ICICI Securities shares in focus amid Sebi's administrative warning, ahead of equity shareholding meet

Shares of ICICI Securities Ltd are in focus on Tuesday after the broking firm received an administrative warning from Sebi in connection with the inspection of books and records for the merchant banking activities of the company conducted in the month of December 2023. ICICI Securities had recently received a similar warning in connection with the inspection carried out for the stock broking activities of the company.

ICICI Securities said there is no impact on financial, operation or other activities of the company, pursuant to the fresh administrative warning letter.

"This is to inform you that the Securities and Exchange Board of India (‘SEBI’) has issued an administrative warning to ICICI Securities Limited (the company) vide their letter dated March 22, 2024 which was received on the same day at 4:06 pm through e-mail," ICICI Securities told stock exchanges on Friday.

The authority has warned the company to avoid recurrence and did not impose any penalty.

"The administrative warning has been issued in connection with the inspection of books and records for the Merchant Banking activities of the company conducted in the month of December 2023. There is no impact on financial, operation or other activities of the company pursuant to the above-mentioned administrative warning letter," ICICI Securities said.

Sebi conducts multiple thematic and comprehensive inspections of various regulated activities from time to time. A warning was issued in connection with one of the thematic inspections carried out of the stock broking activities of the company, ICICI Securities said on March 15.

ICICI Securities delisting, ICICI Bank merger

Last year, the ICICI Securities board approved a scheme of arrangement for delisting of its shares pursuant to which ICICI Bank will issue shares to the public shareholders of ICICI Securities in lieu of cancellation of their shares in the company, making it a wholly-owned subsidiary of ICICI Bank Limited. In November 2023, ICICI Securities received “No objection” and “No adverse observations” letters from BSE and NSE; and in January, NCLT cleared the merger.

ICICI bank is looking to merge its 75 per cent subsidiary ICICI Securities (ISEC) with itself offering investors 0.67 shares of ICICI Bank for every one share in ICICI Securities. The largest public shareholder Norges Fund Investment Bank has voted in favour of the ICICI Securities delisting proposal. Quantum Mutual Fund voted against the proposal.

ICICI Securities shares got listed on April 4, 2018, at Rs 432. This was at 17 per cent discount to its IPO price of Rs 520. Had a reverse merger swap ratio set on the day of its listing, the ratio would have been set at 1.65 ICICI Bank shares for every 1 share of ICICI securities, a 146 per cent premium to the current offer based on the closing price for both the companies, Quantum Mutual Fund recently said.

"Had the ISEC IPO price been used as a benchmark then the share swap ratio would have been 1.9 shares of ICICI Bank for every 1 share of ICICI securities (a 183 per cent premium to the current offer) on the day of its listing. The current swap ratio values ICICI securities at a 30-77 per cent discount to its other listed peers based on consensus earnings forecast for fiscal year ending March 2024," it noted.

"Even if the company was valued at the lowest PE multiple reflected in its peer set (20.4 times for Angel One) the merger offer would have been at least 30 per cent higher. The current merger ratio transfers at a minimum Rs 17.8 billion to ICICI Bank shareholders from ISEC Minority shareholders. Quantum Long Term Equity Value Fund (QLTEVF) and Quantum ELSS Tax Saver Fund (QETSF) owns shares in ICICI Bank and ICICI Securities. We estimate the merger will result in a net loss of at least Rs 60.8 million to our unit holders. Based on the above to protect interests of our unit holders, Quantum Mutual Fund has decided to vote against the resolution," it said.

In the case of Norges Fund Investment Bank, the foreign fund holds nearly 3.25 per cent stake in ICICI Securities. It voted in favour of the proposal on Thursday last week, the first day of e-voting, as per the information posted on the website of Norges Fund Investment Bank. The e-voting will remain open till March 26. A meeting of the equity shareholders of the company will be held on Wednesday, March 27, 2024. at 5:30 pm IST through VC/OAVM regarding the delisting.