After a lukewarm response from retail investors in the initial public offer of realty giant DLF last week, investment bankers are hoping to catch their attention in the follow-on issue of ICICI Bank by offering sops like discount of Rs 50 a share and part-payment option.
The country's largest private lender is aiming to raise about five billion dollars (over Rs 20,000 crore) with its follow-on equity issue in India and the US. The domestic issue of Rs 8,750 crore opens on June 19 and closes June 22.
The bank has reserved five per cent domestic issue, or Rs 437.5 crore, for existing retail shareholders.
While it has fixed the price band at Rs 885-950 a share, the retail bidders, including existing retail shareholders, would be allotted shares at a discount of Rs 50 per share to the issue price.
In addition, the issue is offering two payment options for retail investors. In the first method, retail bidders are required to pay the full bid amount less the discount at the time of application.
The second option allows retail bidders to pay Rs 250 per share on application, Rs 250 per share on allotment and the balance on a call by the bank within six months of allotment. The discount would be adjusted against the call amount.
According to an official of an investment banking firm, the issue offers a hedge against downside risk to retail investors even if the stock price on listing remains the same as the offer price.
For example, if the bank fixes the offer price at Rs 900 and the stock lists at the same price, retail investors still stand to gain Rs 50 a share by virtue of the discount offered.