The Hindu Business Line : Valuation hopes inspire interest in ICICI Bank

THE ICICI Bank stock on Monday perked up on the prospect of a new valuation opportunity provided by its equity issue, which opens from April 2. Today's huge volume driven demand saw the stock cross the upper limit of the issue price band and closed at Rs 299.65 (Rs 284.65) on the BSE. It traded at 12.1 times its trailing four quarter EPS of Rs 24.70.

The stock has gained more than 10 per cent in the last two sessions. Over 26 lakh shares changed hands today on the two top bourses. On the NSE, 44.4 per cent of the traded quantity was presented for delivery.

According to banking industry analysts, as the qualified institutional buyers (QIBs) appear to be ready to offer Rs 295 a share, the highest price on the issue price band, the market topped that. On Friday, the bank's ADR fetched a decent premium over the domestic price.

"Even though the retail response to the offer is to be watched, the institutional offer at that price is almost a foregone conclusion," said a fund manager.

Relatively high liquidity of the counter is an attraction for institutions. According to Mr Gul Teckchandani, CIO Sun F&C, compared to their PSU counterparts, the market is ready to add premium for the private banks for the growth and lower NPA. The prospect for asset sale of Dabhol project, in which the bank had an exposure, has improved sentiment for the stock, Mr Ketan Thacker of Anagram Stockbroking said.

"However, all would not agree on the valuation. The bank is very aggressive and had been successful with its high-risk strategy. But its business model and risk management have a few weaknesses compared to its competitors. Its faster growth strategy tended to leave a gap in the control system and client servicing," an industry watcher commented.

Some of the bank's investments, particularly in certain bank or corporate where it is the largest stakeholder, were not strategic and mere holding onto them did neither enhance value nor enrich its cash flow, another analyst pointed out.

As the FII investment limit in the bank has almost been exhausted, the rush for increasing stake was linked to grabbing the post-issue opportunity, Mr Thacker added.

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