The bank sold the stake, which was parked in a special purpose vehicle, at an average price of Rs 130 per share in the main to three foreign institutional investors Hamblin Watsa Investment Counsel, which is an affiliate of the Canada-based Lombard Insura-nce, the Government of Singapore Investment Corpora-tion, and Prudential Portfolio Managers, part of Prudential Plc. With the infusion of the proceeds from the sale to the banks capital, its capital adequacy ratio has shot up by 2 per cent to 14 per cent.
The shares of the bank were originally owned by the erstwhile ICICI, which had merged with ICICI Bank earlier this year. In accordance with the scheme of amalgamation of the erstwhile ICICI with ICICI Bank, 101.4 million shares of ICICI Bank held by ICICI were transferred to ICICI Bank Shares Trust, which has now offloaded the stake to seven FIIs.
The sale price is at a 5.1 per cent discount to the closing price on Wednesday, but is more than 10 times the average price at which ICICI bought the shares (the average acquisition cost of the erstwhile ICICI being approximately Rs 12.27 per share).
The banks stock jumped 3.8 per cent on Thursday after the deal was announced, but by afternoon, it was down 1.85 per cent at Rs 135 when it sank into the markets that the cash realised would go into provisioning and would be earnings-neutral.
Speaking to FE, ICICI Bank executive director Kalpana Morparia said the Lombard affiliate and the Government of Singapore would each own a stake of 7.0-7.5 per cent, with the rest of the shares being bought by Prudential Portfolio Managers, and some other foreign funds.
Said Ms Morparia, ICICI Bank has made an extraordinary gain of Rs 1,200 crore. The current thinking is to earn almost 10 per cent interest on the income and make use of this money to strengthen the general provisioning and clean up the balance sheet further, Ms Morparia said, adding ICICI Bank has complied with all stipulations laid down at the time of the reverse merger. The disinvestment, which was carried out with the three FIIs, was scheduled to be completed by March 2003.
With the new foreign stake holders, the total FII holding in ICICI Bank has moved up to 36.5 per cent. Reserve Bank of Indias regulations permit up to a maximum 49 per cent by way of FII stakeholding. The bank has a foreign direct investment of 25 per cent in the form of American Depository Receipts. However, the bank has no plans to exhaust the total limit on FII holding.
The bank would not talk about raising capital in the near future. We will focus on becoming one of the best banking service providers in the country, Ms Morparia said. The Life Insurance Corporation (LIC) is still the largest stakeholder in the bank with 8.5 per cent stake. At the time of the merger, ICICI Bank had Rs 2,100 crore by way of provisioning against standard assets, or about 4.5 per cent of the value of the assets. Bad loans were covered to the extent of 63 per cent, higher than the norms.