EQUITIES

ICICI Bank raises Rs 2,250 crore, sells 1.8 crore equity shares to trim 4% stake in ICICI Lombard

As per latest available data from the Reserve Bank of India (RBI), retail loans grew just 12% year-on-year (y-o-y) in April against 15.7% a year ago.

Private lender ICICI Bank on Friday announced that it has divested a 3.96% stake in ICICI Lombard General Insurance Company Limited as it looks to raise capital and strengthen its balance sheet. The bank sold 1.8 crore equity shares of face value of Rs. 10 each on the stock exchange for nearly Rs 2,250 crore. The move comes on expected lines as the leading private sector bank had already stated while announcing its results last month that it will look to further improve its balance sheet as opportunities arise. Shares of ICICI Bank jumped 2.3% to trade at a price of Rs 360 per share on BSE Sensex on Friday. 

“In line with this intent and pursuant to an approval granted by the Board, the Bank has today divested 18,000,000 equity shares of face value of Rs. 10 each of ICICI Lombard General Insurance Company Limited, representing 3.96% of its equity share capital,” the bank told the market regulator on Friday. After selling its 3.96% stake in the insurance arm, ICICI Bank’s shareholding in the company now stands close to 51.9%. 

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During the March quarter, ICICI Bank reported a 26% on-year jump in standalone profit to Rs 1,221 crore. Non-performing assets also declined to 5.53% from 6.70% in the on-year, hinting at a healthy trend in asset quality improvement. The provision coverage ratio on non-performing loans, including cumulative technical write-offs, was 86.8% at March 2020 compared to 80.7% in March 2019. Provisions stood at Rs 3,242 crore while coronavirus related provisions were Rs 2,725 crore. 

Shares of ICICI Lombard Insurance Company Limited, have witnessed a fall of 9% in the last three days and the same continued on Friday, as the stock dived another 1.5% to trade at Rs 1,256 per share. The insurance firm reported growth in premium in the March quarter while operating profits took a hit, falling 13% on-year basis. “Over FY21E we expect lockdown and partial working conditions to result in lower new motor vehicle policy sales, lower renewals, and also lower motor CORs. We expect health premiums to grow with some increase in claims, but over time we expect higher pricing power in health to protect profitability,” said HDFC Securities last month. The brokerage has a target price of Rs 1,042 on the firm with a SELL rating. On the other hand, ICICI Bank has a BUY call from HDFC Securities with a target price of Rs 442.

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