News: ICICI plans to mop up $1 bn

(TT 21/11/2006) Mumbai - The appetite for foreign funds has spilled over from industry to banking, with ICICI Bank reportedly firming up plans to raise close to $1 billion either through syndicated loan or yen denominated bonds.

Sources said 14 banks have received the mandate to arrange the funds, to be utilised for lending in India. However, when contacted, ICICI refused to comment on the plan.

The mega borrowing plan comes at a time of huge demand for loans from the corporate sector and in retail. While advances by banks have grown in excess of 30 per cent, their deposits are up by only 18 per cent.

Advances have outstripped deposits for ICICI Bank as well. There was a robust demand for credit in the first half of the fiscal, particularly from retail customers.

Despite higher interest rates, retail assets of the bank in the first half jumped 57 per cent to Rs 1,07,679 crore on September 30, 2006 from Rs 68,537 crore a year ago.

A section of the market believes the bank will opt for syndicated loans, while bond market circles say the $1 billion will be raised through yen-denominated bonds of different maturities.

The buzz is that it may raise $350 million through one-year bonds, $400 million through two-year bonds, with the rest in loans of higher maturity.

There are unconfirmed reports of the bank planning to cash in on the lower interest rates in Japan and convert the funds into rupee.

This is the third time in four months that the private sector bank is approaching the international debt markets. Earlier it raised around $400 million through five-year bonds and $350 million as perpetual, Tier-I securities.

Not only ICICI Bank but also some big guns of India Inc are shopping for funds overseas.

Reliance Industries Ltd (RIL) recently announced its plans to raise $2 billion to fund its investment in oil exploration and production (E&P) business. Many options are under study, including syndicated loan, bonds, foreign currency convertible bonds or a combination of all these.

Sterlite Industries (India) Ltd, too, is planning to raise up to Rs 12,500 crore ($3 billion) to fund its expansion plans. The company has recently filed with the US Securities and Exchange Commission its plan to raise $2 billion through the issue of American Depositary Shares (ADS).