided that an international issuance of equity capital should be considered. This should include the issuance of American Depository Shares (ADS) by means of a prospectus, and if necessary a domestic issuance," managing director and CEO HN Sinor said.

Reacting to the announcement, ICICI Bank's share prices opened at Rs 103.90 on the BSE, up from Friday's close of Rs 101.00. Thescrip closed at its day's high of Rs 109.05.

"ICICI Bank is expected to peg its ADS at a premium of around Rs 125-Rs 150 per share of Rs 10. If fully subscribed, this will enhance the bank's paid-up capital by Rs 35-40 crore from Rs 165 crore. The issue will dilute ICICI's stake from around 75 per cent to 62-65 per cent," analysts said. DSP Merrill Lynch and JM Morgan Stanley are believed to be the front-runners in the race to bag the mandate for the ADS.

The shares will be listed either at the Nasdaq or the New York Stock Exchange (NYSE). If listed at Nasdaq, ICICI Bank will have the distinction of being the first Asian bank to be listed there. At NYSE, it will be second only to the Bank of Tokyo-Mitsubishi. The details of the proposed issuance, including the final size, premium, would be finalised after discussions with lead managers, ICICI Bank said. ICICI Bank needs additional capital to sustain a healthy growth in the coming years. "The funds will also be required for capital investment in technologyand channel infrastructure, and to strengthen capital adequacy ratio (CAR)," an ICICI Bank release said. "Post issue, ICICI Bank's CAR is expected to be around 14-15 per cent, depending on the premium and the amount of subscription," bank sources said.

The bank's balance sheet size increased significantly with deposits rising sharply by 83.10 per cent to Rs 8,500.17 crore as on December 31, 1999 against Rs 4642.32 crore in the previous fiscal. Total advances, including credit substitutes at Rs 4,056 crore, at the end of the first nine months of the current fiscal increased 51 per cent during the nine months from Rs 2,680 crore on December 31, 1998.

Insight
no other choice

The fact that ICICI Bank had grown so rapidly itself had indicated that the bank had no choice but to approach the capital markets. The likely float is coming while the stock is in the middle of a major re-rating in the stock market. The bank is being re-rated in part towards its effort at shifting largely to theInternet. The re-rating is being compounded by the proposed ADS as well as the potential for growth through acquisitions. The dilution still leaves room for further dilution of ICICI's holding in ICICI Bank, in case of any future acquisitions. ICICI, the parent company, also will be a big beneficiary from the re-rating process through the fact that it will still be holding a majority stake in the enhanced equity; worth at least one-fifth of its own market capitalisation.

Aaron Chaze