ICICI Bank to raise Rs 15,000 crore through share sale

Mumbai: ICICI Bank will raise as much as Rs 15,000 crore through the sale of shares in a move that could bump up the lender’s core equity capital by as much as 200 basis points. The bank had recently announced its intention of raising capital to strengthen its balance sheet, joining private lenders such as HDFC Bank and Axis Bank that are planning similar exercises and Kotak Mahindra Bank, which has already done so.

“The board has approved raising of up to 150 billion, in one or more tranches, by way of issuance of securities, through one or more permissible modes," ICICI Bank said in a notice to exchanges. The bank said it would explore raising funds through private placement, preferential issue, qualified institutional placement (QIP) or follow-on public offer (FPO). The bank’s total capital adequacy at the end of the March quarter stood at 16.11 per cent, while its tier-1 capital adequacy was 14.72 per cent, exceeding the minimum regulatory requirement of 11.08 per cent and 9.08 per cent, respectively.

Banks have announced fund-raising plans as they prepare for increased bad loans and large provisioning requirements once the six-month relief on repaying loan dues gets over at the end of August. As per rating agency Crisil, bad loans could rise to as much as 11.5 per cent of total advances at the end of this fiscal year. The gross bad loan ratio was below 9 per cent at the end of the last fiscal year.

“I expect them to raise these funds only by the second half once they get better valuation, which has taken a severe beating in the last three months,” said Siddharth Purohit, analyst, SMC Institutional Equities. “I don’t deny that capital raise is important but it makes sense to raise this capital once they get more clarity on the moratorium and asset-quality picture.”

In the past six months, the ICICI Bank stock has declined nearly 30 per cent and its current market capitalisation stands at Rs 2.38 lakh crore. The stock fell 1.8 per cent to Rs 368.9 at the close on the BSE Wednesday. The bank recently sold its stake in insurance ventures ICICI Prudential and ICICI Lombard for a total Rs 3,090 crore. The board had approved a separate enabling resolution in May to raise Rs 25,000 crore through debt securities and a separate $3 billion through issuance of bonds, notes and certificates of deposit overseas.

Axis Bank plans to raise up to Rs 15,000 crore through the sale of shares, lifting its core equity capital by 200 basis points. Kotak Mahindra Bank raised Rs 7,442 crore through a QIP. HDFC Bank recently sought shareholder approval to raise Rs 50,000 crore through debt instruments.