The Hindu Business Line : ICICI Bank stock plunges 7%

Mumbai April 30 ICICI Bank's follow-on offer to raise Rs 20,000 crore from the markets will negatively impact the stock and earnings per share (EPS) in the medium to short term, say analysts.

In response to the announcement made on Saturday, the stock plunged 7.26 per cent or Rs 67.75 to Rs 865.90 on the BSE. "The quantity and quality of the equity dilution has surprised markets," said Kotak Securities.

"At the moment, the return on equity (ROE) for the core business and growth will be subdued and remain so for the next two years," said Ms Sarika Lohra, banking analyst, Angel Broking.

"The ROE will come down between 10-11 per cent in 2009, while the cost of equity will be 13 per cent," said Kotak Securities. There is a possibility of the EPS to come down as credit growth is expected to slow down; that for ICICI Bank will be at around 27-30 per cent, said an analyst.

"There is a slowdown in retail credit," said Mr Hemindra Hazari, Head-Research, Karvy Stock Broking. "The bank will have to find different avenues for loan growth," he added. Also, banks have to make higher provisions, which will affect future earnings and hit bottomlines. The equity dilution will also hurt the EPS, said Ms Lohra.

Weak results

"The weak fourth quarter results announced by ICICI Bank have also led to the fall in the stock," said Mr Vishal Goyal, banking analyst, Edelweiss Research. However, the raising of funds will provide headfor loan growth and expansion, said an analyst.

More Stories on : Private Banks | Public Offer | ICICI Bank Ltd

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page