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ICICI Securities too saw its profitability and growth improve as Indians eagerly participated in equities trading and investing (Photo: Aniruddha Chowdhury/Mint)
ICICI Securities too saw its profitability and growth improve as Indians eagerly participated in equities trading and investing (Photo: Aniruddha Chowdhury/Mint)

As Indians throng equity markets, ICICI Securities dodges pandemic gloom

The buoyancy in equity markets needs to persist for ICICI Securities to keep its current momentum going

The pandemic may have cast a gloom over the economy, but Indian brokerages are surprisingly finding this period rewarding. ICICI Securities saw its profitability and growth improve in the June quarter, as Indians eagerly dived into equities trading and investing. With the company’s shares trading close to their February highs, investors are not complaining either.

ICICI Securities reported a net profit of 193 crore, beating Street estimates, as revenue grew 36%. Its revenue from the brokerage segment surged 62% year-on-year, driven by 70% retail growth. The brokerage not only increased the number of customers, but also gained market share. In short, more and more Indians were plunging into equity markets.

Graphic: Satish Kumar/Mint
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Graphic: Satish Kumar/Mint

Customer addition, undoubtedly, was lower than pre-pandemic averages. During April-June, the brokerage added 80,000 new customers compared to the 110,000 additions in the previous quarter.

The initial crash in equities during March had attracted high net-worth individuals and other retail investors to bet their money on the beaten down scrips. The number of demat accounts opened surged, and ICICI Securities seems to have benefited. Analysts said greater retail participation augurs well for the firm’s FY21 revenue.

Motilal Oswal Financial Services Ltd analysts have raised estimates of the company’s FY21 earnings per share by 17%. “Importantly, the brokerage segment is benefitting from tailwinds of increased trading activity from retail customers," they wrote in a note.

But all this is not devoid of concerns. Even as the company’s mainstay brokerage business did well, it reported tepid progress in its other verticals. Distribution slowed with revenue dropping 19% year-on-year. This was expected given the huge redemptions plaguing mutual funds. Distribution of other products, too, suffered owing to the lockdown.

Shares of ICICI Securities have bounced back to the pre-pandemic peaks on hopes that the brokerage business would flourish. Traffic is surging on online trading platforms, a sign that ICICI Securities, too, can see more traction in its retail brokerage business. A multi-purpose online platform, which twines the parent ICICI Bank’s products with a trading account, has helped attract savvy customers.

While this online platform gives it an edge in acquiring customers, the buoyancy in equity markets needs to persist for ICICI Securities to keep the momentum going. And not all analysts are convinced about it.

“Given the highly cyclical nature of the business, we are concerned that we may be closer to peak earnings, and worry that the market may be ascribing a closer-to-peak multiple," said a note from HDFC Securities Ltd.

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