ICICI Bank’s share to split; no financial impact; continue to maintain HOLD rating with adjusted price target of Rs 380 : IndiaNivesh

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ICICI Bank’s share to split; no financial impact; continue to
maintain HOLD rating with adjusted price target of Rs 380/-
ICICI Bank announced to split its shares from one share into five shares as on
September 09, 2014. The board of directors of the bank approved the sub-division
of one equity share of the bank having a face value of Rs 10 into five equity shares
of face value of Rs 2 each. Accordingly, additional proportionate american depository
shares (ADS) would be issued to maintain the ratio of one ADS to two equity shares.
Each American Depositary Share (ADS) of ICICI Bank will continue to represent two
underlying equity shares as at present. The number of ADSs held by an American
Depositary Receipt holder would consequently increase in proportion to the increase
in number of equity shares. The Bank has fixed Record Date as December 05, 2014.
Valuation:
At CMP of Rs 1,794/-, the (standalone) stock is trading at P/ABV of 2.6x and 2.3x for
FY15E and FY16E, respectively. We have a positive view on ICICI Bank. ICICI Bank
has delivered strong core operating performance in H1FY15 and marching towards
return path of 1.8% RoA and 15% RoE. We expect growth momentum to remain
strong driven by improving margins, robust fee income, and strong retail loan
growth. The strong capital adequacy has also positioned it to grow at faster pace
than the average industry growth rate without raising any new capital for the next
two to three years. So, we continue to maintain HOLD rating with adjusted (due to
share split) of Rs 380/- using SOTP method, where the value of its standalone
business comes to Rs 324/- (P/ABV of 2.2x for FY16E) and the value of subsidiaries
at Rs 56/- (holding company discount: 20% to the fair value of subsidiaries at Rs 70/-).

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