ICI Holdings may have completed its 5% stake placement for USD 500 million, sources

said, adding that ICICI Holding may have placed stake to multiple investors and the valuation of ICICI
Holding may work out to USD 10.2 billion.
This company was recently created by ICICI to hold its 74% stakes in the life and general insurance
business. Sources confirm that it has pegged the valuation of its life insurance business, ICICI
PruLife, at USD 6-7 billion and the non-life or general insurance at USD 2-3 billion. The 51% stake in
ICICI Prudential Asset Management is being put at USD 1 billion.
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ICICI Prudential and ICICI Lombard will continue to require large dollops of capital as the life
insurance business is growing at 104% annually while the general insurance business is clocking a
growth of over 88%.
On the other hand, HDFC Bank will raise Rs 3,114 crore via its preferential offer to Carlyle Group. The
HDFC preferential issue consists of 1.8 crore equity-shares, which is 7.11% of the total issued and
paid-up capital.
The Carlyle Group will hold 5.6% in HDFC after the preferential issue. HDFC plans to use a part of the
money for its insurance business, which needs over Rs 600 crore every year. Part of the funds would
be used to maintain HDFC stake in HDFC Bank, said Renu Karnad, ED, HDFC Bank.
The BSE Bankex is up 97 points to 7,564. On the BSE, the ICICI Bank stock is up Rs 10, at Rs 923,
while the HDFC Bank stock is up Rs 56, to Rs 1,125. CNBC-TV18 spoke to analyst Hemindra Hazari
of Karvy Stock Broking to find out which of the two banks is a better bet.
He is a bit surprised with the timing of the ICICI Bank issue as its results were not up to the mark.
“The ICICI Bank issue was a bit of a surprise as when they announced their equity issue, their results
were not up to the mark. There is a concern that its RoE may take a hit, so the market is sensitive to
ICICI Bank’s announcement. On the other hand, HDFC Bank is a very profitable bank. They have
made it clear that they are not interested in increasing their market share but they want to grow
profitably. In the case of HDFC Bank, the concerns of maintaining profitability are much less than in
the case of ICICI Bank,” he said.
Hazari feels there is huge difference in both the banks raising of equity. “There is a big difference
between ICICI Bank’s raising of equity and HDFC Bank’s raising of equity. ICICI Bank is using these
proceeds to fund its own growth, which is expected to remain high, and its investments in other
subsidiaries, which require very large capital like its insurance business. For HDFC Bank, there are no
such subsidiaries and hence there is no such concern for the mortgage lender. That’s why ICICI Bank
requires to raise a larger capital than HDFC Bank,” he said.
He sees no problem in banks coming to the market to regularly raise capital. “HDFC needs to
maintain a minimum CAR of 12% as they are an NBFC. While in the case of ICICI Bank and HDFC
Bank its 9%. Given the fact that the economy is growing, banks need to provide credit so that the
economy can continue to grow. We would expect banks in an emerging economy, with high economic
growth rates, to regularly come to the market to raise capital.
Hazari prefers HDFC Bank to ICICI Bank. “My first preference would be HDFC Bank as the risks are
much lower than in the case of ICICI Bank. One is the sheer size of the issue in the case of ICICI
Bank compared to HDFC Bank and the extent of dilution. Secondly, its not very clear whether there
will be an ICICI Holding and who will fund the insurance venture. Excluding that, one will find that
ICICI Bank has a huge retail exposure and that has been showing some stress in the economy. If
there is some problem say on the leverage side and ICICI Bank has really leveraged itself very highly
in that area, then there are always going to be concerns. While we do not see these concerns in
HDFC Bank,” he added.