ICICI Bank to buyout ICICI Sec in share swap deal

ICICI Bank will buyout the shareholders of ICICI Securities through a share swap deal which will delist the broking firm and make it the wholly-owned subsidiary of country’s second largest private sector bank.

ICICI Bank will issue 67 equity shares of ₹ two each for every 100 shares of ICICI Securities of ₹ three each held by investors. Post the deal, equity shares held by the public shareholders of ICICI Securities will be cancelled and the share capital of the broking firm will reduce to such extent.

While there are business synergies between the Bank and the share broking firm, a consolidation by way of merger is not permissible due to regulatory restrictions on the bank from undertaking securities broking business departmentally, said ICICI Securities.

• Also Read: ICICI Securities board to meet on June 29 to consider delisting shares

The Board of directors of ICICI Securities on Thursday approved the draft scheme of arrangement for delisting of equity shares of the company and it is subject requisite approvals from ICICI Bank and other statutory authorities.

The deal is expected to be completed in 12-15 months.

The merger follows a similar deal proposing HDFC merger with HDFC Bank, leading to lesser number of quality companies to trade for investors.

As on March-end, ICICI Bank held 74.85 per cent of the equity shares of ICICI Securities and the balance of 25.15 per cent was held by the public.

Samveg Patel, Associate Professor, NMIMS University said the shareholders of ICICI Securities are getting about ₹1000 extra, but the premium will get adjusted in few days and the arbitrage opportunity will be removed.

• Also Read: I-Sec delisting . ICICI Securities: A falling knife from the start

The proposed merger may generate the synergy from cost savings and cross selling of products, he said.

The equity broking business has come under pressure ever since SEBI mandated upfront margin and removed the scope for leveraged trades in equity and commodity exchanges.

Manish Chowdhury, Head of Research, StoxBox said with shareholders of ICICI Securities facing some headwinds in terms of increasing competition in the broking space, the timing to turn this flagging business into subsidiary of ICICI Bank cannot be more opportune.

• Also Read: ICICI Securities board okays delisting; every 100 shares to fetch 67 ICICI Bank shares

ICICI Securities had reported that its net profit in year ended March was down at ₹1,118 crore against ₹1,382 crore logged in FY22 while its revenue was down marginally at ₹3,416 crore (₹3,435 crore).

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