ICICI shares expensive, say analysts -(Let's check this dude's prediction in a few months to see how good he is,probably wrong like the rest of the lot)
By Ranjit Gangadharan
BOMBAY, Sept 23 (Reuters) - Concerns over asset quality, tighter spreads and equity dilution will weigh on the performance of the shares of India's leading term lender ICICI Ltd over the near-term, analysts said on Thursday.
"I would rate the shares as a market underperformer going forward," said Ketan Desai, head of research at Asit C. Mehta Investment Intermediates.
ICICI became the first Indian company to list on the New York Stock Exchange on Wednesday after the successful completion of an issue of $315 million American Depositary Receipts (ADRs), including a greenshoe option.
The ADRs (NYSE:ICD - news) closed at $11.01 on Wednesday, higher than the offer price of $9.8. Each ADR is equal to five underlying shares listed on domestic Indian exchanges.
ICICI shares closed up 6.85 rupees at 93.20 rupees ($2.14) on the Bombay exchange. They have risen 98 percent this year.
"Valuations look quite expensive," a banking analyst at one foreign brokerage said. "I see a problem in (interest rate margin) spreads with top-rated companies raising funds on their own."
EQUITY ISSUES
The company had also raised slightly over eight billion rupees through equity issues to domestic institutions and retail investors in September.
The equity capital would go up to 7.85 billion rupees from 5.15 billion following the issues, a company official said.
Analysts said the company's exposure to troubled industrial sectors like steel, textiles, and chemicals was a worry.
ICICI's non-performing assets (NPAs) was 7.6 percent of total assets at end-June against 7.8 percent end-March.
Desai said as AAA rated blue-chip companies were increasingly raising cash on their own at cheaper rates, finance firms will have to be satisfied with tight spreads.
ICICI said U.S. investors were the main buyers of its ADRs.
"U.S.-based retail investors put in over $300 million worth of orders," it said in a statement.
Analysts said ICICI was unlikely to be as fancied as software firm Infosys Technologies Ltd -- the first Indian firm to be listed in the U.S. -- which set a trail-blazing run on Nasdaq after its listing in March.
Infosys's ADR (Nasdaq:INFY - news) closed at $126 on Wednesday against the $34 it was offered at in March.
"ICICI has no specific globally competitive edge," Desai said. "It provides an exposure to India, that's all."
He predicted local factors would influence ICICI's share price movements unlike Infosys ADRs which is the driving force for the domestic stock.
The Infosys shares closed 159 rupees higher at 7,869 on Thursday. Two Infosys ADRs equals one domestic share. At 43.56 rupees to the dollar, the ADRs translates into 10,977 rupees per underlying share.
($1 equals 43.57 Indian Rupee) |
