ICICI Securities, a domestic brokerage firm, made an announcement on Thursday regarding its intention to become a wholly owned subsidiary of its parent company, ICICI Bank, through the process of delisting from the stock market.
Under this proposal, public shareholders of ICICI Securities will be allocated 67 equity shares of ICICI Bank for every 100 equity shares they hold in the brokerage firm.
The approval for this proposal was granted during a board of directors meeting on Thursday. As part of this arrangement, ICICI Bank will issue equity shares to the public shareholders of ICICI Securities in exchange for the cancellation of their equity shares in the brokerage firm.
“While there are business synergies between the bank and the company, a consolidation by way of merger is not permissible on account of regulatory restrictions on the bank from undertaking securities broking business departmentally,” ICICI Securities said in a regulatory filing.
ICICI Securities provided justification for the decision to delist the stock by pointing out that with ICICI Securities as a wholly owned subsidiary, both entities would be able to capitalise more effectively on the identified synergies, in line with the bank’s customer-centric approach.
The company further stated that both ICICI Bank and ICICI Securities would be able to leverage their combined strengths to offer comprehensive financial services to existing and new customers.
Based on a valuation report that independent registered valuers provided and that also received a fairness opinion from the merchant banker, the proposed share exchange ratio of 67 equity shares of ICICI Bank for every 100 equity shares of ICICI Securities.
The cancellation of equity shares held by ICICI Securities’ public shareholders as a result of this transaction will lower ICICI Securities’ share capital.
ICICI Securities highlighted that the public shareholders of the brokerage firm will gain access to a larger and more diversified business, which will provide enhanced revenue stability. Additionally, they will receive more liquid stock, which will be beneficial for the shareholders.
The proposed share exchange ratio implies a premium compared to the market price of ICICI Securities’ shares as of June 23, 2023, prior to the board meeting notification that was issued to stock exchanges on June 25, 2023.
As of March 31, 2023, ICICI Bank already owns 74.85% of the equity shares of ICICI Securities, with public shareholders holding the remaining 25.15%.
