June 25 (Bloomberg) -- ICICI Bank Ltd. failed to get approval to transfer 19.5 billion rupees ($477 million) of insurance and asset-management holdings to a new company in which Goldman Sachs Group Inc. said it would buy a stake.

ICICI Bank ``has been given to understand that its application has not been approved'' by India's Foreign Investment Promotion Board, the Mumbai-based lender said in a statement on June 23. This may impair the ability to bolster capital at the life and general insurance units, impede expansion and hurt the key capital adequacy ratio, it said.

The bank, India's most valuable, had received confirmed purchase offers for stakes in the proposed ICICI Financial Services, according to the statement. New York-based Goldman Sachs and other international investors may have to wait to buy a 5.9 percent stake in ICICI Financial, prompting the lender to invest some of the proceeds of its record $5 billion share sale in the units.

``This is a negative surprise,'' UBS AG analyst Mahrukh Adajania wrote in her report to clients today. Adajania has a ``neutral'' rating for the shares.

ICICI shares declined 4.3 rupees, or 0.5 percent, to 949.45 rupees at 12:47 p.m. local time on the Bombay Stock Exchange today. They fell as much as 1.4 percent earlier. The stock has risen 7 percent this year, compared with a 5 percent gain in the benchmark Sensitive Index.

Holdings Transfer

ICICI planned to transfer its stake of about 74 percent each in ICICI Prudential Life Insurance Co. and ICICI Lombard General Insurance Co., and 51 percent each in Prudential ICICI Asset Management Co. and Prudential ICICI Trust Ltd. to the unit.

Goldman is seeking to buy shares in ICICI's new company, Goldman India country head Brooks Entwistle said on June 14. The bank plans to evaluate other options to gain regulatory approval, ICICI said in the statement.

ICICI completed on June 22 its sale of Indian shares at 940 rupees each, raising 87.5 billion rupees ($2.15 billion), and American depositary receipts at $49.25 each, raising $2.14 billion. Each receipt represented two local shares.

ICICI plans to sell a further $644 million in stock through a greenshoe option, raising the sale to $5 billion, Chief Executive Officer K.V. Kamath said in an interview at the World Economic Forum in Singapore yesterday.

To contact the reporter on this story: Gautam Chakravorthy in Mumbai at chakravorthy@bloomberg.net.

Last Updated: June 25, 2007 03:41 EDT