After a tepid response to the initial public offering (IPO) of ICICI Securities Ltd, the issue saw a weak listing. Shares of the brokerage and investment banking arm of ICICI Bank Ltd were listed at Rs431.10, down 17.09% from its issue price of Rs520.
At 10.01am, ICICI Securities shares were trading at Rs452.60 on BSE, down 13% from its issue price. The stock hit a high and a low of Rs462.70 and Rs431.10, respectively.
ICICI Securities cut the size of its IPO to around Rs3,520 crore after it witnessed low subscription during the share sale in 22-26 March, Mint reported. The company had earlier aimed to raise Rs4,017 crore, with a price band of Rs519-520 per share.
“The company has successfully closed its proposed offer for sale (OFS) and raised approximately around Rs3,500 crore. Earlier, OFS attracted a strong response from anchor investors raising around Rs1,717 crore on 21st March 2018. The QIB (qualified institutional buyer) portion was fully subscribed as of 8.30pm on 26 March 2018,” the company said in a statement.
Ahead of the IPO, analysts had cautioned about the issue’s high valuations. Kotak Securities Ltd had said that at the higher end of the issue price of Rs520 per share, the stock was offered at 31.5 times nine months FY18 annualized earnings.
The company’s business relies heavily on retail customers. Retail brokerage revenue contributed around 90.5% in the total brokerage revenue in FY17. Its average daily turnover for cash equity and equity derivatives traded by their customers increased at a compound annual growth rate (CAGR) of 61.4% to the six months ended 30 September 2017 from fiscal 2013. Its non-brokerage revenue share increased to 36.4% in nine months of FY18 from 29.7% in FY13.
However, its high dependency on brokerage income is risky, said Canara Bank Securities Ltd.
ICICI Bank’s other arms ICICI Lombard General Insurance Co. Ltd and ICICI Prudential Life Insurance Co. Ltd are currently trading 19.74% and 18.56% respectively above their offer price. ICICI Lombard General Insurance Company Ltd was listed in 2017 and saw a gain of 3.11% on listing day while ICICI Prudential Life Insurance Company Ltd listed in 2016 tanked 10.88% on stock markets debut.
Amid controversies, the holding company ICICI Bank has been under selling pressure. The stock has slipped nearly 14% in this year so far.
ICICI Securities offers a wide range of financial Services including investment banking, institutional broking, retail broking, private wealth management, and financial product distribution. By brokerage revenue, ICICI Securities has been the largest equity broker in India since fiscal 2014.
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India: ICICI Securities cut IPO size to nearly $542m owing to weak subscription
India: Market gets unattractive for investors with surging IPO valuations
This article was first published on Livemint.com
