ICICI Holdings-The Power and Value of a Holding Company

ICICI Holdings - The future financial services behemoth
When it comes to scale, innovation and leadership, no bank has come close to ICICI Bank, India’s second largest bank.

It has caught the fancy of its customers, competitors, media and investors in its transformation from a Financial Institution to a retail focused ‘Universal Bank’. It is seen as one of the best proxies on India’s surging economy.

ICICI Bank has taken two major decisions recently which could have a bearing on its valuations.

It is forming a new subsidiary, ICICI Holdings which will be listed by end-2007, and transfer its investments at book value in ICICI Prudential Life Insurance Co., ICICI Lombard General Insurance, Prudential ICICI Asset Management Co. and Prudential ICICI Trust.

The subsidiary could be valued at Rs. 40,000 crores, out of which 70% is from the life insurance business. The bank is planning to raise Rs. 2,000 crores by divesting its 5% stake to foreign investors.


ICICI Prudential Life Insurance Company is the market leader in private sector life insurance, having 29% share amongst private players while ICICI Lombard General Insurance Company has a market share of 33% among private sector general insurance companies and overall market share of about 12%.

The asset management business is among the top 2 players in India with assets under management of over Rs 37,900 crores and net profit of Rs 48 crores. These subsidiaries are valued at around Rs. 200 per share.

ICICI Bank had earlier this year successfully concluded a Rs. 20,000 crore equity issue, biggest in India so far, by June/July 2007. Out of this Rs. 5200 crore was subscribed by domestic investors (since the FDI/FII cap is at 74%).

The motives for creating a separate company and raising funds are to create structure to generate capital, avoid regulatory roadblocks with the current holding structure and have better value through market-priced holding.

Also the revised RBI Basel II guidelines notifying that all banks have to maintain a minimum of Tier I capital of 6% and cannot take any benefits arising from lowering of risk weighting on the credit risk side prompted the move. With this ICICI Bank would be able to fulfill strong corporate and retail demand, and fund loan growth for upto 5 years.