Home / Markets / Mark To Market /  ICICI Securities’ weak Q4 a worry for investors

ICICI Securities Ltd’s March quarter (Q4FY22) results were nothing to write home about. Falling revenues from the retail broking business were a sore point. The segment’s revenue fell 7% sequentially to 325 crore. Its contribution to overall revenues has dropped in the past eight quarters.

In a post-earnings call, the management said focus on revenue diversification led to a fall in share of revenue from retail broking to 36.5% in Q4FY22 from 46.8% a year earlier. The company’s client addition has been slower than the industry’s due to its focus on improving the quality of channel mix. In Q4FY22, ICICI Securities added 618,000 clients, lower than 676,000 clients added in Q3FY22. In the near term, the management expects monthly client addition run-rate at around 200,000.

This didn’t go down well with investors. On Thursday, the stock fell almost 5% to 597.15 apiece on NSE. With this, the stock has declined by about 25% so far in 2022.

“Bank-based brokers and standalone brokers have been facing stiff competition from new-age fintech companies and discount brokers on the pricing front. But in the case of ICICI Securities, there was a tech handicap and the absence of user-friendly tech infrastructure to capture the wave of customers who entered the market post covid," said Sahej Mittal, research analyst at HDFC Securities.

Angle One Ltd is one company offering discount broking. Its Q4 results were characterized by strong growth in client additions and orders. Investors were visibly euphoric with the stock closing 18% higher on Thursday.

“Also, even though their (ICICI Securities’) customer addition in the retail broking has been decent, it has not added to significant revenue growth and could be due to a higher number of clients with lower average revenue per user (Arpu). Stagnation in retail broking revenues is a dampener," Mittal added.

That apart, heavy dependence on the retail cash delivery segment also weighed on the retail broking revenue.

Trade size in this segment tends to reduce when equity market is choppy.

According to analysts at Axis Securities Ltd, near-term headwinds exist for the company owing to the unfavourable market conditions; however the management’s focus on adding high-quality clients could help the company improve its Arpu.

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