When is ICICI Securities Delisting & Why?

ICICI Bank is in the process of delisting its subsidiary, ICICI Securities, from the stock exchanges. This means the shares of the securities broking and merchant banking subsidiary of ICICI Bank will no longer be publicly traded.

The news of the delistment of ICICI Securities was first announced on 23 June 2023, and since then, the company has generated over 77.5% CAGR return in almost a year. ⬇️

In this article, we will discuss the what, why, and when of the soon-happening delisting and how it may affect retail investors like us.

When will ICICI Securities Delist?

The exact delisting date of ICICI Securities is uncertain at this point, but it hinges on the outcome of the shareholder meeting on 26 March 2024. After this, a virtual meeting is scheduled for 27 March 2024 to discuss the delisting resolution. Regulatory approvals from exchanges and NCLT have already been received.

An EGM (Extraordinary General Meeting) is coming up, where shareholders will finally decide if ICICI Securities will merge with ICICI Bank.

Shareholding Pattern of ICICI Securities

If you look at the shareholding pattern, the majority ownership of ICICI Securities lies with the promoters, who hold a significant 75% stake in the company. This indicates that the founders (ICICI Bank) have a strong influence over the company's decisions.

Here's a breakdown of the remaining shareholding:

a. Foreign Institutional Investors (FII): Up to 10.33% is owned by FII. These are foreign entities that invest in Indian stocks. Their holding suggests some international interest in the company.

b. Public: The 8.55% here represents the shares held by individual investors like you and me.

c. Domestic Institutional Investors (DII): 6.35% are owned by Indian institutions like mutual funds and insurance companies that invest in Indian stocks. Their presence indicates that some Indian financial institutions see value in ICICI Securities.

With the delisting, the promoters would own all 100% of ICICI Securities.

Why is ICICI Securities Delisting?

In the months leading up to a vote on whether ICICI Securities would remain publicly traded, some investment firms (mainly mutual funds) bought a lot of the company’s shares. This was interesting because they paid more per share for ICICI Securities than for shares of ICICI Bank, which is the parent company.

The price of ICICI Securities shares stayed higher than expected, even after it was announced how many ICICI Bank shares (67 for every 100 shares of ICICI Securities) holders would get for each ICICI Securities share they owned.

Some investors believe that voting against the merger can increase the value of ICICI Securities as a separate company, which could drive up the share price even more. This is because earlier, the difference in price between the two companies was even bigger, allowing investors to make a guaranteed profit by buying and selling.

Look at the data here: The CAGR return for 1-year of ICICI Bank is much less than that of ICICI Securities (26.8%). This proves the above-mentioned strategy.

Another reason for the delisting could be that the stock broking business ICICI Securities is involved in is tough, with lots of competition, especially for individual (retail) investors. ICICI Securities does many things like investment banking and helping big businesses, but retail broking is cutthroat.

Here's where ICICI Bank comes in. By working more closely with them, ICICI Securities could even out their ups & downs and offer new services like wealth management and loans.

It's interesting because, usually, we see the opposite happening. Lots of banks or companies with broking arms are trying to become separate public companies. This shows just how much pressure there is in the broking industry right now.

Is the Delistment Facing Any Trouble?

ICICI Securities' stock is being watched after receiving a second administrative warning from the Indian market regulator, SEBI. This warning concerns an inspection of their merchant banking activities in December 2023. ICICI Securities previously received a warning for stock broking activities.

Market regulator SEBI did not impose a penalty but warned them to improve compliance. ICICI Securities assures investors that their operations and finances are unaffected.

How Would the Delisting Impact ICICI Bank?

Since the delisting of ICICI Securities would make it a wholly-owned subsidiary of ICICI Bank, many would believe that the arrangement is good news. After all, shareholders of ICICI Securities will receive 67 shares of ICICI Bank for every 100 shares they hold.

But, this decision could have a mixed impact on the shareholders.

It’s not really a shock, if everything was fine with removing the firm from the public landscape, then all the shareholders would have been on board. But that's not the case. One of the essential shareholders, Quantum Mutual Fund, voted against the delisting proposal, while the largest one, Norges Fund Investment Bank, voted in favour.

Here are a few after-effects borne for one of India’s top banks with its subsidiary's decision to delist:

a. Synergy:

This is the main reason given by the personnel included in the matter for the delisting. By merging operations, ICICI Bank hopes to streamline processes, reduce redundancies, and potentially improve overall efficiency.
ICICI Bank reported a total profit of ₹84.9 crores in FY23, high from FY22 ₹63.6 crores. This delisting is expected to ensure cost savings and potentially improved profitability.

b. Control:

With ICICI Securities delisted and wholly owned, ICICI Bank gained complete control over its brokerage arm. This allows for better strategic alignment and opens doors for new product or service offerings within the bank.

c. Focus:

Delisted entities often experience less scrutiny from market analysts. This could allow ICICI Bank to focus more on its core banking operations without the added pressure of managing a separate listed entity.
The above were positive outcomes from the delisting. Here are some areas of concern for the bank:

d. Public Perception:

A successful bank often benefits from having well-performing subsidiaries. Delisted entities can sometimes be seen as a lack of confidence or transparency, potentially impacting investor sentiment towards ICICI Bank.

Hence, where there is a possibility of ICICI Bank's share price rising with the delisting, there is also a chance of it taking a deep dive.

e. Minority Shareholder Concerns:

Not all ICICI Securities shareholders are happy with the exchange ratio for the share swap. This could lead to legal challenges or reputational damage for ICICI Bank.

Will the Market or Investors Be Affected by the Delisting?

Regarding the market, the delisting will reduce the number of listed companies, impacting the indices slightly. However, the overall impact is expected to be minimal. There is also a possibility that the investors with ICICI Bank shares may face some fluctuations till the delistment meets its conclusion.

Hence, it would be advisable to keep an eye on the news related to the bank and its subsidiaries. It could also be an opportunity to reevaluate the company's fundamentals and see whether it meets your investment objectives.

The Bottom Line

By combining forces with ICICI Bank, ICICI Securities hopes to smooth out fluctuations in their business and offer a wider range of financial services to their clients. The success of this strategy will depend on their ability to leverage each other's strengths and navigate the ever-changing dynamics of the securities industry.

However, whether they will be able to delist successfully (and on schedule) is another thing to discuss. For all the upcoming updates on the matter, be tuned to Insider Bullets.

*Disclaimer: The stocks and companies discussed above aren't a recommendation from Finology Insider and shall not be construed as a replacement for professional advice. Consult a professional or conduct the necessary research before making investment decisions.