Why ICICI Securities Share Price is Rising

Shares of ICICI Securities, India's largest broking firm, witnessed a remarkable surge on Monday as its shares soared by 15%, reaching a 52-week high of Rs 650. This impressive surge propelled the stock to its highest level since November 2022.

These gains were in addition to a 7.14% jump that the stock witnessed on Friday despite the frontline indices S&P BSE Sensex and Nifty 50 ending in the red.

The stock has been on an upward trajectory over the last four trading sessions, demonstrating remarkable growth of 27%.

Let's find out what's driving the rally in ICICI Securities.

Voluntary delisting plan

India's leading private sector lender ICICI Bank has announced that its Board of Directors will meet on 29 June 2023 to consider a proposal for the delisting of ICICI Securities, one of its listed subsidiary companies.

ICICI Securities, which serves as the brokerage and non-bank mutual fund distributor arm of ICICI Bank, will also convene a board meeting on the same day to consider the delisting proposal.

As per the data on the BSE, ICICI Bank currently holds a 74.85% stake in ICICI Securities, equivalent to 241 m equity shares. The remaining 25.15% is owned by public shareholders, accounting for 81 m equity shares.

This decision comes five years after ICICI Securities' initial public offering (IPO) in April 2018, which received a lackluster response. The IPO subscription rate was 78% overall, with retail investors bidding only 89% of the allotted quota.

Since its listing, ICICI Securities' stock performance has mostly trailed behind benchmark indices.

Upon the announcement, ICICI Securities' shares experienced a 15% surge in early trading on Monday. This rally in share price can be attributed to the positive market response typically seen in voluntary delisting offers.

Shareholders often anticipate higher exit prices, determined through a reverse book-building process, which allows the company to gauge demand for shares at different price levels. Based on the responses received, an attractive exit price can be determined.

The expectation of a higher exit price generates increased buying interest from investors, leading to a surge in the company's stock price.

Furthermore, the possibility of delisting creates a sense of scarcity among investors as the shares will no longer be available for trading on public exchanges if successful. This limited supply of shares increases demand, further boosting the stock price.

What next?

ICICI Securities has four business segments: broking, distribution of financial products, investment banking, and Private Wealth Management (PWM), which provide a varied revenue mix.

To stabilise its brokerage revenue, ICICI Securities has successfully implemented subscription models.

Additionally, the growth of its Margin Trading Facility (MTF) business has reduced its reliance on brokerage revenue, which now makes up only 37% of the overall revenue mix in the financial year 2023. This compared to 55% in the financial year 2020. The company's wealth business, too, has grown remarkably at 59% CAGR over 2020-23.

Also, analysts anticipate the broking revenue to remain stable in the financial year 2024 while expecting strong growth of 21% in the distribution business and 23% in interest income, led by strong growth in the MTF (margin trading facility) book.

ICICI Securities has seen tough times in the recent past due to the high linkage of its revenue to broader equity markets. This, therefore, has translated into a sharp decline in broking revenue as its dependence on cash volumes has been relatively higher.

To address these challenges, ICICI Securities is actively diversifying its revenue streams by introducing new tools and products for the derivatives segment. Additionally, the company is focused on increasing the penetration of its MTF among its customers.

Furthermore, the launch of new distribution products, such as loans and general insurance, is expected to contribute to enhanced revenue in the future. These strategic initiatives aim to reduce the company's dependence on volatile equity markets and foster a more stable and diversified revenue base for ICICI Securities.

How ICICI Securities have performed recently

Shares of ICICI Securities have surged over 24% in the past month. Over the past five days, the stock is up 19%.

ICICI Securities shares touched a 52-week high of Rs 647 on 26 June 2023 and a 52 -week low of Rs 411 on 4 July 2022.

About ICICI Securities

ICICI Securities is engaged in the business of broking (institutional and retail), distribution of financial products, merchant banking and advisory services.

It's a subsidiary of ICICI Bank, and the broking arm of the ICICI Group. The company also offers wealth management services and distributes financial products.

You can compare ICICI Securities with its peers on our website.

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