Ahead of a proposed initial public offering (IPO), ICICI Securities Ltd, the broking arm of ICICI Bank Ltd, plans to sell about 3% of its equity to institutional investors through private placements, according to a person familiar with the development who did not wish to be identified.
The person added that JPMorgan India has been given the mandate to manage the deal. This couldn’t be independently verified with JPMorgan over the weekend and the company did not respond to an email query. S. Mukherjee, managing director and chief executive officer, ICICI Securities, declined to comment.
According to the person, the private placement is part of a larger plan that involves selling 10% of ICICI Bank’s equity in ICICI Securities. With 3% going to institutional investors, 7% will be sold to the public through a share sale.
The person familiar with the development added that ICICI Bank is looking at a valuation of around Rs18,000 crore for ICICI Securities. This means a 10% sale will fetch it around Rs1,800 crore.
In January, the bank’s board approved the listing of ICICI Securities. 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.
While it could take a few months for the share sale to hit the market, interest in the financial services sector does appear to be rising.
According to a Dun and Bradstreet survey of brokerages, 80% of the turnover in India’s stock market comes from just 100 brokers out of a total 9,000. And together, 193 broking houses own 90,000 or 93% of all trading terminals in the country. The numbers indicate that the share trading business is concentrated among large brokers.
Several brokerages have sold shares to the public over the past year and their shares have listed at a significant premium to the issue price. The list includes Motilal Oswal Financial Services Ltd, Edelweiss Capital Ltd and Religare Enterprises Ltd. Some brokers, such as Geojit Financial Services Ltd and India Infoline Ltd, are expanding into the institutional broking business and others are entering the investment banking business. Still others have star-ted selling financial products.
ICICI Securities has a presence across most segments of the capital market: investment banking, institutional equity and debt broking. ICICIdirect.com, its retail broking business, is among the largest online brokerages in the country and has at least 1.4 million customers and handles, on average, around 350,000 trades a day.
However, the company did see a marginal decline in 2007 in some of its other businesses, such as merchant banking. According to data compiled by Bloomberg, ICICI Securities slipped from sixth to seventh position in domestic equity-raising activity, or managing IPOs. In the domestic bond issuance business, it slipped from the top position in 2006 to fifth position in 2007, but maintained its market share at 12.4%.
According to a 21 January research report by Emkay Shares and Stock Brokers Ltd, ICICI Securities reported revenues of Rs257 crore and net profit of Rs71 crore in the third quarter of 2007-08 ended December. For the year ended 31 March 2007, it had reported a net profit of Rs133 crore.