Cyril Amarchand Mangaldas Advises the Largest Equity Offering of ICICI Bank on Raising INR 15000 Crore through QIP

Background of Development

The largest equity offering ever by a private sector bank in India was entered by the ICICI bank, in which legal support was facilitated by Cyril Amarchand Mangaldas.

Cyril Amarchand Mangaldas takes forward the values going back 103 years, of the erstwhile Amarchand & Mangaldas & Suresh A. Shroff & Co., who have enjoyed unparalleled pre-eminence, experience and reputation of almost a century in the Indian legal fraternity. ICICI Bank has successfully raised almost Rs 15,000 crore through Qualified Institutional Placement (QIP).

Qualified Institutional Placement

Qualified Institutional Placement (QIP) is the means whereby a listed company can issue equity shares, fully and partly convertible debentures, or any securities other than warrants which are convertible to equity shares to a Qualified Institutional Buyer (QIB). Through this method, these listed companies can issue securities to a selected group of persons. The Securities and Exchange Board of India (SEBI) initiated QIP in 2006. This was done to reduce the dependence of domestic companies on foreign capital.

The complications associated with raising capital in the domestic markets had led many companies to look at tapping the overseas markets via Foreign Currency Convertible Bonds (FCCB) and Global Depository Receipts (GDR) to fulfil their needs. To keep a check on this process and to give a push to the domestic markets, QIPs was launched.

Share Price

According to the newspaper report in Financial Express dated August 15, 2020, the lender said that it has issued 418,994,413 shares at an issue price of Rs 358 per equity share, a discount of Rs 3 from its closing price on Friday. The private sector lender had earlier this week on Saturday set the floor price at Rs 351.36 per share for the QIP. The issue opened on August 10, 2020, and closed on August 14, 2020. Pursuant to the allotment of shares, the paid-up equity share capital of the bank stands increased from ₹12,952,832,416 consisting of 6,476,416,208 equity shares of face value ₹2 each to ₹13,790,821,242 consisting of 6,895,410,621 equity shares of face value ₹2 each.

The Key Players in Equity Offering

Some of the marquee names that have been allotted the shares of ICICI Bank through the QIP include Monetary Authority of Singapore, Morgan Stanley Investment Management Inc., and Societe Generale.

“The equity issuance witnessed healthy participation from the global and domestic investor community, including foreign portfolio investors, domestic mutual funds and insurance companies,” ICICI Bank said in a release.

The private sector lender informed that the amount raised via the QIP will be used towards strengthening the capital adequacy ratio of ICICI Bank and improving its competitive positioning and general corporate requirements. “The Bank believes that it is well-positioned to serve the market and benefit from the opportunities that would arise going forward, ” ICICI Bank said.

The Recent Trend of QIPs

Along with the ICICI Bank, other private financial institutions to have raised capital through the markets include Axis Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank, and HDFC. The recent fund raising efforts by various lenders are being seen as a positive signal by many as the overhang of the capital requirement to deal with the pandemic is now out of the way for lenders. ICICI Bank is one of the top picks of leading domestic and global brokerage firms.

The Legal Team

Cyril Amarchand Mangaldas acted as the domestic legal counsel to Book Running Lead Managers (BRLMs) in relation to a qualified institutions placement (QIP) by ICICI Bank Limited (ICICI Bank), one of the largest private sector banks in India. This transaction is the largest equity offering ever by a private sector bank in India.

The BRLMs to the QIP, included ICICI Securities Limited, Morgan Stanley India Company Private Limited, J.P. Morgan India Private Limited, Goldman Sachs (India) Securities Private Limited, Kotak Mahindra Capital Company Limited, DSP Merrill Lynch Limited, Citigroup Global Markets India Private Limited, Jefferies India Private Limited, Nomura Financial Advisory and Securities (India) Private Limited, BNP Paribas, SBI Capital Markets Limited, HDFC Bank Limited, Axis Capital Limited, Motilal Oswal Investment Advisors Limited, JM Financial Limited, IIFL Securities Limited, Edelweiss Financial Services Limited, and YES Securities (India).

The Capital Markets Practice of Cyril Amarchand Mangaldas advised the BRLMs on the Transaction. The BRLMs shall ensure compliance with stipulated requirements and completion of prescribed formalities with the Stock Exchanges, RoC and SEBI including finalization Prospectus and RoC filing.

The Transaction team was led by Yash Ashar (Partner & Head – Capital Markets) and Abhinav Kumar, (Partner); Neha Samant (Principle Associate); Arzoo Virmani (Senior Associate – Designate); Surbhi Purohit (Associate); Vanya Utkarsh (Associate); Jhalak Shah (Associate); Itisha Khandelwal (Associate); and Ashwathi Umaria, (Associate). S Vivek, (Partner); with support from Siddhant Sattur, (Associate) has advised on the certain foreign investment-related advice in relation to the transaction. Other legal advisors to the transaction included Davis Polk & Wardwell (International legal advisor to the BRLMs) and AZB & Partners (Indian legal advisor to ICICI Bank).

The Transaction was signed on August 10, 2020, and concluded on August 15, 2020. When a company raises funds through a Qualified Institution Placement then some securities of the said company get listed with the stock exchange board where it shares have been listed. The legal counsel for the qualified institutions will have to do due diligence. As per Section 171 of SEBI (Issue of Capital and Disclosure Requirements) “Eligible Securities” include equity shares, non-convertible debt instruments along with warrants and convertible securities other than warrants”. The Legal advisors Cyril Mangaldas traces its professional lineage to 1917, is now the largest full-service law firm in India, with over 750 lawyers including over 141 partners, and offices in India’s key business Centre’s at Mumbai, New Delhi, Bengaluru, Hyderabad, Chennai and Ahmedabad.

The firm, Cyril Amarchand Mangaldas, was recently awarded “India – Firm of the Year” at the AsiaLaw Regional Awards 2019 and “India Deal Firm of the Year” at the In-House Community Counsels of the Year Awards 2019. The firm was also named as the “Most Innovative National Law Firm of the Year – India for 2018” at the IFLR Asia Awards, has also been successful in winning the prestigious & coveted “National Law Firm of the Year, 2018 for India” at the Chambers Asia-Pacific Awards. The firm was also voted as the “Employer of Choice for 2018” from India, by the Asian Legal Business, now 4 years in a row, building upon the several awards that the erstwhile Amarchand & Mangaldas & Suresh A. Shroff & Co. had won in the past.

The Benefit of the Equity Offering

The Reserve Bank of India has been asking banks to loan upon capital in advance, expecting a huge surge in bad asset pile because of the economic impact of the pandemic. According to online news details ICICI Bank had decided to set aside ₹5,500 crores as provisions for possible reverses on the loan book in the June quarter, where its consolidated net profit grew 24 per cent to Rs 3,118 crore on the back of one-time gains on stake sales in insurance arms. ICICI Bank’s total capital adequacy on June 30 stood at 16.32 per cent and Tier-1 capital adequacy at 14.93 per cent, well above the minimum regulatory requirements of 11.08 per cent and 9.08 per cent respectively. The Rs 15,000 crore fundraise will take the bank’s Tier-1 capital up by 198 basis points to 16.69 per cent.

This press release is an exclusive coverage by INDIAN LAW WATCH.