ICICI Securities To Sell 3% In Pre-IPO Deal; Rumoured Valuation $4.5 Billion
ICICI Securitis (I-Sec), the investment bankiing and broking arm of ICICI Bank, plans to sell 3 per cent stake in a pre-IPO deal, reports Mint newspaper. ICICI Bank had announced in January that I-Sec would be listed in the next six months. The Mint report, quoting unnamed sources, said that investment bank JPMorgan India had been given the mandate to manage the deal. This information was, however, not verified.
Even though it was reported earlier that I-Sec would be selling 10-15 per cent stake in the IPO, the Mint report says it may offload a total of 10 stake, of which 3 per cent will go to institutional investors. The report also added that ICICI Bank is looking at a valuation of around Rs 18,000 crore ($4.5 billion) for I-Sec. That would be the highest valuation commanded by an investment bank in India. I-Sec has a thriving investment banking business, besides institutional and retail broking activities.
In February 2007, JM Financial had sold its 49 per cent in the institutional broking business to Morgan Stanley for $445 million, valuing the entity at $908 million. Simultaneously, JM bought Morgan Stanley’s 49 per cent stake in the investment banking business for $20 million. So the combined JM Morgan Stanley investment banking and broking business was valued at about $1 billion early last year. Similarly, in December 2005, Merrill Lynch acquired an additional 50 per cent stake (totalling up 90 percent), for about $500 million, which valued the firm at $1 billion.
So I-Sec’s rumoured $4.5 billion valuation puts the investment bank on top of all these firms. In January, ICICI Bank’s announced unlocking value in its subsidiaries, and put the listing of I-Sec as an immediate step. The bank has five other unlisted subsidiaries: ICICI Prudential Asset Management Co. Ltd, ICICI Ventures, ICICI Prudential Life Insurance Co. Ltd, ICICI Lombard General Insurance Ltd and ICICI Securities Primary Dealership Ltd.
Mint reports, quoting a recent research report by Emkay Shares and Stock Brokers Ltd, that I-Sec reported revenues of Rs 257 crore and net profit of Rs 71 crore in the third quarter of 2007-08 ended December. For the year ended 31 March 2007, it had reported a net profit of Rs 133 crore.
03/4/08, 3:17 PM |
Even if we assume 50% growth for the year (would be lower than this), valuations suggest 100x FY08 earnings and that too in the middle of bear market. Thank heavens the issue didn’t come in 2006.