ICICI Bank is dealmaking from a place of strength

ICICI Securities

27/06/2023 04:39

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are their own.)
       MUMBAI, June 27 (Reuters Breakingviews) - Another Indian
financial institution is tidying up. The $80 billion ICICI Bank
 ICBK.NS  is weighing up a delisting of its broking firm ICICI
Securities  ICCI.NS , the news prompted a 10% rally in the
shares of the $2.4 billion unit. This time the country’s second
largest private sector lender is dealmaking from a position of
strength. 
    The stockbroker was listed five years ago during the peak of
a bad debt crisis. It was one among a flurry of subsidiary IPOs
that battered lenders including State Bank of India  SBI.NS 
undertook to generate cash. ICICI Bank was particularly
vulnerable, with then CEO Chanda Kochhar battling allegations of
dodgy lending to the Videocon group. She’s since left and is
facing charges from the country’s central investigative
agencies. 
    The bank raised a less-than-expected $540 million from the
IPO and the brokerage tanked 16% on debut; it has since grossly
underperformed its parent, delivering total returns of 122%,
against 238% for ICICI Bank, whose value has nearly quadrupled
partly thanks to a turnaround under boss Sandeep Bakhshi. 
    After Monday’s share price jump, it will cost about $610
million for the lender to buy the 25% it doesn’t already own.
ICICI Securities trades at roughly 18 times trailing earnings
but went public at more than twice that valuation, Centrum
Broking calculated at the time. That makes it a small price to
pay to unwind what was a desperate deal. (By Shritama Bose)
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 (Editing by Una Galani and Thomas Shum)
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