The board of directors of ICICI Bank on Monday approved an issue of American Depository Shares, capping the issue size at 6 per cent of the bank's paid-up capital. This means the size of the issue -- a secondary sponsored ADS -- would be capped at 44 million shares.

A secondary sponsored ADS issue involves the sale of a block of shares by shareholders in India to a block of shareholders overseas. ICICI Bank expects the entire process to be completed before the end of the financial year.

"This sponsored ADS issue gives an opportunity for foreign institutional investors to tender their shares," Kalpana Morparia, deputy managing director, ICICI Bank, told Business Standard.

However, should only domestic shareholders tender their shares in the bank, this would restrict the sponsored ADS to 3.2 per cent of the bank's share capital based on the current head room available, she added. The current FII holding in the bank has touched the 49 per cent cap, and aggregate foreign holding stands at 70.8 per cent.

The ICICI Bank ADR is currently trading at $19. The ICICI Bank share on Monday closed at Rs 360.30 on the Bombay Stock Exchange. Each new ADS would represent one fully paid-up equity share of Rs 5 each. The bank will not realise any monetary gain from the sponsored ADS issue.

Rather shareholders will realise the funds. The bank will be able to build a book of shares based on the demand from overseas investors, which will be met by the sale of domestic shares.

"As listing is outside the country, this is the manner in which we can facilitate the exchange of shares from one group of investors to another," said Morparia. The advantage for the bank is that more shares will be listed in a market that is more liquid and deeper.

ICICI Bank will need to seek shareholders' approval, which will be undertaken through a postal ballot. Further, it will also need to get the approval of the Foreign Investment Promotion Board.