The Hindu Business Line : Red herring prospectus for public issue filed

BORROWING by a single corporate group accounts for over 57 per cent of ICICI Bank's capital funds (i.e. tier I plus tier II capital), according to the prospectus for the proposed public issue filed by the bank with SEBI.

This is the largest borrower group as on December 31, 2003, and accounts for approximately 5.2 per cent of the bank's total exposure.

The single borrower as on December 31, 2003, accounted for approximately 2.2 per cent of our total exposure and 24.6 per cent of our total capital funds, the prospectus said.

These exposures violate RBI norms that permit a bank to lend up to 50 per cent of its total capital to a borrower group and up to 20 per cent to an individual. Therefore, the bank has obtained approvals from the RBI to exceed them. According to the prospectus, the single borrower limit was breached due to the amalgamation of ICICI with ICICI Bank.

Under the risk factors in the document, the bank has stated, "Credit losses on these large single borrower and group exposures could adversely affect our business, our future financial performance, our shareholders' funds and the price of our equity shares." The draft red herring prospectus has been filed for raising Rs 3,050 crore through a book-built issue with a green shoe option of Rs 450 crore. The date of the issue is yet to be finalised. As on December 31, 2003, the bank's gross NPA, including technical write-offs, were higher at Rs 8,802 crore compared with Rs 8,414 crore as on March 31, 2003. The ratio of net NPA to net customer assets decreased to 4.7 per cent on December 31, 2003 compared with 4.9 per cent on March 31, 2003. During the nine-month period ended December 2003, the Bank sold Rs 288 crore of its bad loans to Asset Reconstruction Company (India) Ltd.

Out of the 14 subsidiaries of ICICI Bank, three were loss-making for the nine-month period ended December 2003. They include ICICI Securities Holdings Inc, a US-based subsidiary of ICICI Securities with a net loss of Rs 60 lakh; ICICI Prudent Life Insurance, with a net loss of Rs 152.68 crore; and ICICI Bank UK Ltd, with a net loss of Rs 5.79 crore.

Retail lending as a per cent of total exposure has almost quadrupled since March 2002 levels to 28.2 per cent. Meanwhile, lending to most other segments has declined excepting marginal increases in the case of telecom, engineering and infrastructure. The retail portfolio as on December 2003 was at Rs 28,265 crore. "Objects of the issue are to provide capital for executing our business strategy, including growth in our retail portfolio, international expansion, investment in our insurance subsidiaries and for other general corporate purposes," said the prospectus.

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