Delisting of ICICI Securities

ICICI Securities is undergoing Delisting process which means it will no longer be traded on stock exchanges and ICICI Bank will own 100% of the company. Let’s understand the whole thing in this post.

This Part 2 of the Delisting series, to know about Delisting Click Here

DELISTING

In 2023 ICICI Securities in a filing revealed that the company will be delisting from stock exchanges.

This means that investors will not be able to buy and sell these shares on stock exchanges like National Stock Exchange, Bombay Stock Exchange etc., once this process is completed.

THE REASON FOR DELISTING

ICICI Securities has the main work of providing brokerage services. In recent times, the market share of the brokerage industry has been overtaken by Discount brokers like Zerodha, Groww, Angel One etc.

This means that the main business of ICICI Securities has been losing market share. Further, many areas of its business are similar or overlap with ICICI Bank like providing loans, insurance etc., so this creates unnecessary competition between them.

For ICICI Bank, it would be better to have its banking business and brokerage and investment business to be beneficial instead of competing against each other.

It would also have been better for ICICI Bank to have ICICI Securities as its Brokerage Department but as per the same release it was revealed by ICICI Securities that due to regulations the Bank cannot do it.

So the main reason for delisting of ICICI Securities is for ICICI Bank to get 100% ownership of this company. As of March 31 2023, ICICI Bank had 74.85% shares in the company while the rest of the public had 25.15% shares.

While ICICI Bank owns a majority share and has decision making powers, by taking 100% ownership and going off the stock exchange, the company can be saved from various filing requirements as well as not having dissenting opinions from other shareholders which means faster decisions for the company.

For example, if ICICI Bank wants to stop ICICI Securities from engaging in Insurance and lending business to stop unnecessary competition among them, the shareholders of ICICI Securities might oppose this view because why would any investor want their business to not operate in these fields and make more money.

Also, by having full ownership, ICICI Bank and ICICI Securities can work together. ICICI Securities will have access to all the resources, experts, capital of ICICI Bank which will give it a boost.

The Details of Delisting

The shareholders of ICICI Securities will receive shares of ICICI Bank in exchange. This is called Share Swapping. As per the release, for every 100 shares of ICICI Securities, 67 shares of ICICI Bank will be given in exchange.

After going through all the required filings, this resolution was passed and so it appears to be only a matter of time before ICICI Securities goes off the Stock Exchange. 

But, there is one thing standing in the way. More than 100 minority shareholders and a potential case.

You see, it has been claimed by some shareholders that they were approached by the Executives of the Bank to vote in favour of the Delisting, which means that regulatory investigation may happen in this Delisting.

Also, Quantum Mutual Fund, one of the minority shareholders, has also cried foul because their investors will lose money based on the current share swapping value.

A class action case (where more than one person/body files the case based on same act usually when many people’s rights are breached) has also been filed before the National Company Law Tribunal by some investors being led by Manu Rishi Guptha, an investment manager from Bangalore.

ICICI Bank maintains that the valuation is based on independent advisor’s opinion, so they do not appear to be in the mood for changing the valuation.

What’s next for ICICI Securities?

What happens next will depend on the outcome of the class action case and potential regulatory investigation into the alleged approaching of shareholders.

If given clean chit, then ICICI Securities will be completely owner by ICICI Bank as planned and the Bank can then proceed to implement new changes which they believe will be best for both companies.

If however, the delisting is not allowed then ICICI Securities will continue to be on the stock exchange and some additional action might also be taken by Regulatory Authorities like SEBI.