ICICI Bank executes India's largest ever equity deal

The domestic portion of the $4.3 billion placement is priced at a 1.4% discount to the latest close, while the ADR offering comes at a 0.8% discount.
ICICI Bank has raised $4.3 billion from its combined offering of domestic common shares and American Depository Receipts and secured its place in the record books as having completed the largest ever equity fund raising by an Indian corporate.

The deal surpasses real estate developer DLFÆs $2.25 billion IPO that was completed last week and, if the 15% greenshoe is also exercised, ICICIÆs offering will stand at $4.93 billion and be more than twice the size of IndiaÆs second largest follow-on, which according to Dealogic data was Oil & Natural Gas CorpÆs (ONGC) $2.36 billion offering in March 2004.

ICICIÆs deal was split virtually equally between the domestic and international offerings, both of which saw very strong demand. Not surprisingly given that the ADR trades at a premium to the underlying shares in India, the pricing of the ADRs was tighter than for the domestic offering and came at a 6.6% premium to the pricing of the domestic offering.

This explains why foreign investors alone subscribed for about 12 times the shares available to all qualified institutional buyers (QIB) on the domestic offering. However, the final allocation will be capped as 26% of the deal needs to go to domestic investors to ensure ICICI doesnÆt break its 74% foreign ownership limit, which is already pretty much filled.

Total demand from QIBs exceeded the shares earmarked from them (50% of the domestic deal) by 21.6 times and the domestic deal, which amounted to Rs87.5 billion ($2.15 billion) ended up 11.5 times covered overall. According to sources, the book was fully covered within 20 minutes of the bookbuilding opening.

The price was fixed towards the top end of the Rs885 to Rs950 range at Rs940, which represented a discount of 1.4% versus FridayÆs close of Rs953.75. Retail investors, who asked for 1.03 times the 33% portion set aside for them, will buy the shares with a price reduction of Rs50 per share.

The $2.14 billion ADR tranche, which wasnÆt marketed with a range, was priced at $49.25 per unit, equal to a 0.8% discount to FridayÆs close of $49.64. Given that there was a fixed issue size this resulted in the sale of 43.45 million ADRs, each of which accounts for two common shares. Taking this into account and adjusted for the exchange rate, the final domestic price translates into a price per ADS of $46.20.

According to sources, the ADR tranche was five to six times covered with about 150 investors in the book. The interest was said to be well diversified between the main regions but with particularly strong interest from the UK, the Middle East and the US.
There was no immediate information on whether Temasek Holdings and the Government of Singapore Investment Corporation (GIC) had been allocated shares, but a local newspaper reported last week that the pair had submitted bids totalling Rs83 billion ($2 billion) to acquire shares in the offering. It has also been reported that the Indian central bank would give them approval to raise their investments in ICICI to 10% each. At present they are treated as one foreign entity, as they are both owned by the Singapore government, which means they are only allowed to hold 10% together. They currently have a combined stake of 9.56%, according to ICICI Bank's share sale documents.

The ADR price moved about 6.5% higher during the two-week roadshow and the premium versus the domestic shares widened to 6% from 4.6%, which indicates how strong the support for both the stock and the offering was.

Both the ADR and the domestic share have also been moving higher since the deal was first announced on April 28. As a result, the ADR offering price represented a 7.6% premium to the average closing price since then and the domestic price a 3.6% premium.

Investors were said to have been buying the shares partly on the back of the IndiaÆs economic growth story in general, but according to one observer the stock is also trading at an attractive 1.5 times its current book value when stripping out the insurance business. ICICI is the second largest bank in India in terms of total assets after government-owned State Bank of India and the largest private sector bank. It also has the largest market capitalisation among all the listed lenders.

As of the end of fiscal 2007 in March, ICICI had total assets of $91.5 billion and a net worth of $5.6 billion. Its net profit increased by 13.9% to $640 million. The net proceeds from the combined offering will be used for future growth and to make sure the bank meets the required capital adequacy ratios.

The ADR portion was led by joint bookrunners Goldman Sachs, Merrill Lynch and JPMorgan, with the first two also being global coordinators. CLSA acted as joint lead manager.

DSP Merrill Lynch, Enam Financial, Goldman Sachs and JM Financial were joint bookrunners on the domestic portion.
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