ICICI Bank is a well known private sector bank in India. It is rated as the second largest bank in the country with total assets of Rs.3,44,658 crores (USD 79 billion) as on 31.03.07. It is ranked third amongst all the companies listed on the Indian stock exchanges in terms of free float market capitalization i.e. after excluding all promoter holdings, strategic investments and cross holdings among public sector entities. It has about 950 branches across the country and there are subsidiaries in United Kingdcom, Canada and Russia. The bank also has branches in 17 other countries including United Sates, Singapore, Hong Kong and United Arab Emirates.
ICICI (Industrial Credit and Investment Corporation of India, formed in 1955), promoted the bank in 1994 as a wholly owned subsidiary. ICICI had about 46% stake in the bank after its first IPO in 1998. The company’s ADRs (American Depository Receipt) got listed at the NYSE in the year 1999 (the first ever Indian company to achieve the distinction). In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January 2002. Consequent to the merger, the ICICI group's financing and banking operations, both wholesale and retail, have been integrated in a single entity.
Today, the bank has diversified into personal and corporate banking, NRI banking, insurance services, mutual funds, online trading services, demat services etc.
There were two IPO’s (follow on public offers) previously, in 2004 and 2005. On 19.06.07 book building process for issuing 9,88,70,000 shares started. Face value of the share is Rs.10 and the price band is Rs.885 – Rs.950. The issue closes on 22.06.07.
Let us now compare important financial data at the time of issue, stock price and trend, investor response etc. for both previous and current issues.
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| 2004 | 2005 | 2007 |
| Start date | 02/04/04 | 01/12/05 | 19/06/07 |
| End date | 07/04/04 | 06/12/05 | 22/06/07 |
| Size (lakh shares) | 1196 | 990 | 989 |
| Price band | 255 - 295 | 505 - 545 | 885 - 950 |
| Issue price | 280 | 525 |
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| No. of shares allotted to: (crores) |
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| FII's | 4.55 | 4.41 |
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| Retail investors | 1.53 | 2.88 |
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| Subscription : x times |
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| FII's | 5.8 | 6.4 |
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| Retail investors | 0.57 | 0.77 |
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| Financial data | 2004 - 05 | 2005 - 06 | 2006 - 07 |
| Net profit | 1852 | 2420 | 2761 |
| P/E (adjusted) |
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| 29.93 |
| EPS | 25.45 | 30.93 | 31.93 |
| Book value |
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| 270.35 |
| Market Price on 31st March | 392.80 | 589.05 | 853.35 |
| % gain in stock price | 34.05 | 66.68 | 69.03 |
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| Stock price during IPO on NSE | 289.45 | 529.90 | 945.15 |
Observations:
- It can be seen that the difference between market price and the price band in which shares were issued, is not much. In the current issue, retail investors will get a 50 rupees discount to the final price that will be fixed by the bank. In earlier issues, despite a 5% discount in final price the retail investors were not attracted much.
- In the last two issues, retail investors had 57% and 77% subscription. As a result, they got nearly what they applied for. This again showed some lack of interest among general public.
- Foreign institutional investors hold a large stake in ICICI Bank. They have been oversubscribing issues.
The following table gives the share holding pattern as on 31.03.07 (Source: ICICI bank web site www.icicibank.com)
| Indian promotors | 0.00 |
| Foreign promotors | 0.00 |
| Mutual funds / UTI | 4.40 |
| Financial institutions / banks | 0.25 |
| Insurance companies | 11.73 |
| Foreign Institutional investors | 45.02 |
| Foreign banks | 0.02 |
| Corporate bodies | 5.19 |
| Retail investors < 100,000 | 5.27 |
| Retail investors > 100,000 | 1.58 |
| Foreign companies | 0.01 |
| Custodial shares | 26.52 |
FII’s hold 45.02% stake in this company. Retail investors about 6.85% only.
The net profit and percentage gain in stock price during 2005 – 06 and 2006 – 07 have been steady. At the P/E ratio of nearly 30, stock looks interesting.
Let us analyze the monthly chart of ICICI bank technically.
The stock has gone up from 71.70 in September 2001 to 941.10 in January 2007, resulting in 13 times appreciation.
In the monthly chart displayed above, clearly, the stock is in its 5th wave. It will find strong resistance to cross 1010. According to the wave theory, a correction should start after the completion of 5th wave, which of course needs a confirmation. But as of now there is no reversal sign in the charts yet.
Conclusion:
It is entirely the investor’s choice whether to apply for the IPO or not, since the stock is already available in the secondary market at nearly the same price. Also, from the technical point of view, if a correction occurs in the stock as explained above, the investment may become a dead one, at least for sometime.
Having said that, the sound financial performance and huge FII investment may attract some of the investors.
It is also not clear why the retail investors are not attracted to this stock. It is possible that this section of market thinks it is overpriced. Reasons could be many, but this is a technically right stock to invest at the correct price levels.