InvestorQ : What is ICICI Bank planning to raise $3 billion for and why has the stock price performance been so weak?
Deepa Salunkhe made post

What is ICICI Bank planning to raise $3 billion for and why has the stock price performance been so weak?

Answer
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Juvina Maggie answered.
3 months ago


ICICI Bank will raise $3 billion via share sale in order to boost its capital adequacy ratios, which is already quit comfortable for ICICI Bank. The bank is targeting a sale of shares before the month of September 2020. In the last few days, ICICI Bank has already raised $410 million by selling strategic stakes in ICICI Pru Life and ICICI Lombard.

ICICI Bank has a capital adequacy ratio of 16.1% which is comfortable but ICICI Bank wants to bridge the gap with HDFC Bank where the capital adequacy stands at 18.5%. However, the markets are apprehensive that this could be due to expectations that the bank may be expecting a sharp spike in bad assets after the EMI moratorium comes to an end.

The only concern the markets has is on the equity dilution front. Since the $3 billion is likely to be raised through the issue of fresh equity, it is likely to substantially dilute the equity of the bank and hence its EPS too. This has the potential to reduce the attractiveness of the stock at the current price, which may explain the sharp fall in the stock price.