ICICI Securities IPO Review

ICICI Securities Limited

ICICI Securities IPO comprises saleof  7,72,49,508 shares. ICICI Securities offers a wide range of financial Services including investment banking, institutional broking, retail broking, private wealth management, and financial product distribution.
ICICI Securities has been the largest equity broker in India since fiscal 2014 in terms of brokerage revenue,

ICICI Securities Limited  IPO Details

Issue Period March 22, 2018-March 25, 2018
Issue Details Offer for Sale of 77,249,508 Equity Shares
Issue Size (Rs. Cr) 4,017 Cr
ICICI Bank Shareholders Reservation 3,862,475 Equity Shares  – 201 Cr
Price Band Rs.519 – 520
Bid Lot 28 Equity Shares and multiple thereof
Issue Structure :  
QIB 75% of the Net offer 
NIB 15% of the Net offer
Retail 10% of the Net offer – 7,338,703 Equity Shares- 382 Cr
Applications for 1x retail subscription 2,62,097
BRLMs DSP Merill Lynch, Citigroup Global, CLSA India, Edelweiss Financial, IIFL Holdings, SBI Capital Markets
Registrar Karvy Computershare Pvt. Ltd..
About ICICI Securities Limited
  • ICICI Securities Ltd is a technology-based firm offering a wide range of financial services including investment banking, institutional broking, retail broking, private wealth management, and financial product distribution.
  • ICICI Securities aims in ‘Creating Informed Access to the Wealth of the Nation‘ for its diversified set of clients that include corporates, financial institutions, high net-worth individuals and retail investors.
  • Headquartered in Mumbai, ICICI Securities operates out of 75 cities in India and wholly owned indirect subsidiaries in Singapore and New York. 
  • Its retail brokerage and distribution businesses are aided  by a nationwide network, consisting of over 200 owned branches, over 2,600 branches of ICICI Bank through which electronic brokerage platform is marketed and over 4,600 sub-brokers, authorized persons, independent financial associates and independent associates as at December 31, 2017.
ICICI Securities Limited: Financials: 

Rs. In crore
Particulars 2017(9) 2016(9) Fy17 Fy16 Fy15
Revenue from Operations 1,344.69 1,022.69 1,404.23 1,124.58 1,209.51
Revenue Growth (%) 31.49% 24.87% -7.02%
Profit Before Tax 612.57 394.65 522.04 374.1 449.68
Profit after Tax 399.09 255.41 338.59 238.72 293.87
Net Profit as % to Revenue 29.68% 24.97% 24.11% 21.23% 24.30%
EPS (Rs.) 12.39^ 7.93^ 10.51 7.41 9.12
Share Capital 161.07 161.07 161.07 161.07 161.07
Reserves 514.05 300.37 328.51 237.09 191.24
Net worth as stated 668.81 422.58 482.97 391.15 346.29
Long Term Borrowings 84.56 69.11 82.65 62.75 52.5
Short Term Borrowings 860.71 492.98 395.41 172.86 226.53
RONW(%) as stated 69.30% 60.44% 77.47% 64.74% 99.59%
Net Asset Value (Rs.)  20.76 14.09
IPO Price 520
Face Value 5
EPS  (Fy17) 10.51
PE – (fy17 Earnings) 49.47
CAGR Sales 3 Yrs 23.24%
CAGR Net Profit 3 Yrs 56.00%
Market Cap 16751.28 crore
Market cap / Sales 11.93
Rationale for Investment
  • ICICIdirect platform provide the customers with a seamless settlement process through a 3-in-1 account, which links the electronic brokerage platform with customers’ savings bank and dematerialised accounts held with ICICI Bank.
  • ICICI Securities Limited is the largest equity broker in India.
  • ICICI Securities Limited has a strong distribution business, where they distribute  various mutual funds, insurance products,FDs of select companies, loans and pension products to retail customers. This is source of considerable commission income to the company. In 2017, revenues from the
    distribution of third party mutual funds accounted to 47.3% of its revenue
  • ICICDirect offers a Superior customer experience through product and technology innovation
  • Company has exhibited a strong financial performance with significant operating efficiency
Risks & Concerns:
  • Continuous downtrend in equity capital market can dent ICICI Securities Limited profitability. 
  • Increased Competition  is likely to result in pricing pressures
  • ICICI Securities Limited has been facing rise in operating expenses.
Peer Comparison:
Peer Group Comparison  (Rs. in Crore)
Particulars/ Company  ICICI Sec Motilal  IIFL JM
Net Sales 1,404.23 1,726.19 4,912.47 2,359.26
PAT 338.59 359.97 686.09 470.2
Equity 161.07 14.45 63.58 79.45
Market /IPO Price 520 1,040.65 612.2 119
Face Value 5 1 2 1
EPS 10.51 24.91 21.58 5.92
Price / Earning 49.47 41.77 28.37 20.11
NPM % 24.11% 20.85% 13.97% 19.93%
Market Cap 16751 15037 19462 9455
Market Cap/Sales 11.93 8.71 3.96 4.01

ICICI Securities Limited appears to be priced at a premium to peers. Further ICICI’s asset management business is housed as  a different subsidiary, whereas others like Motilal Oswal, edelweiss have this as part of their  company. 

ICICI Securities IPO: Assessment
  • ICICI Securities is likely to benefit from fundamental transformation in the Indian savings environment
  • ICICI Securities Limited has met with good anchor demand.
  • ICICI Securities Limited is  one of the pioneers in the e-brokerage business in India, along with its strong brand name, large registered customer base, wide range of products across asset classes, complimentary advisory services. How ever over the years this advantage may have got blunted.
  • Retail brokerage revenue contributed around 90.5% in the total brokerage revenue in FY17. This can get affected in the scenario of a slowdown in equity markets.
  • The ICICI Securities  IPO appears to be fully priced and even though it may see reasonable QIB demand, I  do not intend to apply in ICICI Securities IPO as of now.

Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. I may have vested interest in every stock I discuss and my views may be biased. Please do your own due diligence as stock market investments have high degree of inherent risk.

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