Shares of ICICI Securities (I-Sec) rose by over 10% on Monday after ICICI Bank, its parent company, announced plans to discuss the delisting of the broking firm from stock exchanges. ICICI Bank currently holds just under 75% of I-Sec, and this decision is seen as a move to consolidate its financial services business, especially since a significant portion of investment banking can be carried out within the bank itself. The announcement led to I-Sec’s shares surging, hitting their 52-week high of Rs 650 on the Bombay Stock Exchange before settling at 10.4% higher at Rs 622 by the end of trade on Monday.
One possible reason for the delisting may be that I-Sec’s shares have been underperforming and languishing since its debut in April 2018. After its initial public offering, where shares were priced at Rs 520, they have only gained 8% since then. In comparison, ICICI Bank’s stocks have risen 241%. The bank has the option to conduct a buyback financed by stocks.
According to Prashanth Tapse, Senior VP (Research) at Mehta Equities, “In a voluntary delisting offer, the stock usually reacts positively on an assumption of a higher exit price to shareholders determined through a reverse book-building process. Despite receiving a poor response during the IPO, many shareholders are now hoping to exit at a higher price in the event of the delisting offer being approved.
If the proposal is approved, I-Sec will become the first major broking firm to be delisted from the exchanges. This development could stir interest in the share prices of other broking firms, especially since it comes at a time when the Indian stock market is witnessing an inflow of retail investors.
Despite the positive news for shareholders in the short term, some experts are cautious about the long-term implications of the delisting since it could lead to less transparency. Investors might be wary of putting their money into a company with limited regulatory oversight. Meanwhile, some have pointed out that this is merely a move towards consolidation at a time when the economy is facing tremendous uncertainty, so it remains to be seen how this decision will impact the industry in the long run.
