In a surprise announcement ICICI Securities (ISec) has proposed to delist the shares.
- ISec was listed 5 yrs back in March 2018, when like any other IPO it was being termed as value unlocking exercise by the ICICI Bank (IBank)
- Post IPO, IBank’s shareholding had reduced to 79.22% which further reduced to 74.85% currently. Of the balance, 14% is held by the institutions and 11% by the public.
What could have led to the change in heart within 5 years – from listing to delisting?
In my personal view, the reasons could have been –
- Although ISec continues to be a very strong franchise, it has been facing increased competitive pressures especially from the discount brokerages like Zerodha. Consequently, it has to face increased scrutiny from investors every quarter.
- Given that it’s a small business relative to the whole ICICI Group, the concerns and a closer scrutiny may not be desirable from the overall ICICI brand perspective.
- The decision to delist could have further found support because –
- ICICI Bank’s core operations have regained strength; and
- RBI has once again become flexible in allowing bank’s ownership in the non-core businesses (to facilitate HDFC merger)
Personally, I see a lot of merit in this decision.
IBank has approved the delisting of ISec in a share swap deal that would make it the bank’s wholly-owned subsidiary.
Once ICICI Securities is delisted, it can go full throttle against the competition without bothering much about the commercials.
I would be more concerned about the impact it can then have on the listed peers.
To ICICI it would be a part of bouquet of services for it’s customers.
Retail is unhappy about the delisting as its happening at a valuation lower (18x P/E) compared to what it was listed at (35x P/E) + strong future business outlook.
It’s important to note here that public owns only 8.5% stake in the Company. ICICI Bank owns 74.8% and balance around 16.7% is owned by the institutions.
Some retail shareholders have written to institutions to oppose the merger.
Given the shareholding pattern, unlikely that the proposal will not go through.
In the voting process that ended on March 27, investors holding 71.89% of the lender’s shares favoured the proposal, while those owning 28.11% voted against it, paving the way for ICICI Securities’ delisting from the bourses.