FPO offers upsides to retail investors: ICICI

Bangalore, Jun 18: The forthcoming follow-on public offer (FPO) will not go the DLF way and will attract retail investors even if the stock price remained the same as the offer price, ICICI Bank officials claimed today.

India's largest private sector lender is coming out with a FPO with a price band of Rs 885 to Rs 950 to raise Rs 8750 crore in the domestic market. The remaining, in the capital raising exercise that runs to the tune of Rs 20,125 crore, includes green shoe option and the American Depository Shares (ADS) to be listed in NYSE. The issue would be made through the book-building route.

The issue opens on June 19 and closes four days later.

Under the green house option, the bank may allocate additional equity shares up to Rs 1312.5 crore and operate a price mechanism post-listing.

Speaking to media persons here Senior General Manager Rajiv Sabharwal said that the Rs 50 discount offered to retail sectors and the payment options, Rs 250 on application and the same amount on allotment to be paid within 21 days will be a huge attraction to the retail investors.

Market experts are skeptical of the issue attracting the retail investors in large numbers and it was priced too high and equal to the today's listing price of the ICICI Bank in the stock market.

Explaining the advantages the retail investors could look for, Mr Sabharwal said the existing shareholders (holding below Rs one lakh share value as on record date) could also apply in the reservation as well as retail segment. Once the shares were allotted and the shareholdres pay the second installment, the shares would become tradable under partly paid up shares.

"Due to the discount of Rs 50, the retail investors will get the shares at Rs 850. They will pay Rs 500 as paid up value that includes Rs 250 on application and the same amount on allotment, and the inpaid value still remains a high Rs 350," he added.

Once put on the stock exchanges, these shares would be traded at a price equivalent to the market price of fully paid share less call in arrears or Rs 900 minus Rs 350, which would mean that the listing price of the partly paid share was at Rs 550 bringing an investor gain of 10 per cent. It would be approximately 14 per cent benefit in the unpaid value that the investor had to pay later, he explained.

"The investors should see the profits made by those who subscribed to the issue made in 2005 which had brought 158 per cent appreciation to the investors. The issue price then was Rs 525 per equity share and between December 2005 and June 15, 2007 the share price went up to Rs 908. This gain is higher than comparative figures of HDFC Bank, SBI. The annualised income from the ICICI Bank had been a high 48 per cent," Mr Sabharwal added.

UNI