ICICI block trade

Temasek reduces stake in ICICI through $300 million block

The trade comes as the Indian stock market enjoys a recovery, with investors accepting a tight discount in exchange for a very liquid stock.

Allamanda Investments, a unit of Singapore state investor Temasek, has sold about a $300 million stake in ICICI Bank, cutting its holding in the Indian lender by nearly half.

The move came after market rumours about a block sale in the bank, and also about a week after US private equity group Carlyle raised $270 million from its partial sale in India’s Housing Development Financing Corp (HDFC). The block trade in HDFC, which was led on a sole basis by Deutsche Bank, was the first major equity transaction in the Indian market since L&T Finance Holdings raised $277 million from an initial public offering in late July last year.

The Indian stock market’s resilient performance has been encouraging deal activity, as sellers look to take profits and buyers hope to take advantage of further upside. The benchmark Sensex index is up about 14% so far this year, after dropping 25% in 2011, while ICICI has gained about 35% to date after nearly a 40% fall last year.

Allamanda sold 15.9 million shares, or 40% of its stake in the bank, at Rs924 each, which translated into a 1.46% discount compared to Tuesday’s close of Rs937.75.

The sale size represented about 1.4% of the banks’ outstanding stock, according to Bloomberg data. As of the end of December, Allamanda held a 3.46% stake, or 39.8 million shares, in ICICI.

Temasek had a portfolio value of S$193 billion ($155 billion) as of 31 March 2011, and 36% of this was in financial services, according to the company website.

The book for the ICICI block sale opened at 7.30pm on Tuesday and closed within two hours, a source said. It was marketed globally and a variety of funds took part, though the majority of the demand came from Asia, including India, the person said, adding that there was also some US demand.

ICICI’s American depositary receipts and futures are very liquid, which means that the deal is only worth a day or two’s trading when the turnover in these products is included — and the tight discount is probably a reflection of the premium that the market is paying for that liquidity, the source noted.

After the block transaction, ICICI’s stock fell 1.8% on Wednesday to finish at Rs920.5, underperforming a 0.5% rise on the Sensex index.

Goldman Sachs was the sole bookrunner for the transaction.

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