Shares of ICICI Securities gained as much as 15.29% on Monday’s intraday trade to reach a fresh 52-week high of ₹ 650.00 apiece on the Bombay Stock Exchange (BSE).
According to an exchange filing on Sunday, ICICI Bank is set to consider a proposal for delisting the equity shares of ICICI Securities, along with the brokerage’s board. They will be meeting on Thursday, June 29, 2023.
ICICI Securities is the listed subsidiary of ICICI Bank and is among the largest stock brokers in India. It debuted on the bourses in April 2018.
The proposal to delist the brokerage will involve its shareholders receiving shares of ICICI Bank in lieu of their shareholding in ICICI Securities. According to the Securities and Exchange Board of India (SEBI’s) regulations, holding companies are required to provide shares in exchange for delisting a subsidiary when both the holding company and the subsidiary are in the same line of business.
However, the Reserve Bank of India (RBI) might not allow cash outflow from banks for such purposes, therefore, ICICI Bank might choose to go forward with a share swap, according to experts. The delisting will help ICICI Securities to ease regulatory reporting requirements.
Being combined with the parent entity helps companies access capital at cheaper prices, but ICICI Securities was already taking advantage of ownership in this aspect. The conversion of ICICI Securities shares to ICICI Bank’s shares will help its shareholders to diversify their exposure into broader financial services as opposed to just stock broking.
Brokerage firm Motilal Oswal suggested that ICICI Securities has seen tough times in the recent past due to high linkage of its revenue to broader equity markets. This led to a sharp decline in broking revenue as its dependence on cash volumes has been relatively higher.
ICICI Securities’ retail broking revenue declined 19 per cent YoY to about ₹ 260 crore in the March quarter. However, its retail cash segment market share improved 105 bps YoY to 11 per cent, while the derivatives segment market share expanded 32 bps YoY to 3.6 per cent, Motilal Oswal Securities suggested in a note, earlier.
With a market capitalization of ₹ 18,183 crores, ICICI Securities is a mid-cap company. It has a high return on equity of 42.31% and a dividend yield of 4.00%. Its
shares were trading at a price-to-earnings ratio (P/E) of 16.30, which is significantly higher than the industry P/E of 22.21, indicating that the stock might be overvalued as compared to its peers.
The company’s promoters hold a 74.85% stake in it, followed by retail investors with 12.23%, foreign institutions with 8.75%, domestic institutions with 3.14% and mutual funds with 1.03%.
Written By Simran Bafna
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