ICICI Bank to come out with IPO in 4 units, insurance stake sale possible
August 21, 2009
Keen to revive its plans to unlock values in its four units, in line with the revival in the stock markets, ICICI Bank Ltd Friday said it could make initial public offerings in four subsidiaries or sell stake in its insurance ventures, as soon as the government raises sectoral foreign direct investment (FDI) limit.
The bank would take a call on the subject once the laws are amended to hike foreign direct investment in insurance sector to 49% from 26%, ICICI Bank chief executive and managing director Chanda Kochhar told reporters.
Earlier, in 2007, the bank was contemplating to list its three units—ICICI Securities, ICICI Prudential Life Insurance and ICICI Lombard General Insurance.
The bank had also announced its intention to transfer its entire holdings in ICICI Prudential Life Insurance, ICICI Lombard General Insurance Co, Prudential ICICI Asset Management Co and Prudential ICICI Trust to ICICI Holdings. At that moment, Reserve Bank of India had said it preferred to avoid an intermediate holding company structure, under which a bank is owned by a holding company that conducts non-banking businesses, because it would raise problems with regulation.
While pointing out that ICICI Bank's share price had increased three times in the last six months to about Rs750 per share, Kochar clarified that the listing of its unit would help in creating values for the stake holders. At this price, ICICI's market capitalisation is about Rs800 billion compared to market leader SBI's about Rs1.2 trillion.
"Still we are way off from the peak of over Rs1,450," she rued but said that she would strive to do everything to add value in the group for the shareholders.
"In all these four units, ICICI Prudential Life Ltd, ICICI Lombard Ltd, ICICI Securities Ltd and ICICI Home Finance Ltd possibility exists, but nothing that we have finalised currently. Hence, nothing you would see immediately," she said, when asked about the time frame she envisaged in terms of monetising investment in these entities.
She, however, was non-committal on any preferential treatment for its existing shareholders in the IPOs, saying they would anyway share the value unlocked from this exercise.
"As far as subsidiaries are concerned, over a period, we (will) clearly monetise some investment made in our subsidiaries. This means we would either do IPO or watch what happens on the insurance side that is clearance of government's norms to raise FDI cap for selling stake in the venture," Kochhar said.
A bill to increase FDI cap to 49% from 26 is awaiting the nod from the parliament. Currently, ICICI Bank holds 74% stake in both life and non-life venture insurance companies.
"In terms of IPO, we should wait for how the FDI cap issue turns out and then decide what percentage foreign partners will hold and so on. We will take a decision after that," she elaborated, but made it clear that time and market was not opportune for IPO in the life or general insurance ventures.
Pointing out that there was no need to take a decision on IPO in a hurry, she said the bank had enough capital and also the requirement of investible funds in these subsidiaries was very small this year.
"As I said we have enough capital to fund our growth but to fund growth of subsidiaries as well. And I think in the current market, it's not the best value and the right optimum value that they are going to get. I would rather wait for the market to reach a position where we get most optimum value and then look at," she added. – Yogesh Sapkale