Amid soaring valuations for recently listed Indian brokerages, ICICI Bank Ltd’s plan to list its brokerage arm ICICI Securities Ltd in the quarter starting April is set to be placed before the largest Indian private bank’s board soon.
According to the people familiar with the developments, an in-principle decision was taken at a management meeting on 5 January.
Based on the valuations of its peers, Vaibhav Agrawal, an analyst at Angel Broking Ltd, says ICICI Securities would contribute about Rs45 per share to ICICI Bank’s current share price, in what is known as sum of the parts valuation where analysts assign a valuation to each business part of the holding company.
ICICI shares rose 6.1%, or about Rs78, on Monday to Rs1,363.90 a share even as the bank said it is exploring various options but had no announcement to make. On Tuesday, the shares fell 2%, or Rs30.40 a share, to close at Rs1,333.50.
ICICI Securities will be the first subsidiary of ICICI to get listed. The bank has five other unlisted subsidiaries—ICICI Prudential Asset Management Co. Ltd, ICICI Ventures, ICICI Prudential Life Insurance Co. Ltd, ICICI Lombard General Insurance Ltd and ICICI Securities Primary Dealership Ltd. The bank is yet to appoint a merchant banker for starting the listing procedure.
ICICI Securities houses the investment banking, institutional equity and debt broking and ICICIdirect.com—the retail broking business. Unlike most other listed brokerage houses which have predominantly been into brokerage business and have started expanding in other areas such as merchant banking and private equity in recent times, ICICI Securities enjoys presence across most of the capital market businesses.
A matter of timing: K.V. Kamath, chief executive, ICICI Bank. (Ramesh Pathania / Mint)
Being an early starter in the business, ICICIdirect.com is a dominant market player in the online retail broking space and is said to have maximum number of online retail investors. It has at least 1.4 million customers and handles at least 350,000 trades every day.
In other business segments, such as merchant banking or equity capital markets, the firm saw a slight decline in its market share in 2007. As per the league tables compiled by Bloomberg, ICICI Securities slipped from sixth to seventh position in the domestic equity raising activity. In the domestic bond issuance, it slipped from the top position in 2006 to fifth position in 2007, but it maintained its market share at 12.4%. During the last year, the firm also lost a few of its senior executives to domestic peers as well as foreign investment houses.
Analysts noted that the bank’s timing couldn’t be better as listed brokerage houses are commanding a valuation of 35-40 times earnings of the next financial year. Over the past few months, Motilal Oswal Financial Services Ltd, Edelweiss Capital Ltd and Religare Enterprises Ltd have got listed on the stock market.