ICICI Securities delisting: Proxy advisors IiAS and ISS recommend voting for delisting proposal

  • ICICI Securities, the broking arm of the country’s second-largest private lender ICICI Bank, in June 2023 announced the delisting plan through a scheme of arrangement.

Ankit Gohel
Published20 Mar 2024, 11:07 AM IST
ICICI Securities delisting resolution needs more than two-thirds of the votes cast to be in its favour to be passed.
ICICI Securities delisting resolution needs more than two-thirds of the votes cast to be in its favour to be passed.(Photo: Bloomberg)

ICICI Securities delisting: Proxy advisory firms Institutional Investor Advisory Services (IiAS) and ISS have supported the delisting of ICICI Securities and have advised the shareholders of the company to vote in the favour of delisting.

Earlier, two other proxy advisory firms, Stakeholder Empowerment Services (SES) and InGovern Research Services had recommended institutional investors to support the delisting of ICICI Securities.

The shareholders of ICICI Securities are set to discuss the delisting resolution on March 27 through a virtual meeting.

The investors will get a window between March 22 and 26 to vote on the delisting resolution. Only minority shareholders of ICICI Securities can vote on the resolution. They collectively hold 25.23% of the company, while ICICI Bank holds the remaining 74.77% stake. The resolution needs more than two-thirds of the votes cast to be in its favour to be passed.

Read here: Proxy advisors give thumbs up to ICICI Securities delisting

ICICI Securities, the broking arm of the country’s second-largest private lender ICICI Bank, in June 2023 announced the delisting plan through a scheme of arrangement. 

Scheme of arrangement

As per the scheme, ICICI Securities’ shareholders will receive 67 shares of ICICI Bank for every 100 shares held. ICICI Securities was listed in April 2018 and is now being delisted within a span of around 6 years from listing.

According to the company, such delisting would provide significant benefits for the public shareholders as they will get equity shares in the holding company thereby providing them access to a much larger and more diversified business with greater stability in revenue unlike the securities business which is inherently cyclical as it is significantly dependent on the macro-economic environment and buoyancy in equities market, resulting in volatility in financial performance and share price.

Read here: Why ICICI Securities is delisting in a growing retail investors market

IiAS Recommendations

IiAS noted that ICICI Securities is being delisted at a P/E of about 15x, while it was listed at a P/E of about 32x – even so, over the past year prior to delisting the stock traded at an average P/E of ~ 13x.

IiAS has recommended voting for the delisting resolution because the implied valuation of ICICI Securities was at a premium of 2% to the closing price one day prior to the announcement, and at 23% higher than the closing price four days prior. 

At current market prices too, the implied valuation is at a 3% discount to the market price, but at a 43% premium to the market price four days prior to the date of the announcement, IiAS said.

It believes delisting ICICI Securities and keeping it as a separate legal entity within the ICICI Bank fold will align it with market practices as the banks in India mostly have their broking business held privately.

ISS Recommendations

International proxy advisory firm ISS also said that the resolution for delisting ICICI Securities warrants shareholder support. 

It believes the proposed scheme of arrangement is said to provide significant synergies in terms of customer acquisition, technology, etc, given the changing competition landscape in the financial intermediaries market from the time of listing of the company.

Also Read: ICICI Securities wants to delist. Why are mutual funds buying its shares?

After the proposed scheme of arrangement comes into effect, the company will become a wholly owned subsidiary of ICICI Bank.

“Given the cyclical nature of the company’s business, being part of a banking entity with a large customer ecosystem, could bring stability to the company's financial performance, and shareholders would continue to participate in the growth prospects of the combined entity,” it said.

The delisting also allows both companies to take advantage of their respective service offerings, as a merger is not feasible due to regulatory restrictions.

Furthermore, ISS noted that the share exchange ratio was in accordance with the delisting regulations and was at a premium of 15% to the unaffected price of 563.1 on June 23, 2023.

“The value assigned to the company for the purpose of the scheme is based on independent valuation reports and is broadly in line with market peers,” it said.

At 11:05 am, ICICI Securities shares were trading 0.81% higher at 719.55 apiece on the BSE.

Catch Stock Market Live Updates here

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.

Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.

Business NewsMarketsStock MarketsICICI Securities delisting: Proxy advisors IiAS and ISS recommend voting for delisting proposal
MoreLess