ICICI Bank Public Issue : Use the Part Payment Option
ICICI Bank will be offering part payment option for retail investors applying in its follow on public issue (FPO). Unlike the DLF IPO, ICICI Bank will be listing its partly paid shares along with the fully paid shares (which are already listed and traded on NSE and BSE). This sounds interesting to me. So unlike the DLF IPO retail investors don’t have to think twice before going for the part payment option in the ICICI Bank public issue. During a coversation with a friend, I was told that there is a catch in using the part payment option. According to him, since only retail investors would have partly paid shares and most of them would like to sell them on listing, there would be higher selling pressure here than in the fully paid up category. However there is a flaw in this logic. If the same asset class trades at two different valuations, then there is an arbitrage opportunity and hence arbitrageurs will enter the picture. This will make sure that the price difference between the partly paid ICICI Bank shares and the fully paid ICICI Bank shares is negligible. Hence retail investors can safely use the part payment option for applying in ICICI’s public issue. This is the third time ICICI Bank is raising funds through a public issue. Given below are a list of features which make the ICICI Bank public issue very attractive.
Upto 5% discount to the FPO issue price (only for retail investors) Part Payment Option (only for retail investors) Green Shoe Option 5% Reservation to existing shareholders (record date June 13th) ICICI Bank Public Issue Price Band : ICICI Bank has fixed the price band for its public issue between Rs. 885 and Rs. 950 which I must admit is on the higher side. But the good news is that Retail Investors will get a discount of Rs. 50 per share on the Issue Price fixed by ICICI Bank.
ICICI Bank Public Issue Payment Options : ICICI Bank is offering two payment options for retail investors investing in its Public Issue. Under the first option retail investors need to pay Rs. 250 per share on application, Rs. 250 per share on allotment and the remaining amount on call. ICICI Bank reserves the right to call the balance amout any time within 6 months from the date of allotment. Under option 2 Retail investors should pay the full amount less the Rs. 50 discount offered to retail investors. Under the first option, I wonder if the ICICI public issue gets oversubscribed, ICICI Bank will adjust the application money and the call money and give us fully paid up shares. Any clarifications? Anyone?