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IcIcI Bank

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ICICI Bank obtained the FIPB approval for selling upto 24 per cent in its financial services company to foreign investors. The proposed Finco (still subject to RBI approval) would be the holding company for its Life Insurance, General Insurance and Asset Managament businesses.

Finco approval positive for valuationsIBank had earlier proposed the sale of 5.9 per cent stake in Finco to a few investors (subject to approvals) for Rs 26.5 bn. This valued the Finco at US $ 11bn and the 3 businesses at $ 15 bn. The Life Insurance business is valued at around $ 11.5 bn; General Insurance at $ 2.5 bn and Asset management at $ 1 bn. This is equivalent to Rs 408 per share of IBank. The valuation provides benchmark for the valuation of subsidiaries in future.

IBank PO Rs 1225Adjusting for the value of subsidiaries, IBank trades at 1.09 FY09E adjusted book value. We believe that in fact IBank could trade upto 1.8XFY09E book given rising value of subsidiaries; forecast net profit growth of 35 per cent in FY09, net NPLs at <1.2>

The concerns on the CDO and Yen exposures are overdone. Impact of CDO exposure ( $ 1.5 bn) on bank's earnings is 3 to 3.5 per cent of its earnings offset by the leverage on its Treasury stock. Further IBank has no exposure to the US sub-prime markets and all its Yen borrowings are fully hedged.

Regards

Jinvani Advisors