Mumbai-based Institutional Investor Advisory Services (IiAS) and international proxy advisory firm ISS have joined two other proxy advisors in supporting the delisting of ICICI Securities. The total number of proxy advisors in favor of the delisting now stands at four.
Last week, two prominent Indian proxy advisors, Mumbai-based Stakeholders Empowerment Services (SES) and Bengaluru-based InGovern, also recommended the delisting of ICICI Securities. Their recommendation suggested issuing shares of ICICI Bank to shareholders of ICICI Securities.
The shareholders of ICICI Securities will discuss the resolution regarding the delisting of the company at a virtual meeting scheduled for March 27, 2024.
IiAS Supports Delisting Resolution
IiAS has supported the resolution to delist ICICI Securities based on the argument that the implied valuation of the company is at a 2% premium to the closing price on the day prior to the delisting announcement and a 23% premium to the closing price four days prior to delisting.
ICICI Securities announced its delisting plan on June 25, 2023, through a scheme of arrangement. Under this scheme, shareholders of ICICI Securities will receive 67 shares of ICICI Bank for every 100 shares they hold. If the plan is successful, ICICI Securities will become a wholly-owned subsidiary of ICICI Bank.
According to IiAS, banks in India typically run their broking businesses through privately held arms. Therefore, delisting ICICI Securities and keeping it as a separate legal entity within the ICICI Bank fold would align with market practices.
ISS Supports Delisting for Stability and Valuation
The international advisory firm ISS believes that being a part of ICICI Bank, with access to a larger customer ecosystem, could bring stability to the financial performance of ICICI Securities. Given the cyclical nature of ICICI Securities’ business, this arrangement is seen as beneficial.
ISS also found that the share exchange ratio is in accordance with the required regulations and represents a 15% premium to the price on June 23, 2023, one day prior to the delisting announcement. The value assigned to the company for the purpose of the scheme is based on independent valuation reports and is broadly in line with market peers.
The independent valuation reports were prepared by PwC Business Consulting Services and Ernst & Young Merchant Banking Services.
InGovern and SES Also Support Delisting
InGovern and SES, two other proxy advisors, have also published reports supporting the resolution to delist ICICI Securities. InGovern’s report highlights that the average ratio of ICICI Securities’ stock price to ICICI Bank’s stock price in the six months before the deal announcement was 0.54, representing a 24% premium to the proposed swap ratio.
SES points out that the average ratio of market share prices of ICICI Securities to ICICI Bank in the preceding year before the deal announcement was 0.56, while the proposed share swap ratio is 0.67:1. Therefore, it appears that shareholders of ICICI Securities are being offered a slight premium compared to the market price differential.
Considering the sound strategic rationale and the evaluations provided, the ISS report concludes that the resolution warrants shareholders’ support. These reports from proxy advisors provide important insights into the delisting of ICICI Securities and offer various perspectives on the matter. The final decision will be made by the shareholders in the upcoming virtual meeting.
