Business Today
ICICI Bank board members get busy allaying investor concerns as stock slumps
The investors are worried about value erosion in the bank as uncertainties cloud its operations and potential liabilities make future earnings unpredictable.
ICICI Bank board members get busy allaying investor concerns as the stock slumps

When a stock slumps almost 7.5 per cent in a month, at a time when the Bank Nifty shows an uptick of 2 per cent, investors are bound to get nervous.
Which is why, according to a report in The Economic Times, the ICICI Bank board has been busy allaying the concerns among its top institutional and retail investors regarding the recent allegations of favouritism and its potential impact.

The investors are worried about value erosion in the bank as uncertainties cloud its operations and potential liabilities make future earnings unpredictable.

Although no large investor has so far publicly voiced concerns, cracks are beginning to appear. "Our doubts are increasing every passing day. What has also worried us is the pindrop silence and lack of disclosure by ICICI Bank regarding its involvement this particular inquiry," an investor who did not wish to be identified told the daily.

The fact is that investors love the concept of the superstar CEO but owe no allegiance to anyone. And in the face of concerns regarding valuation loss and/or reputational risk, they can demand changes. It's pretty much what happened at Flipkart last year.

The report added that over the past two weeks, top ICICI Bank board members have responded to queries and held conference calls with several investors, assuring them that the bank adheres to corporate governance standards and that internal investigations are being carried out. Some management officials have reportedly been participating in the reassuring investors - excluding CEO Chanda Kochhar, who has chosen to maintain complete silence on the matter.

The biggest shareholders of the bank include Life Insurance Corporation of India, HDFC Trustee Co., SBI Mutual Fund, Reliance Capital Trustee and Aditya Birla Sun Life Trustee. Foreign portfolio investors reportedly held a 47 per cent stake (collectively) in the bank at the end of December.

Doubts were probably fanned further when the Central Bureau of Investigation picked up Kochhar's brother-in-law Rajiv Kochhar for questioning last week.

The allegation here is that his company, Avista Advisory, got the mandate to restructure foreign currency-denominated debt deals worth over $1.7 billion of seven companies, all of which had taken loans from ICICI Bank at the same time. Rumours of lookout notices being issued by the CBI for the CEO and her husband, Deepak, made matters worse.

In case you missed the big news, the Kochhars are under lens since whistleblower Arvind Gupta's disclosures about Rs 3,250 crore plus Rs 660 crore loans and alleged quid pro quo in the form of an identical 10 per cent foreign funding (Rs 325 crore and Rs 66 crore) in Deepak Kochhar's company NuPower Renewables. The latter was a 50:50 JV with Videocon promoter Venugopal Dhoot. These revelations led to allegations of propriety and conflict of  interest.

While all the involved parties, except the bank's chief, have vociferously rubbished all such allegations, sources told the daily that some ICICI Bank investors are set to mount pressure on the board this week to come up with a plan to calm their nerves because the continuous flow of negative news is harming the bank and its prospects.

In any case, the bank has faced two tough years. Its Q3 numbers were far from impressive - net profit nosedived 32 per cent and NPAs increased to 7.8 per cent of loans. Its accounting standards have also come under the RBI scanner in recent quarters. The bank's share price, in fact, has dropped a whopping 22 per cent since its peak in January.

The rumour now is that the board will informally meet this week to discuss the road ahead.

 

Get latest news & live updates on the go on your phone with our News App. Download The Business Today news app on your device
More from SECTORS