ICICI Securities to delist its shares

ICICI Securities, one of the leading brokerage houses in the country, has decided to delist its shares from the stock exchanges. Following the de-listing, ICICI Securities would operate as a wholly-owned subsidiary of ICICI Bank and its shares held by public shareholders would be extinguished. At present, ICICI Bank holds a 75 per cent stake in ICICI Securities.

Talking about the shareholders, for every 100 shares of ICICI Securities held by the shareholders, they will receive 67 shares of ICICI Bank. For instance, if an individual holds 100 shares in ICICI Securities valued at Rs 61,430 (based on the closing share price of Rs 614.30 as of June 28, 2023), they would receive 67 shares of ICICI Bank valued at Rs 62,809 (based on the closing share price of Rs 937.45 as of June 28, 2023).

Consequently, the shares of ICICI Securities are valued at a premium compared to their existing market price. However, this valuation may change in the future based on the performance of both companies.

This move would result in a 5.4 crore increase in ICICI Bank's total outstanding shares, bringing it to 703.7 crore. The process could take anywhere between 12-15 months.

What does ICICI Securities do?

ICICI Securities is one of the leading brokerage companies in the country, with a dominant presence in the institutional segment. It holds an 11 per cent market share in retail equities and a 12 per cent market share in ETFs. Additionally, the company distributes financial products and provides investment banking services.

ICICI Securities recently made its debut on the stock exchanges in April 2018. However, the company has struggled to perform well since its inception, even listing at a 17 per cent discount on its issue price. It has consistently underperformed the Sensex, with the exception of a few weeks during the post-COVID bull market. One of the reasons for this underperformance is the lack of revenue growth in three years since listing. Between FY18-20 revenue declined by 4 per cent, while net profit fell by 1 per cent. Although the company did witness some growth post-COVID, it did not have fruitful impact in its market share.

Rationale behind this move

ICICI Bank has stated by making ICICI Securities a wholly owned subsidiary, it can better leverage the synergies between both entities. As ICICI Securities is a low capital-intensive business, ICICI Bank will not need to inject additional capital into the company. This move allows both companies to take advantage of their respective service offerings, as a merger is not feasible due to regulatory restrictions.

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