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After rallying over 22 per cent in the last four sessions, shares of ICICI Securities saw profit booking ahead of its board meet on Thursday to consider a proposal for delisting of shares of the company, pursuant to a scheme of arrangement with ICICI Bank.
The ICICI Securities stock fell 2.76 per cent to Rs 605.10 on BSE. The scrip surged 10.38 per cent on Monday and 7.14 per cent on Friday.
Prashanth Tapse, Senior VP (Research), Mehta Equities said: “In a voluntary delisting offer the stock usually reacts positively on an assumption of higher exit price to shareholders determined through a reverse book building process. If we go through the history, in 2018 April, the Rs 4,000 crore IPO had received poor response and was undersubscribed at 78 per cent during the three-day bidding process. On a listing date it was listed below the issue price and since then the stock has mostly underperformed to benchmark indices.”
“ICICI Securities feels it is the right time to take a call on this corporate decision. It would be difficult to assume the exact reason for such a surprising decision from the management,” Tapse said.
The brokering firm is promoter by ICICI Bank. The private lender owned 24,16,52,692 shares, or 74.85 per cent stake, in the broking firm as on March 31. Latest shareholding data showed foreign institutional investors owned 8.65 per cent stake in the broking firm, insurance companies 3.14 per cent and mutual funds 1.03 per cent. Small investors that owned up to Rs 2 lakh worth ICICI Securities shares account for 7.69 per cent stake in the company.
Analysts noted that ICICI Securities has seen tough times in the recent past due to high linkage of its revenue to broader equity markets. This has translated into a sharp decline in broking revenue as its dependence on cash volumes has been relatively higher, Motilal Oswal suggested.
That said, there was stability in the past couple of quarters. The primary issuances have been on weak footing amid a volatile equity market, Motilal Oswal Securities said in April.
“ICICI Securities is now on the course of diversifying its revenue with the launch of several tools and products for the derivatives segment. Besides, the company has intensified its focus on increasing the penetration of MTF among its customers. The launch of new distribution products – loans and general insurance – will further enhance revenue in due course. On the cost front, ICICI Securities will continue to invest in human resources and technology,” it said.
For the March quarter, ICICI Securities’ retail broking revenue declined 19 per cent YoY to about Rs 260 crore. However, its retail cash segment market share improved 105 bps YoY to 11 per cent, while derivatives segment market share expanded 32 bps YoY to 3.6 per cent, Motilal Oswal Securities suggested in an April note.
