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Review By Rudra Shares & Stock Brokers Ltd on March 22, 2018
Issue Open: 22 Mar 2018 to 26 Mar 2018
Issue Type: Book Built Issue IPO
Issue Size: Offer for Sale 77,249,508 Equity Shares @ Rs5 Aggregating up to Rs 4016.97 Cr
Face Value: Rs 5 per Equity Share
Issue Price: Rs519 Rs520 per Equity Share
Market Lot: 28 Shares
Minimum Order Quantity: 28 Shares
Listing At: NSE, BSE
ICICI being one of the pioneers in the e-brokerage business in India, along with its strong brand name, large registered customer base, wide range of products across asset classes, complimentary advisory services, strong financial performance, delivering higher ROE, enable it to stand out of the crowd amongst its peers.
A high share of working population (estimated 90% below the age of 60 by 2020) in India, coupled with rapid urbanization and rising affluence, is expected to propel the growth of the Indian financial services sector.
Company’s business looks quite attractive as it has delivered superior returns but high valuations at current level would fail to provide gain for short term in the company.
On the upper price band of Rs 520 with annualized EPS of H1 FY18, the stock is being valued at 31.5 xs.
We recommend to SUBSCRIBE the IPO for long term gains.
The share capital of Company, is set forth below:- (Amount in Rs except share data)
Authorized Share Capital:- 400,000,000 Equity Shares @5 Aggregate value 2,000,000,000
5,000,000 Equity Shares @100 Aggregate value 500,000,000
Issued, subscribed and paid up capital before the Issue:- 322,141,400 Equity Shares @5 Aggregate value 1,610,707,000
Present Issue:- Offer for Sale 77,249,508 Equity Shares @ Rs 5aggregating up to Rs 4016.97 Cr
The company expects that the listing of equity shares will enhance its visibility and brand image and provide liquidity to its existing shareholders.
ICICI is a leading technology-based securities firm in India that offers a wide range of financial services including brokerage, financial product distribution and investment banking and focuses on both retail and institutional clients. It has been the largest equity broker in India since fiscal 2014 by brokerage revenue and active customers in equities on the NSE (Source: CRISIL), powered by significant retail brokerage business, which accounted for 90.5% of the revenue in fiscal 2017.
Headquartered in Mumbai, and operate offices in India, the United States, Singapore and Oman, the company is a part of the ICICI Group, one of the largest financial conglomerates in the country and promoted by ICICI Bank, India’s largest private sector bank in terms of consolidated total assets with an asset base of Rs 10.5 trillion as at December 31, 2017.
Company offers its retail customers a wide range of products and services in equities, derivatives and research, and also distribute various third-party products including mutual funds, insurance products, fixed deposits, loans, tax services and pension products. Moreover, it also offer s its customers a wide variety of advisory services, including financial planning, equity portfolio advisory, access to alternate investments, retirement planning and estate planning.
Company provides domestic and foreign institutional investors with brokerage services, corporate access and equity research. Its Investment banking business offers equity capital markets services and other financial advisory services to corporate clients, the government and financial sponsors.
Retail brokerage and distribution businesses are supported by nationwide network, consisting of over
200 own branches,
Over 2,600 branches of ICICI Bank through which electronic brokerage platform is marketed and
Over 4,600 sub-brokers, authorized persons, independent financial associates and independent associates as at December 31, 2017.
The ICICI Group includes the largest Indian private-sector life insurance company by retail weighted received premiums, the largest Indian private-sector general insurance company by gross written premium, each in fiscal 2017, the largest Indian asset management company by average AUM in India for the quarter ended December 31, 2017 (Source: AMFI), and other companies involved in home finance, private equity, primary dealership and other businesses.
Company’s objective is to achieve a leading market position in India in the range of businesses that it operates in, through the following strategies:
Indian Economy
According to EIU forecasts, the Indian GDP is expected to grow at an average of approximately 7.7% (in real terms) between fiscal 2017 and fiscal 2020, which is higher than the expected real GDP growth rates for China and the world.
Government Initiatives
In the recent past, the Government of India has introduced wide range of structural reforms that are expected to increase the economic growth and improve the overall business environment in India, enhancing productivity and stimulating higher foreign and domestic investments. Some of the key reforms are demonetization, Aadhaar programme, GST, recapitalization package of PSBs, the IBC, financial inclusion, direct benefits transfer, affordable housing and BMPS. In addition, the Government’s focus on fiscal discipline through prudent monetary and fiscal policies is expected to result in sustainable higher growth.
According to CRISIL Research, the smart phone penetration rate in India is expected to increase rapidly over next few years, reaching 66% by the end of fiscal 2022. In addition, the share of mobile data subscribers is projected to increase from 34% in fiscal 2017 to 66% by the end of fiscal 2022. With the increase in smart phone penetration and faster data speeds, consumers are increasingly finding digital platforms more convenient.
In addition, as compared to historical trends, the industry has witnessed significantly higher growth recently, with total AUM having increased at a CAGR of 40.1% from March 31, 2016 to September 30, 2017, as a result of increased financial savings and improving investor awareness about mutual funds as an asset class.
Indian Equity Market
Moreover, the Indian equity brokerage industry revenues are projected to increase at 15% - 18% CAGR in the next five years and are expected to reach Rs 300 billion by fiscal 2022, driven mainly by the continued uptick in trading volumes and increasing retail investor participation.
A high share of working population, coupled with rapid urbanization and rising affluence, is expected to propel the growth of the Indian financial services sector
Total revenues increased from Rs 705.8 crores in fiscal 2013 to Rs 1404.23 crores in fiscal 2017 and Rs 1344.69 crores in the nine months ended December 31, 2017, representing a CAGR of 18.8%.
In fiscals 2017 and the nine months ended December 31, 2017, revenue from brokerage business represented 62.6% and 63.6% of total revenue.
In fiscals 2017 and the nine months ended December 31, 2017, revenues from investment banking business accounted for 8.4% of total revenue, The revenue from investment banking business has increased from Rs 70.1 crores in fiscal 2013 to Rs 119.48 crores in fiscal 2017, at a CAGR of 14.2%, and stood at Rs 113.44 crores in the nine months ended December 31, 2017.
Company’s retail customers accounted for 90.5% and 89.1% of the revenue from brokerage business in 2017 and the nine months ended December 31, 2017, respectively
Revenues from the distribution business have increased from Rs 162.14 crores in fiscal 2013 to Rs 350 crores in fiscal 2017 and was Rs 328 crores in the nine months ended December 31, 2017.
PAT stood at Rs 338.59 crores and Rs 399.09 crores in fiscal 2017 and the nine months ended December 31, 2017, representing a CAGR of 47.4%.
Company have an established track record of delivering returns to shareholders. ROE has exceeded 30.0% past two years & for fiscal 2017, ROE stood at 69.2%.
As of December 31, 2017, had 0.8 million active customers who had traded on the National Stock Exchange in the preceding 12 months
Cost ratio has decreased 62.8% in fiscal 2017 to 54.4% in the nine months ended December 31, 2017
The Net Asset Value per Equity Share as of December 31, 2017 and March 31, 2017 stood at Rs 20.76 and Rs 14.99.
The net worth as on December 31, 2017 stood at Rs 668.8 crores.
As of December 31, 2017, had Rs 8, 60.71 crores of outstanding short-term borrowings.
Aggregate contingent liabilities at Rs 130.67 crores as on December31, 2017.
Company’s business looks quite attractive as it has delivered superior returns but high valuations at current level would fail to provide gain for short term in the company. On the upper price band of Rs 520 with annualized EPS of H1 FY18, the stock is being valued at 31.5 xs. We recommend to SUBSCRIBE the IPO for long term gains.
Review By Rudra Shares & Stock Brokers Ltd on March 22, 2018
Rudra Shares & Stock Brokers Ltd.
Rudra Shares & Stock Brokers Ltd. is Kanpur based brokerage houses offering services to Retail and HNI customers. Rudra Shares offer a range of financial services which includes institutional and retail brokerage of Equity, Currency, Commodities, Derivatives, Online Trading, Depository Services, Fixed Deposits, IPOs and Mutual Funds Distribution, Wealth Advisory and Research.
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