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ICICI Securities Ltd - IPO Note - Sushil Finance

Posted On: 2018-03-22 09:46:38

Price band for IPO - Rs. 519 to Rs. 520
Issue Opens on: March 22, 2018
Issue Closes on: March 26, 2018

ICICI Securities Ltd 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. They have been the largest equity broker in India since fiscal 2014 by brokerage revenue and active customers in equities on the National Stock Exchange, powered by their significant retail brokerage business, which accounted for 90.5% of the revenue from their brokerage business in fiscal 2017.

As of December 31, 2017, ICICI direct, their award winning proprietary electronic brokerage platform, had approximately 3.9 million operational accounts of whom 0.8 million had traded on NSE in the preceding 12 months. Since inception, they have acquired a total of 4.6 million customers through this platform as of December 31, 2017.

Their retail brokerage and financial product distribution businesses empower their customers to access the Indian financial capital markets through their ICICI direct platform and provide them with a seamless settlement process through a 3-in-1 account, which links the electronic brokerage platform with customers' savings bank and dematerialized accounts held with ICICI Bank.

HIGHLIGHTS

- Largest Equity Broker in India Powered by a Proprietary Technology Platform: ICICIdirect.
- Natural Beneficiary of Fundamental Transformation in the Indian Savings Environment.
- Strong and Growing Distribution Business with an "Open-Source" Distribution Model.
- Superior Customer Experience through Product and Technology Innovation.
- Strategic Component of the ICICI Ecosystem.
- Leading Institutional Platform.
- Strong Financial Performance with Significant Operating Efficiency.
- Experienced Senior Management Team.

Objects of the issue

- The issue is an offer for sale by the promoter, ICICI Bank, the company will not receive any benefits from the issue.

OUR VIEW

ICICI Securities is one of the pioneers in the online broking services in India, catering to a vast customer base which consists primarily of retail investors. The business is based on an asset light model relying on their electronic brokerage, 'ICICI-direct' platform.

Financially, the company has showcased its strong technology based business model, with the revenues growing at 19% CAGR over the last 5 years, the PAT growing at 45% CAGR. This is mainly attributable to their asset light model and the improvement in the scale of operations.

The EBITDA Margin has been at an average of 32% over the last 5 years, and was 40.2% and 48.9% in F.Y 17 and Dec'17 respectively. The PAT Margin on average was at 17% over 2013-17, and 24% and 29.6% for F.Y 17 and Dec'17.

For F.Y 17 the company had an ROE of 69.6% and an ROCE of 91.32%, while the average ROE and ROCE over 2013-17 were 49% and 71% respectively. The company had an ROA of 16.55% in fiscal'17.

Looking at the valuation, the issue price of 520 is at 25 times the book value based on Dec'17 numbers, and the P/E Ratio comes to 31.5 times on F.Y-18 earnings (annualized). This when compared to peers identified by the company is near the average P/E of the pack.

The company has increased its market share from 4% in 2013 to 9% in 2017, which is highly commendable. This is an excellent play on the shift to Financial Assets vs. Real Assets. We advise investors to subscribe to the issue & stay invested for the medium to long term.


Source: Equity Bulls

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