icici securities ltd Management discussions

OPERATING ENVIRONMENT

Global Economy

The global economy continued a strong recovery in CY2022, initially led by a continuation of the surge in global trade that began with the post-Covid recovery in CY2021. But global trade volumes decelerated by September 2022 as the monetary tightening began biting towards the end of the year. Inflation became a worldwide problem, triggered by excessive rapid growth in money supply and large fiscal stimulus programmes in the US and Europe in 2020-21, and exacerbated by the Russia- Ukraine war that began on February 24, 2022.

By June 2022, CPI inflation in the US was at 40-year high, and the inflationary pressure in the US and Europe remained acute into the early months of 2023, spreading also to emerging economies. Having signalled until January 2022 that it would not raise its policy rate until 2024, the US Fed abruptly began its most aggressive monetary tightening in four decades, and the US 10-year minus 2-year yield curve remained severely inverted from July 2022 onwards (having first inverted briefly in April 2022) , clearly signalling a recession in 2023.

The International Monetary Fund (IMF), in its latest World Economic Outlook (released January 30, 2023) , estimated that world Gross Domestic Product (GDP) grew 3.4% (real, inflation-adjusted) in CY2022, decelerating from the post-Covid bounce to 6% growth in 2021 and the longer-term average annual growth of 3.8%. The enforced tightening of US monetary policy since March 2022, which took the US policy interest rate up by 475 bps within a year (to a range of 4.75-5% as of March 2023 FOMC meeting), and the even more abrupt shift away from ultra-loose monetary policy by the European Central Bank (ECB) from July 2022 onward, led the IMF to forecast a sharp slowdown in growth of the Advanced Economies in 2023 to just 1.2% - with the US growing 1.4%, the Euro area just 0.7% and the UK contracting 0.6%.

Actual real GDP growth is likely to be slower in the Advanced Economies: the US Federal Open Market Committee (FOMC), at its March 2023 meeting, reduced its median forecast for 2023 real GDP growth to 0.4%, and 1.2% for 2024. Given the strength of the US economy in Q1 2023, this implicitly acknowledges that the economy will contract the rest of the year.

Emerging Economies, however, remained relatively unscathed, having kept external debt in check, and been largely circumspect about monetary and fiscal stimulus during the Covid crisis. India stood out on both fronts, with external debt having declined to 19% of GDP in June 2022 (from 24% in March 2014), and the fiscal deficit returning quickly to a glide path toward 6% of GDP (having never exceeded 9% of GDP even at the height of the Covid- induced global slump in 2020). The IMF forecasts that emerging economies will accelerate to 4% real GDP growth in 2023 (from 3.9% in 2022), with India again the fastest-growing major economy (6.1% growth in 2023, 6.8% in 2022 and 2024), and China projected to rebound to 5.2% growth in 2023 (from 3% in 2022) but moderating to 4.5% in 2024. With Russia slated to accelerate to 2.1% growth in 2024, the IMF projects that Developing Economies will grow 4.2% in 2024, thus ensuring global real GDP growth of 2.9% in 2023 (despite the recession in the Advanced Economies) and 3.1% in 2024.

Indian Economy

After expanding by 8.8% in FY2022, based on a broad- based recovery in manufacturing (+11.1% YoY) and services (+8.8% YoY), Indias real GDP decelerated to 7.7% YoY growth in the first 3 quarters of FY2023, mainly because of a sharp slowdown in manufacturing growth (+0.4% YoY), particularly a contraction in labour-intensive manufacturing output. By contrast, services accelerated to 10.4% YoY growth in April-December 2022 (from 9.4% in April-December 2021) and construction (10% YoY) and agriculture (+3% YoY) expanded at a good clip. From the demand perspective, the deceleration was attributable primarily to stagnation in real government spending and a deterioration in net exports, as robust real exports of goods and services (+14.3% YoY) were outpaced by real imports, which expanded 22.8% YoY in April-December 2022. Real fixed investment spending grew a robust 12.6% YoY in April-December 2022, and was 14.4% higher than the pre-Covid level (of April-December 2019), while real private consumption expenditure (PCE) grew 9.5% YoY in the first 3 quarters of FY2023.

Indias services exports grew 30.5% YoY in the first 11 months of FY2023, easily the fastest growth in over a decade, accelerating from the post-Covid bounce of 21.2% YoY growth in FY2022, and exceeding the previous decadal high of 18% in FY2019. Services imports were up 24.6% YoY, so the services trade surplus for April 2022-February 2023 widened 38.6%

YoY to US$ 133 Billion. The goods trade deficit widened sharply in April-September 2022 amid elevated crude oil prices, narrowed slightly in Q3FY23, and declined by 2.5% YoY in January-February 2023 as exports and imports declined in response to the slowdown in US and European demand. The services and incomes surpluses are likely to ensure a current account surplus (0.2% of GDP) in Q4FY23, reducing the FY2023 current account deficit (CAD) to 2.4% of GDP.

Inflation as measured by the Consumer Price Index (CPI) edged above the Reserve Bank of Indias (RBI) preferred target range (2-6% YoY) between January and October 2022, but moderated to 5.7% YoY by December 2022. The renewed surge in fuel prices triggered by the Russia- Ukraine war was a major factor keeping inflation high, which obliged the RBI to steadily hike its policy repo rate from 4% in April 2022 to 6.5% by February 2023 monetary policy committee (MPC) meeting. A renewed uptick in foodgrain prices (+16.3% YoY in February 2023) led to CPI inflation rising well above the RBIs target range in -February 2023, raising the spectre of more rate hikes from a hawkish MPC. The big reported increase in wheat and rice prices was mainly a statistical quirk, arising from the fact that free foodgrain was distributed to over 800 Million Indians from January 2023 onwards: any item obtained free is not included in measuring the CPI, so non-PDS foodgrains influence on the CPI was being exaggerated. Nonetheless, the headline CPI inflation was likely to oblige the RBI to raise interest rates further, unless non-PDS foodgrain could be distributed better.

Outlook of Global and Indian Economy

We expect world real GDP growth to slow to 2.2% in 2023, slower than the IMFs January 2023 forecast of 2.9% real GDP growth, as central banks in the developed economies continue to sharply scale back their aggressive monetary expansion in the face of virulent inflation that remains near 4-decade highs. The abrupt shift in monetary stance over the past year has already caused some disarray in the US and European financial system, with victims including Switzerlands second-largest bank and the 15^th largest US bank (and a couple of smaller ones). With inflation still very far from central bank targets (more than double the US target, triple the ECBs and BoEs targets at the end of March 2023), central banks will have to prioritise the fight against inflation, even if it causes further ructions in the financial markets. While bank-specific liquidity support will continue, aggregate money supply will continue to be reined in, causing the supply of credit to tighten, weakening the economy further. Our global growth estimate is predicated on zero growth for developed economies in 2023 (slower than the IMFs January 2022 forecast of 1.4%), and 4.2% growth for emerging economies (primarily because we expect India to grow faster than the IMFs 6.1% growth forecast for 2023).

With many major supply-side reforms over the past 2 years, e.g. the lowest corporate tax rates in Asia (especially for new manufacturing units), a more flexible labour market with the simplification of labour codes, and production-linked incentives (PLI) spurring new investments in export-oriented manufacturing, India is poised to experience a steady further acceleration in investment-led growth. Exports of services are ironically benefitting from increased immigration controls in the US (especially) and Europe, resulting in enhanced off-shoring of shared services, while Indian software companies increasingly become more sophisticated in whole-business consultancy and broaden their offering of research- and process-outsourcing. With the rupees real effective exchange rate depreciating 5% since mid-November 2022, Indias merchandise exports too are likely to receive a boost to their competitiveness, especially once export duties (imposed since May 2022 to fight inflation) are eliminated. With lower crude oil prices helping to both lower Indias headline inflation rate and lower the CAD to 1.5% of GDP in FY2024, we expect Indias real GDP to grow 7% despite the recession in advanced economies (other than Japan) in CY23.

Equity Markets

For an Indian investor, FY2023 turned out to be highly volatile for equities given the global events. From a crossasset class perspective, investors betting on gold (+16%), US$ (+8.4%), real estate (5%-6%) and bonds (3.8%) earned positive returns in FY2023 while those betting on stocks were provided flat returns.

FY2023 turned out to be a year in which there was massive pressure of rising equity risk premium and risk-free rate on equity valuations along with unprecedented uncertainty on income growth for corporates. First half of FY2023 began with the unprecedented nuclear brinkmanship caused by the Russia-Ukraine conflict which fuelled a commodity shock thereby resulting in surge in prices as well as shipping costs. Central banks were caught by surprise due to the steep rise in inflation thereby triggering one of the sharpest rate hike cycles by the US Federal Reserve in decades. Towards the end of FY2023, the narrative is changing from further aggressive Quantitative tightening (QT) to prospects of an end to QT cycle in the near term and probable Quantitative easing (QE) in 2024. The above change in stance is driven largely due to the banking crisis in US and Europe caused by aggressive rate hikes taken by the US Fed which has the potential to trigger a recession in the developed world.

Within equities, high-beta, capital-intensive and value stocks outperformed low-volatility stocks during FY2023. Large-caps outperformed small-caps. Amongst large caps, sectors which outperformed were PSU stocks, FMCG, auto and financials.

PAT/GDP is likely to improve in FY2024 after dipping marginally in FY2023 due to the contraction in profit pool of commodity companies. Indias domestic capex cycle and credit cycle are at a nascent stage of recovery coinciding with the decadal bottom of the NPA cycle along with pro-growth union budget which focused on enhancing capex spend on infrastructure (FY2024 capex outlay stands at 10 Trillion).

Strong flows from DIIs gave cushion against volatility in equity market and outflows from FPIs

Foreign Portfolio Investors (FPI) selling during FY2023 relatively slowed down as compared to FY2022 outflows with second half having inflows from FPIs. Further, DIIs continued their strong momentum of inflows in FY2023.

Secondary market witnessed the outflow of Foreign Portfolio Investors (FPIs) of US$ 25.3 Billion. However, including the primary market inflows, the selling was much lower at US$ 6 Billion in FY2023. FPIs were net sellers in the 1st half of FY2023 totalling US$ 9 Billion outflows although the trend reversed in the 2nd half of FY2023 with FPI becoming net buyer resulting in inflows of US$ 3 Billion. Consequently, aggregate FPI equity asset stood at 44.6 Trillion as of March 31, 2023. During FY2023, Sectors which saw massive outflows were IT, energy financials and consumer durables whereas capital goods, MCG, Healthcare services, consumer services and autos saw massive inflows.

Indian debt market which witnessed continuous outflow over the past few years (except FY2022) by Foreign Portfolio Investors (FPIs) saw outflow of US$ 1.1 Billion in FY2023.

In contrast, the Indian capital markets saw consistent buying by domestic investors in the face of continued unprecedented selling by FPIs during rare and extreme fear-inducing events seen over the past year (QE reversal, US Federal reserve aggressive interest rate hike, high inflation across globe and global brinkmanship due to the Russia-Ukraine conflict).

DII were net buyers across FY2023 totalling US$ 32.2 Billion (highest ever) and absorbed selling pressure of FPIs. SIPs continued to remain resilient despite the market volatility with cumulative SIP flows of 1,560 Billion in FY2023 vis-a-vis 1,246 Billion in FY2022 signifying rise of retail investors. Further, domestic equity Assets Under Management (AUM) has increased by 17% to 16.9 Trillion (March 2023) from 14.42 Trillion (March 2022).

Investment Products Mutual Funds

MF Industry AAUM grew at a marginal growth of 6% over March 2022 on a Y-o-Y basis as on March 2023 although market was almost flat throughout the year. The AAUM stood at 40.04 Trillion vs 37.7 Trillion with outflows in Q1-23 spooked on account of Russian onslaught on Ukraine.

However, the Industry has witnessed more than 500% growth over the last one decade from 7 Trillion as on March 2013.

There was an active participation from both individual and institutional investors throughout the year and steps to suck out excess liquidity from the central back could not deter strong retail participation.

Value of assets held by individual investors in MF increased marginally by 12% i.e. from 20.8 Trillion in March 2022 to 23.2 Trillion in March 2023. Individual Investors now comprise 58.1% vs 55.2% of Total Assets in March 2022.

SIP Inflows

The last 12 months saw a healthy growth in Systematic Investment Plans (SIP) inflows with monthly SIP inflows collectively standing at a robust 1.56 Trillion in March 2023 vs 1.24 Trillion in March 2022 i.e. healthy growth of 25%.

The SIP AUM rose by 19% to 6.83 Trillion from 5.76 Trillion during the same period and SIP Accounts rose to 63.5 Million from 52.77 Million.

MF SIPs have over delivered on its expectations which resulted into consistent additional inflows coupled with M2M gains on their AUM.

Investors enjoyed the bullish trend in the equity market with a strong euphoria across sub-categories of equity funds. Their 10-year average returns were more than 15% in categories like small cap, mid cap, multicap etc. and thus created an absolute alpha as against the tradition products like fixed deposits.

In FY2023, out of the total MF folios, Retail folios stood at 132 Million (91.1%). However, AMFI data showed industry added 4 Million new investors in FY2023 vs 10.9 Million in FY2022 i.e. a decline by 63%.

Net Inflows in FY2023

The last FY2022-23 saw a 11% dip in the equity funds category for their net Inflows vs FY2021-22. If Aggressive hybrid and dynamic asset allocator/balance advantage (BAF) funds are also clubbed within the same, then the dip in growth is more than 30% i.e. around 679 Billion. Total net Inflows for FY2023 stands at 1.56 Trillion vs 2.24 Trillion in FY2022.

Investors dumped the most preferred BAF of last FY and the trend shifted more towards sectorial and thematic funds. The Investors preferred also small caps and midcaps funds in FY2023 against the popular mix of flexicap and multicap funds of FY2022.

MF Account Classification:

As on March 2023, no. of Accounts in MF Industry increased to 145.7 Million vs 129.5 Million in March 2022 resulting in a growth of 13%. Retail Investors ruled this space with absolute dominance, having a 90%+ share on the no. of accounts followed by HNIs.

With an anticipated range bound market in last FY along with robust retail participation coupled with debt becoming more promising as terminal rate in sight becoming clearer towards March 2023, AMCs tried to cash in on it by launching a slew of new fund offerings primarily on the debt side mostly Index funds as the sentiments of retail investors was to capture returns at least equal Index level.

This year saw 150+ NFOs with 100+ being into Debt category in this FY2023.

In the last 12 months, Equity funds have mobilised 340 Billion (from 58 NFOs) 9% of Individual assets are in Equity-oriented schemes while the same proportion of Institutions are into Liquid and Money Market Schemes.

As equity funds rule the space this year, the proportionate share of equity-oriented schemes (Equity + Hybrid equity) is now at 67.7% as on March 2023 Vs 66.7% in March 2022.

Average ticket size as on March 2023 for Equity funds is 1.54 Lakhs from 1.59 Lakhs in March 2022 i.e. down by 3% while for debt its 14.5 Lakhs down from 15.3 Lakhs in March 2022 i.e. down by 8% Retail investors average ticket size stood at 68,321 on March 2023 (down from 70,199 in March 2022)

B:30 cities assets penetration saw an increase by 9%, Currently 17% of the MF Industry came from these cities.

Industry Asset Mix Synopsis as per AMFI as on March 2023.

Total Assets March 2023	40.04 Trillion
	Individual Asset %	Institutional Asset %
Industry mix % of AUM	58.1	41.9
Industry mix Value of AUM in Trillion	23.26	16.78
Equity Asset % in AUM	79	13
Non Equity % in AUM	21	87
Individual Equity Value AUM in Trillion	18.4	4.9
Individual Non Equity Value AUM - Trillion	4.88	11.9
Assets Break-up in March 2023	40.04 Trillion
City Classification	T:30	B:30
% of Assets	82	18
Value of Assets in Trillion	32.8	7.2
Equity Assets %	46	78
Value of Assets in Trillion	15.1	5.6
% of Individual Asset	74	26
Value of Individual Asset	24.3	1.9
Regular Vs Direct
	Regular	Direct
% of Retail Investor	80	20
% of HNI Investor	74	26
% of Liquid Schemes	22	78
% of Debt Schemes	41	59
% of Equity Schemes	77	23

**(Institutions include domestic and foreign institutions and banks. HNIs are investors who invest with a ticket size of 0.2 Miillon or above. Equity Assets include equity and balanced funds)

Life Insurance

Since the privatisation of the insurance industry two decades ago, the fallout from the COVID-19 pandemic has possibly been largely positive for the industry. The need for life insurance has gained significant visibility since the pandemic struck, as the uncertainties of life have become starkly visible.

Increased awareness and need for protection helped the industry to turn the headwinds into tailwinds. In FY2023, the retail new business premium* grew by 19% to 1,040 Billion of premium collection, up from 876 Billion in FY2022. The growth was led by the private players posting a YoY growth of 24%, while at the same time Life Insurance Corporation (LIC) posted a YoY growth of 9.5%. The private players share in retail new business premium is at 66% on FY2023 exit.

	FY12	FY13	FY14	FY15	FY16	FY17	FY18	FY19	FY20	FY21	FY22	FY23
Private Total	175	178	172	200	227	287	357	401	420	452	551	684
Growth		1.80%	-3.30%	15.90%	13.60%	26.40%	24.30%	12.50%	4.80%	7.50%	21.90%	24.20%
LIC	304	294	282	208	214	245	278	291	315	305	325	356
Growth		-3.40%	-4.10%	-26.30%	2.90%	14.70%	13.40%	4.50%	8.30%	-3.20%	6.70%	9.50%
Total	479	472	454	408	441	532	635	692	735	757	876	1,040
Share of Private Insurers	37%	38%	38%	49%	52%	54%	56%	58%	57%	60%	63%	66%

The Industry has already seen radical shifts in customer needs, behaviours and preferred methods of insurance buying. Life Insurance selling which was heavily dependent on in-person interactions, moved to customers interacting digitally with advisors on various platforms and also comfortable buying digitally. This trend started with protection and now is also seen in insurance savings. In addition to the pandemic-induced uncertainties, volatile markets, falling interest rates, have played a pivotal role in increased demand for solutions offering Guaranteed returns and assured savings for long periods of time.

Looking ahead, the low penetration of insurance will provide significant headroom for the industry to grow in the coming years led by digital agility, innovation, product solutions that cater to customer needs of Income fulfilment, custom-fit solutions, and goal-linked requirements like Retirement and child products.

*Retai.i New Business Premium - Above mentioned new business premium is only retail business (excluding group business) of regular premium and single premium plans (Single premium and Annuity plans considered with 10% weightage)

Source: IRDA

General insurance

As per General Insurance Council (GI Council) data, the health segment has grown strongly (23% YoY for FY2023). Motor as a segment rebounded during the year (with 15% YoY growth). Overall, General Insurance industry grew by 16% YoY and ended the year with a gross premium of 2.60 Trillion, vis-a-vis 2.2 Trillion in FY2022.

Personalised products, automation for faster claims, advanced analytics, Insurtech partnerships and blockchain are some of the key drivers expected to strengthen the industry further. The insurance industry is expected to grow at approximately 15-17% in a 3-5-year horizon while rapidly adopting digital and big data. Also given the penetration level of Indian insurance industry, as measured by % of GDP which is 1% and premium per capita which is US$ 22 is lower compared to global average of 4% (% of GDP CY21) and US$ 449 (CY21).

Despite the fact that COVID-19, particularly the second wave, was detrimental to the health insurance industry in terms of a large surge in claims, it drove awareness growth for the segment. With an unusually large share of out-ofpocket expenditure, poor status of government health facilities, and rising affluence among the public - insurers have witnessed higher level of interest from masses across multiple platforms. The pandemic boosted top-line growth in health insurance, which is now considered as an important financial tool, due to a variety of variables.

Billion	FY22	FY23	YoY change
Fire	215	239	11%
Motor Total	704	813	15%
Motor OD	272	318	17%
Motor TP	433	495	14%
Total Health	736	907	23%
Health retail	307	354	15%
Health group	429	552	29%
Marine Total	42	51	21%
Engg	36	43	20%
Aviation	9	9	4%
Liability	42	49	16%
Personal Accident	69	70	2%
Crop	295	320	8%
Misc	60	69	15%
Total	2,208	2,569	16%

Source: Gross premium underwritten by non-Ofe insurers within India (segment-wise) IRDAI

Health insurance

Health has become the largest segment within Indian nonlife segment, in line with global trends. Health GDPI as a percentage of total Indian GDPI increased from 27% in FY2020 to 35% in FY2023 making it the largest segment ahead of motor. Health is also the largest segment in nonlife insurance globally at ~50% as per of CY21. Assuming total Indian GDPI to clock 12% CAGR over next 5 years and assuming health mix to increase from 35% to 50% in line with the world trend, health GDPI can register 22% CAGR over next 5 years in India.

Currently, health insurance segment is seeing following trends (1) Rising claim inflation leading to price hikes, hence aiding premium growth. The claim inflation is a combination of rising unit cost of services and increasing utilisation and better medical facilities and (2) Improvement in insurance penetration, which has already happened in India though there is large scope to improve as evident from global examples. India has seen decline in out of pocket expenditure (OPE) in health, but there is large scope of improvement. In India, the percentage of OPE in health expenditure has reduced from 69% in CY13 to 55% in CY19 (Source: World Bank). However, there is large scope of improvement compared with other countries. OPE as a percentage of total health expenditure for China and other low income countries was 35% and 43% respectively as of CY19 while the corresponding world average is 18%.

Going forward, health premiums are expected to maintain strong growth driven by demand and price hikes.

Capital market activity

Initial Public Offering (IPO) market saw subdued performance in FY2023 with a total of 39 IPOs as compared to 58 IPOs in FY2022 (including FPOs, InvITs, ReITs). The year saw 12 Qualified Institutional Placements (QIPs) take place as compared to 29 transactions in FY2022. Other products like Rights, Offer for Sale (OFS) etc. saw a decent mobilisation of funds. While the fresh fund raise in FY2023 were muted as compared to earlier period, we saw a modest spike in FY2023 in number and amount of transactions in the consolidation products such as Open Offers and Buybacks. We saw 152 deals in FY2023 with cumulative issue size of around 595 Billion as compared to 116 deals with cumulative issue size of around 569 Billion in FY2022. The FY2023 has seen total 3 offerings comprising 2 private placement and 1 QIP of in InvIT/ReIT compare to total 6 offerings including in 1 public issue, 3

private placement and 2 Rights issue in FY2022. The total number of equity capital market deals (including fresh issuances and consolidation products) in FY2023 were 233 as compared to 235 in FY2022. (Source: Prime Database)

Key Highlights:

• 39 IPOs (including FPOs, InvITs, ReITs) aggregated to 533 Billion in FY2023 as compared to 58 IPOs which aggregated 1,297 Billion in FY2022, representing a decrease of 36% and 60% in count and mobilisation terms, respectively.

• 13 QIPs aggregated 102 Billion in FY2023 as compared to 29 QIPs which aggregated 285 Billion in FY2022, representing a decline of 59% and 64% in count and mobilisation terms, respectively.

• 12 Rights Issues aggregated 58 Billion in FY2023 as compared to 10 Rights Issue which aggregated 253 Billion in FY2022, representing an increase in count by 20% and decrease of 77% in mobilisation terms, respectively.

• 19 Offer-for-Sale (SE) aggregated 112 Billion in FY2023 as compared to 22 Offer-for-Sale which aggregated 145 Billion in FY2022, representing a decline of 14% and 23% in count and amount terms, respectively.

• 90 open offers aggregated 377 Billion in FY2023 as compared to 76 open offers which aggregated 255 Billion in FY2022, representing an increase of 18% and 47% in count and amount terms, respectively.

• 62 Buybacks aggregated to cumulative amount of 218 Billion in FY2023 as compared to 40 Buybacks which aggregated to 313 Billion in FY2022, representing an increase of 55% in terms of count and decline of 30% in amount terms.

(Source: Prime Database and SEBi Filings)

Equity Markets Activity (Source: Prime Database):

Sr. Particulars No.	FY2022		FY2023		% change
	No. of Deals	Offer Amount ( in Billion)	No. of Deals	Offer Amount ( in Billion)	No. of Deals	Amount ( in Billion)
1 IPOs (including FPOs, InvITs, ReITs)	58	1,296.87	37	521.15	-36.21%	-59.81%
2 QIPs (including InvITs, ReITs QIPs)	29	285.32	12	102.36	-58.62%	-64.12%
3 Rights Issues	10	253.01	12	57.79	20.00%	-77.16%
4 Offer for Sale (SE)	22	145.30	19	111.59	-13.64%	-23.20%
5 Open Offer	76	255.46	90	376.74	18.42%	47.48%
6 Buybacks	40	313.16	62	217.81	55.00%	-30.45%
Total	235	2,549.12	232	1,387.44	-1.28%	-45.57%

Regulatory Direction

Regulatory Authorities continued to work in the direction of enhancing transparency, protecting investor interests and also enabling the industry to serve the customer by adopting new technology. Some of the notable regulatory developments that were articulated or enacted in the current fiscal include:

Through a series of guidelines, including KYC Registration Agencies (KRA) to independently validate the KYC records, nomination in trading and demat accounts the KYC norms have been made progressive. While this has minor business impact in terms of delays in account activation, this is in the interest of long-term sustainability of the sector.

• To make the trading process more secure for the investors, Two Factor Authentication (2FA) process has been mandated for accessing the online trading platforms.

• Revision in Peak margin requirement calculation based on the beginning of the day margin norms for the Derivatives segments during the day has been implemented, which has resulted in simplification and certainty in margin collection from investors.

• Brokers to desist from entering orders or executing transactions which, prime facie, appears to be nongenuine on their own account and / or behalf of their clients.

• To ensure the safety of the assets of the investors, the process of transferring of securities for meeting the deliveries or settlement obligation has been modified, resulting in ease of transaction for the customer. Further, with respect to the safety of investor assets, SEBI has streamlined the process of handling unpaid securities, liquidation of client securities in case of default and compulsory returning of funds of investors in a single day during the particular quarter/month.

• The reporting of technical glitches of online trading platforms has been made stricter with brokers within a stipulated timeframe. There are also financial disincentives introduced to ensure that players will invest in technology and redundancy to ensure smooth functioning. ^•

• In order to hasten the resolution of investor complaints and create a smooth redressal mechanism for investors, brokers website display the investors rights, escalation matrix, various-communications sent to them etc.

• In order to ensure no backdoor IPO funding, ASBA applications can be processed only post the application monies is blocked in the investors bank account. IPO application through UPI mode has also been mandated.

• I n order to create more awareness amongst the investors, brokerage and other charges for each order is displayed prominently in the online trading screen as per a SEBI order. This will ensure order level display of charges on all platforms at the time of order placement.

• In order to strengthen the supervision of systematically important brokers, SEBI & Exchanges have introduced enhanced monitoring of such brokers on periodic basis.

• Further, SEBI is planning to introduce new measures of blocking of funds in investors bank account before trading in secondary market and parking the investor funds with clearing corporations to ensure the safety of investor assets.

• Portfolio Managers who manage PMS funds will come under tighter scrutiny. Restrictions on benchmarking has been introduced and portfolio performance will be published.

OUR STRATEGY

We endeavour to become a comprehensive financial solutions provider to life cycle investment, protection and borrowing needs of Indians in a digital and open architecture format. Our strategy is intended to help us broadbase our business model and diversify and granularise revenue streams.

We began our transformation agenda about three years back by adopting a customer-centric coverage model from a product-centric one. To achieve this, we adopted three pivots:

a. First, we pivoted to an open architecture customer acquisition model. This means when we acquire a customer, that person need not be an ICICI Bank customer. This was pathbreaking from our established practice of almost two decades where we on-boarded only ICICI Bank customers. With ~90% of the liability market (savings account, current account, deposits) not belonging to ICICI Bank, we were restricting ourselves. Hence by going open architecture on customer acquisition, our addressable market has gone up 9X. During FY2023, 66% of new customers were outside of ICICI Bank ecosystem.

b. The second pivot was broadening and going open architecture beyond equities to include the whole range of investment, insurance, loan, wealth, and retirement products and solutions on our platform. From basic bank fixed deposits, we offer the whole range of fixed income portfolio on our platform. We also offer the entire wealth-related products like Portfolio Management Services (PMS) - our own and third party, alternatives, etc. We have 8-10 renowned RIA (Registered Investment Advisor) partners, whose curated portfolios we offer under the Masters of the Street offering. Under the series of one-click baskets, we offer our own research-curated portfolios for retail clients and we have also launched the higher-end version of it - Premium Portfolios.

We have expanded our partnerships in distribution of life insurance, health insurance, and general insurance products. From being only an ICICI Prudential Life and ICICI Lombard distributor, over the last few years, we have onboarded different insurers like HDFC Ergo, HDFC Life, Star Health, Care Health, etc.

As we have a long history of retaining customers, loan was a natural adjacency for us and we offer the whole suite of loans like business loans, home loans, personal loans, loans against property (LAP), loans against shares (LAS), loans against mutual funds, credit cards etc. Retail loan is a big finance category and we plan to have a meaningful presence in this segment. Here too we have gone open architecture and offer loans from multiple partners, giving a wider choice to customers.

c. The third pivot is digitisation, where we are able to serve all these financial solutions in a personalised and digital form to our customer. We are using analytics to offer the most suitable product and solution to our customers based on their life stage, risk profile, and financial goal.

As a result of our broad-basing strategy, brokings contribution to our topline stood at 37% in FY2023, against 55% in FY2019. During the time, our topline doubled, indicating even faster growth of non-broking revenue.

Our distribution revenue - where we distribute various third party products like MFs, insurance products, pension products, SGBs, loans, corporate bonds etc. - is ~20%, with another ~20% coming from quasi-equity products, which constitutes of subscription fees of our products like Prime, pre-paid brokerage, and financing charges towards margin trade and ESOP funding. This used to be in low single digits a few years back. While it is linked to equity, the correlation is lower compared to direct broking and is relatively sticky. Our treasury operations contribute

about 5-7% of revenue, and remaining ~15% comes from institutional equity, split almost equally between broking and investment banking.

Over the next 3-4 years, in addition to equities, we aim to have three to four other strong topline contributors, which will provide stability and growth during periods when market performance is muted. These are distribution of new products like assets and insurance, besides our existing lines of business.

Indias Private Wealth Management opportunity

As Indians become more and more affluent, we see tremendous opportunity in Indias wealth management space. We intend to serve this segment through a unique combination of brand, proposition and platform led, and RM supported, giving us the ability to rapidly scale up without proportionate increase in physical resources like branches or RMs.

If Indias wealth space is viewed as a pyramid, then on absolute top, there are ~5,000 wealthiest families with US$ 50 Million+ wealth. These are typically born rich and large business owners and family offices who prefer exclusive ideas and advisory. They are served through highly specialised global wealth management firm offering a host of global investment products. We too serve them through our U-HNI & family office offering, where we engage them through exclusive ideas and advisory.

Below that are the high networth individuals, numbering ~8,00,000, with wealth of US$ 1 Million - 50 Million. They are more likely grown rich Indians, who value a trusted brand and want a full product proposition suite and a digital platform for convenience. They typically bank with foreign & private sector banks but are largely underserved in bespoke wealth management. They are our core-private wealth customer cohort. They trust the ICICI brand, are used to technology and hence comfortable with self-service but also have access to a dedicated RM, and are willing to pay for service and advise.

Following them are the affluent segment, numbering ~17 Million individuals with networth of US$ 100K-1 Million. They value a full-service digital platform and we serve them through an eco-system approach. This category is also underserved.

We have enhanced ourselves to morph into a wealth- tech platform, offering stocks, mutual funds, alternate investment products, managed portfolios, FDs, bonds, etirement solutions, loans, insurance and other value- added solutions like estate planning. These products cater to the needs of our customers throughout their financial life cycle of - wealth generation, preservation and transfer.

As a result, our wealth customer count - customers with AUM of 10 Million+ with the company - has gone up from ~32K in FY2019 to ~78K in FY2023. Their AUM with us has increased from ~ 1 Trillion to ~3 Trillion+ during the same period. Currently, we are acquiring 2,500 - 4,000 such customers every quarter.

Our revenue from the wealth segment has increased from ~ 2.5 Billion for the full year in FY2019 to ~ 2.5 Billion a quarter now. So overall, our wealth franchise has come up well and we have emerged as amongst the largest wealth-tech firm in India.

We remain optimistic of scaling this business materially as we are increasingly becoming a structural play in the Indian private wealth management opportunity.

OPERATING PERFORMANCE OF BUSINESS VERTICALS

The Companys consolidated revenue stood at 34,254.8 Million for FY2023 as compared to 34,384.8 Million for FY2022. Consolidated Profit after tax (PAT) decreased by 19% to 11,176.3 Million in FY2023 as compared to 13,826 Million in FY2022. During the year, our total assets grew by 4% to 5.89 Trillion and yield on the same stood at 0.5%.

The company was successful in diversifying its revenue as broking contribution reduced from 45% in FY2022 to 37% in FY2023, on account of increase in the revenue of distribution and wealth businesses.

Our strategy of ramping up scale of clients helped us acquire new clients with 1.62 Million new clients added in the year. Our diversification in customer base continues as well as ~64% of the new customers acquired in FY2023 were of age <30 years, 84% of customers were from Tier II & below geography and 66% of the customers were sourced from channels apart from ICICI Bank.

Retail Equity

The retail equity and allied income decreased by 2% from 20,128 Million in FY2022 to 19,770 Million in FY2023. Broking revenue was down by 20% on account of weak retail activity in the market however our allied income grew by 38% from 6,382 Million in FY2022 to 8,831 Million in FY2023.

Furthermore, we are able to attract trustworthy clients owing to our innovative offerings like Prime, Neo, one- lick equity investments etc. helped us attract quality clients and in enhance vibrancy of transacting clients on our platform.

The strong growth in allied revenues was led by growth in interest income earned on our MTF books as well as increase in subscription fees and other charges earned on our various product propositions including Prime, Pledge charges recovery etc. The interest income registered a strong growth of 29% from 4,980 Million for FY2022 to 6,436 Million for FY2023 because of growth of our daily average MTF and ESOP funding books from an average of 56.47 Billion for FY2022 to 69.68 Billion for FY2023.

Our Prime customer base continues to grow and stands at 1.15 Million as of March 2023. Similarly, our average MTF book grew 1.3 times in FY2023 as we ended the year as market leaders with ~ 23% market share. Prime and Prepaid revenue combined now contributes 68% of Retail Broking revenue in FY2023. Our NEO customer base increased by 1.4 times in FY2023 and now stands at 0.31 Million.

Our Retail ADTO increased by 107.7% in FY2023 as market share for the period was at 10.4% in case of retail cash segment, 3.7% in case of retail derivative segment and 5.5% in case of retail commodity.

Institutional Equity

The revenue from our institutional equity business fell by 26% from 2,538 Million in FY2022 to 1,870 Million in FY2023 on the back of subdued market conditions across India, Asia Pacific, UK and US. The institutional equities business saw good traction on the back of high ranks maintained with marquee domestic investors and improved traction with FPI investors. Even though overall operating environment was relatively tough with lower number of primary market deals & flattish secondary market volumes, our business saw improved market share and top performance in procurement in majority of the IPOs marketed during the year.

With the COVID threat receding, during FY2023, the Company rationalised its digital engagement and significantly increased its physical engagement offerings. A large part of the physical engagements was in the form of reverse-roadshows and offshore corporate roadshows with the objective of enhancing our FPI franchise.

We facilitated on-ground channel checks and expert insights for our clients with a plethora of investor calls and meetings across sectors. During the year, we organised our flagship BFSI conference in Mumbai and our Bengaluru Corporate Day, which received an extremely encouraging response from participating companies and investors. Apart from 750+ meetings of nvestors with both listed and unlisted corporates, the BFSI Conference saw participation from marquee FPI investors who had travelled to India primarily to attend the event. We hosted industry stalwarts like Dr. Rakesh Mohan, President & Distinguished Fellow Centre for Social & Economic Progress (CSEP) and Dr. Sreeram Chaulia, Professor & Dean Jindal School of International Affairs (JSIA) as keynote speakers.

We also consolidated our position with investors in the US and UK by organising virtual interactions with senior management of relevant companies tailored for investors based out of different time zones.

Distribution of Financial Products

In FY2023, our distribution revenues increased from 5,996 Million to 6,682 Million, led by growth in all major product categories.

Within distribution revenues, MF revenues grew 9% YoY to 3,832 Million in FY2023 compared to 3,505 Million in FY2022. We continued to strengthen our position amongst the largest distributors of MFs with our MF AUM reaching an all-time high of 601 Billion in March 2023 which was 4% higher than March 2022.

ICICI Securities, holds the 5th largest Systematic Investment Plan (SIP) book in the industry, amounting to more than 1 Million folios. In FY2023, we have distributed Mutual Fund schemes across categories of 39 Asset Management Companies (AMC).

We continued to promote regular and disciplined saving habit through the Systematic Investment Plan (SIP) amongst our investors through digital and customer engagement initiatives as well as through our innovative, simplified and customer-centric "iDirect One-Click" mutual fund baskets to help address concerns of investors who usually struggle selecting the right funds to invest. As a result, our SIP flow increased by 2% YoY in FY2023, leading to market share on SIP book of 3.2% in FY2023.

Revenue from distribution of non-MF financial products increased by 14% led by increase in revenue from insurance and also growth in revenue from distribution of fixed income products, loan products and other financial products.

In the uncertain economic environment, customers preferred to choose investments with fixed returns and low volatility. Customers also favoured ETFs, as majority indices delivered ouble-digit returns. Considering customers preference, Company during the year has expanded its offerings in alternative investments like ETF, Sovereign Gold Bonds (SGBs), RBI bonds, Corporate Fixed Deposits (CFD), REITs (Real Estate Investment Trusts) etc. Companys market share in SGB has now expanded to ~10%.

While the Loan Distribution grew by 57% from 146 Million to 229 Million, the Insurance business grew by 46%. This resulted in our commission from distribution of life insurance growing from 701 Million to 1,018 Million. General Insurance, though in nascent stage, registered growth in premium and policies.

Loans distributed by us grew by 66% for the year with 37.5 Billion of loans being distributed in FY2023, Vs 22.6 Billion in FY2022. Overall, during the year, we curated 12 loan products like Home Loans, Loan against Property (LAP), Lease Rental Discounting (LRD), Business Loans, SME Loans, Personal Loans, Credit Cards, Auto Loans, Two-wheeler loans, Loans against Securities (LAS), Remittances and Forex services for our customers.

Private Wealth Management

Through enhanced proposition, we are able to deeper mine existing clients and increase wallet share. At the same time, we have created a strong acquisition machinery, through which we continue to acquire profitable clients. Clients acquired during preceding five years have higher average AUM and better Average Revenue Per User (ARPU) than the ones on-boarded before last five years. As at March 2023, there were ~ 78,000 clients, up from ~ 68,000 clients as at March 2022. Our client base is sticky, with 47% of assets coming from clients who are with us for over 10 years. These factors contribute to sustained increase in AUM from 2.86 trillion in FY2022 to 3.22 trillion in FY2023 and revenue from 9.24 billion in FY2022 to 10.05 billion in FY2023.

ICICI Securities won 4 awards during FY2023 for excellence in private wealth management.

ICICI Securities Portfolio Management Service (PMS), launched in FY2019, offers a wide range of PMS strategies across market capitalisation and investment styles. It is an ideal investment avenue for High Networth Investors (HNI) with benefits like regular reviews, risk management and flexibility and convenience. In addition to existing three distinguished offerings - an actively managed ACE Equity portfolio, smart beta strategies - Active Index and I-Sec Momentum Quality Dynamic Advantage Portfolio, and an asset allocation strategy driven through the Multi asset PMS, the Company has launched a new PMS portfolio - "Sterling" in FY2023. This is a pathbreaking direct mutual funds & ETF proposition for core portfolio allocation of its

clients. The strategy ensures right mix of asset allocation, market cap allocation and fund manager selection to capitalise on the current debt and equity opportunities.

The total assets under management in ICICI Securities PMS grew by 96% from 7.15 Billion to 14 Billion as of March 31,2023.

Another notable launch for FY2023 was "LIFEY" - a milestone-based investment tool to plan, invest and track mutual fund investments. This tool help clients create investment portfolios and help them meet their life stage milestones such as owning a home, travel, childs education, retirement and many more. Clients enjoy great flexibility in creating portfolios which suit their risk appetite. With comprehensive tracking and timely rebalance alerts, it helps them stay on course.

The Company also launched a single number facility to enable hassle-free connectivity between its private wealth management clients and their relationship managers / customer service team.

Issuer and advisory services

The revenue from our issuer and advisory services business fell by 51% from 2,955.8 Million in FY2022 to 1,448.1 Million in FY2023. The decrease in revenue was due to sharp decrease in deal activity in the market.

On account of volatile market scenario, there was a subdued number of transactions in FY2023 as compared to FY2022. In FY2023, we managed transactions across IPOs, QIP, Rights issues, advisory transactions, etc. across Financial, Consumer Technology, Pharma, Chemicals and other sectors. During this period, the Company managed 9 IPOs with a market share of 56.7% (in terms of issue size) (Source: Prime Database). The amount raised through such IPO issuances managed by the Company during FY2023 was 295.34 Billion, which included the IPOs of Life Insurance Corporation, Five-Star Business Finance Limited, KFin Technologies Limited, Paradeep Phosphates Limited, Archean Chemicals Industries Limited, Fusion Micro Finance Limited, Prudent Corporate Advisory Services Limited, Syrma SGS Technology Limited, and Landmark Cars Limited.

The Company successfully completed 1 QIP of AU Small Finance Bank Limited for an amount of 20 Billion, 1 Rights Issue of Capri Global Capital Limited for an amount of 14.4 Billion and 1 QIP of InvIT of National Highways Infra Trust for an amount of 12.16 Billion - in FY2023.

The Company managed 2 Offer for Sale (OFS) in FY2023 for an amount of 47.31 Billion was completed with a market share of 42.40% (in terms of offer size) (Source: Prime Database), which included the OFS of Axis Bank Limited and GR Infraprojects Limited.

The Company acted as an advisor for the open offer of ACC Limited, Ambuja Cements Limited, Eureka Forbes Limited with aggregate size of 322 Billion in FY2023 with market share of 85.6% (in terms of offer size) (Source: Prime Database). The Company also successfully completed the buybacks of Zydus Lifesciences Limited and Bajaj Consumer Limited amounting to 8.31 Billion in FY2023.

FINANCIAL PERFORMANCE

Overview

The Company registered consolidated revenue of 34,254.8 Million for FY2023 as compared to 34,384.8 Million for FY2022. Consolidated Profit after tax (PAT) for FY2023 was 11,176.3 Million compared to 13,826 Million for FY2022, a decrease of 19.2%. Our total cost increased from 15,857.2 Million in FY2022 to 19,243.6 Million in FY2023, an increase of 21.4% on account of increasing Tech spends.

Analysis of Consolidated financial statements a. Results of Operations

Extract of Consolidated Statement of Profit and Loss

Particulars	For the year ended March 31, 2023	For the year ended March 31, 2022
Revenue from operations
(i) Interest income	10,014.9	7,185.1
(ii) Dividend income	0.5	0.4
(iii) Fees and commission income
- Brokerage income	12,563	15,525.9
- Income from services	10,674.4	11,020.2
(iv) Net gain on fair value changes	889	588.7
(v) Net gain on de-recognition of financial instruments under amortised cost category	-	-
(vi) Others	15.7	29.5
(I) Total Revenue from operations	34,157.5	34,349.8
(II) Other income	97.3	35
(III) Total Income (I + II)	34,254.8	34,384.8
Expenses
(i) Finance costs	5,362.9	2,736.8
(ii) Fees and commission expense	1,563.2	1,665.6
(iii) Net loss on fair value changes	-	-
(iv) Impairment on financial instruments	32.9	(69.4)
(v) Operating expense	1,307.4	1,139.6
(vi) Employee benefits expenses	6,978.2	6,644.1
(vii) Depreciation, amortisation and impairment	750.7	625.3
(viii) Others expenses	3,248.3	3,115.2
(IV) Total Expenses (IV)	19,243.6	15,857.2
(V) Profit/(loss) before tax (III - IV)	15,011.2	18,527.6
(VI) Tax expense:
(1) Current tax	3,782.4	4,564
(2) Deferred tax	52.5	137.6
	3,834.9	4,701.6
(VII) Profit/(loss) for the period (V-VI)	11,176.3	13,826
(VIII) Other comprehensive income (net of taxes)	(0.8)	(2.6)
(IX) Total comprehensive income for the period (VII+VIII) (comprising profit/(loss) and other comprehensive income for the period)	11,175.5	13,823.4

Interest income

Interest and other operating income increased from 7,185.1 Million for the year ended March 31, 2022, to 10,014.9 Million in the year ended March 31, 2023, an increase of 39.4%. This was primarily due to two reasons. First, an increase in interest on retail fund-based products-MTF. The Companys combined daily average ESOP and MTF book increased from 56.5 Billion in FY2022 to 69.7 Billion in FY2023. Second, interest earned on bank fixed deposits held with exchanges as margin for its brokerage business. The Companys daily average fixed deposits book increased from 45.5 Billion in FY2022 to 56.8 Billion in FY2023.

Fees and commission income Brokerage Income

Our brokerage income decreased from 15,525.9 Million for the year ended March 31,2022 to 12,563 Million for the year ended March 31,2023, a decrease of 19.1%. This was primarily due to decrease in retail equity volumes which was partially compensated by increase in retail derivative volumes, however offset by reduction in yields owing to higher adoption of our Prime and NEO propositions.

Income from services

Income from services decreased from 11,020.2 Million for the year ended March 31, 2022 to 10,674.4 Million for the year ended March 31, 2023, a decrease of 3.1%. This was primarily due to decrease in issuer services and advisory fee income by 51.0% from 2,955.8 Million in FY2022 to 1,448.1 Million in FY2023. Our distribution business income increased significantly from 5,996.2 Million to 6,681.7 Million mainly on account of increase in mutual fund, insurance and loans.

Net gain on fair value changes

Net gain on fair value changes increased from 588.7 Million for the year ended March 31,2022, to 889 Million for the year ended March 31, 2023 primarily due to fair value changes in our treasury segment.

Other Income

Other income of 97.3 Million for the year ended March 31, 2023 is mainly on account of interest on income tax refund received and foreign currency transaction and translation during the year.

Finance costs

Finance costs increased from 2,736.8 Million for the year ended March 31,2022 to 5,362.9 Million for the year ended March 31,2023, an increase of 96%. This was primarily due to increase in borrowings from 77.4 Billion in March 2022 to 92.9 Billion in March 2023 and increase in cost of funds, following an increase in retail fund-based assets and, hence, the interest expense thereon.

Fees and commission expense

Fees and commission expense decreased from 1,665.6 Million for the year ended March 31,2022 to 1,563.2 Million for the year ended March 31,2023, a decrease of 6.1%. This was primarily due to decrease in revenue linked payouts.

Impairment on financial instruments

Company creates a provision on loans and receivables based on ageing criteria, which gets reversed on subsequent realization of receivables. Impairment on financial instruments was a charge of 32.9 Million for the year ended March 31,2023 compared to a credit of (69.4) Million for the year ended March 31,2022 primarily on account of reversal of balance one-time contingency provision because of no adverse experience. This provision was created during FY2020 to provide for any scenario that could have arisen on account of market volatility arising from COVID-19.

Operating expenses

Operating expenses increased from 1,139.6 Million for FY2022 to 1,307.4 Million in FY2023, increased of 14.7% mainly on account of account of one time provision pertaining to margin penalties passed on to clients from October 2021 to November 2022.

Employee benefits expenses

Employee benefits expenses increased from 6,644.1 Million for the year ended March 31, 2022 to 6,978.2 Million for the year ended March 31, 2023, an increase of 5%. This was primarily on account of annual increments in salaries and increase in headcount.

Depreciation and amortisation expense

Depreciation and amortisation expense increased from 625.3 Million for FY2022 to 750.7 Million in FY2023, primarily on account of depreciation on additions of technology-related assets.

Other expenses

Other expenses increased from 3,115.2 Million for the year ended March 31,2022 to 3,248.3 Million for the year ended March 31,2022, an increase of 4.3%. This increase was primarily on account of increase in technology-related expenses during the year.

Profit

As a result of the above, profit before tax decreased from 18,527.6 Million for the year ended March 31, 2022 to 15,011.2 Million for the year ended March 31, 2023, a decrease of 19%.

Our total tax expense decreased from 4,701.6 Million for the year ended March 31,2022 to 3,834.9 Million for the year ended March 31, 2023, a decrease of 18.4%.

The effective income tax rate for the year ended March 31, 2023 is 25.5% (March 31, 2022 is 25.4%).

Profit after tax decreased from 13,826 Million for the year ended March 31, 2022 to 11,176.3 Million for the year ended March 31,2023, a decrease of 19.2%.

Segment-wise performance

(in Million)

Segments	For the year ended
	March 31, 2023		March 31, 2022
	Segment Revenue	Segment Results	Segment Revenue	Segment Results
Broking and distribution	31,306.6	13,692.3	30,521.1	16,114.9
Issuer services and advisory	1,448.1	543.2	2,955.8	1,893.9
Treasury	1,442.4	718.0	907.9	518.8
Total	34,254.8	15,011.2	34,384.8	18,527.6

Note: Unallocated amount of 57.7 Million for FY2023 is included in total revenue and results and pertains to interest on income tax refund.

Revenue from our Broking and distribution segment increased from 30,521.1 Million for the year ended March 31, 2022 to 31,306.6 Million for the year ended March 31, 2023, an increase of 2.6%.

Revenue from our Issuer services and advisory segment decreased from 2,955.8 Million for the year ended March 31,2022 to 1,448.1 Million for the year ended March 31,

2023, a decrease of 51%. This decrease is on account of slump witnessed in primary market activity.

Revenue from our Treasury segment increased from 907.9 Million for the year ended March 31, 2022 to 1,442.4 Million for the year ended March 31, 2023, an increase of 58.9%. This increase was primarily due to increase in income from trading activities during the year and gain on fair value changes on securities.

Financial Position

The following table sets forth, at the dates indicated, our summary balance sheet:

(in Million)

Particulars	As at March 31, 2023	As at March 31, 2022
ASSETS
1 Financial assets
(a) Cash and cash equivalents	2,406.4	7,735.9
(b) Bank balance other than (a) above	65,501.3	48,430.2
(c) Derivative financial instruments	-	0.8
(d) Securities for trade	9,163.3	2,430.2
Receivables
(I) Trade receivables	7,734.3	3,848.3
(II) Other receivables
(a) Loans	64,198.8	68,566.7
(b) Investments	77.1	107.1
(c) Other financial assets	1,196.6	1,135.7
	1,50,277.9	1,32,254.9
2 Non-financial assets
(a) Current tax assets (net)	1,365.0	1,247.1
(b) Deferred tax assets (net)	373.5	424.1
(c) Property, plant and equipment	1,238.2	627.2
(d) Right-of-use assets	968.6	899.0
(e) Capital work-in-progress	192.9	109.6
(f) Intangible assets under development	115.8	32.6
(g) Other intangible assets	370.5	309.5
(h) Other non-financial assets	785.6	558.2
	5,410.1	4,207.3
Total Assets	1,55,688.0	1,36,462.2
		(in Million)
Particulars	As at March 31, 2023	As at March 31, 2022
LIABILITIES AND EQUITY
LIABILITIES
1 Financial liabilities
(a) Derivative financial instruments	0.4	-
(b) Payables
(I) Trade payables
(i) total outstanding dues of micro enterprises and small enterprises	-	-
(ii) total outstanding dues of creditors other than micro enterprises and small enterprises	9,148.4	10,776.1
(II) Other payables
(i) total outstanding dues of micro enterprises and small enterprises		-
(ii) total outstanding dues of creditors other than micro enterprises and small enterprises		-
(c) Debt securities	87,886.9	77,392.3
(d) Borrowings (Other than debt securities)	5,038.9	-
(e) Deposits	74.2	43.6
(f) Lease liabilities	1,082.7	1,019.4
(g) Other financial liabilities	18,239.6	16,521.6
	1,21,471.1	1,05,753.0
2 Non-financial liabilities
(a) Current tax liabilities (net)	-	-
(b) Provisions	177.4	151.0
(c) Other non-financial liabilities	5,514.5	6,252.9
	5,691.9	6,403.9
3 EQUITY
(a) Equity share capital	1,614.3	1,613.4
(b) Other equity	26,910.7	22,691.9
	28,525.0	24,305.3
Total Liabilities and Equity	1,55,688.0	1,36,462.2

Total assets increased from 136.46 Billion as at March 31, 2022 to 155.69 Billion as at March 31,2023, an increase of 14%. This increase was primarily due to increase in bank balances, cash and cash equivalent, trade receivables and securities for trade.

Total liabilities increased from 112.16 Billion as at March 31, 2022 to 127.16 Billion as at March 31, 2023, an increase of 13%.This increase was primarily due to increase in debt securities, borrowings other than debt securities and other financial liabilities.

d. Cash Flows

The following table sets forth, for the periods indicated, a summary of cash flows:

(in Million)

Particulars	For the year ended March 31, 2023	For the year ended March 31, 2022
Cash flow (used in) / generated from operating activities	(6,741.6)	(25,974.6)
Cash flow used in investing activities	(1,247.8)	(687.6)
Cash flow generated from / (used in) financing activities	2,659.9	31,304.6

Cash used in operating activities

Net cash flow used in operating activities changed from (25,974.6) Million for the year ended March 31, 2022 to (6,741.6) Million for the year ended March 31, 2023. This change was primarily due to decrease in loans by 4,347.7 Million for the year ended March 31, 2023 vis a vis increase in loans by 39,475.7 Million for the year ended March 31,2022.

Cash used in investing activities

Net cash used in investing activities changed from (687.6) Million for the year ended March 31, 2022 to (1,247.8) Million for the year ended March 31,2023. Net cash usage in investing activity primarily represents purchase of property, plant and equipment during the year.

Cash generated from financing activities

Net cash generated from financing activities changed from 31,304.6 Million for the year ended March 31, 2022 to 2,659.9 Million for the year ended March 31, 2023. This change was primarily due to an increase in borrowings from 77,392.3 Million to 92,925.8 Million resulting in net generation of 15,533.5 Million during the year and a higher interest pay-out in the year ended March 31,2023, as compared to the previous year.

Contingent Liabilities

As at March 31, 2023, we have 1,509.3 Million as claims against the Company not acknowledged as debt (March 31,20221,497.2 Million).

Borrowings

As at March 31, 2023, we have short-term borrowings of 87,886.9 Million and total equity of 28,525 Million.

Our short-term borrowings primarily consist of commercial papers and have received a domestic rating of A1+ by CRISIL and ICRA.

A. Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor

Particulars	FY2023	FY2022	Change %
Interest Coverage Ratio(Times)	3.84	7.99	51.9
Debtors Turnover Ratio	3.00	6.90	56.2

Explanation:

During the year, there is decrease in Interest Service Coverage Ratio due to increase in Finance costs by 2,639.30 Million and decrease in PBIT by 877.10 Million.

During the year, there is decrease in Debtors Turnover ratio due to decrease in Fees and commission income by 3,308.7 Million and increase in client and exchange receivable by 3,886.10 Million.

B. Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof.

Particulars	FY2023	FY2022
Return on Net Worth (%)	42%	65%

Explanation:

Return on Net Worth calculated as "PAT: Average net-worth excluding other comprehensive income and translation reserve" decreased from 65 % in FY 2022 to 42 % in FY 2023 primarily due to an increase in average net worth by 24.2 % from 21,315.4 million in FY 2022 to 26,478.3 million in FY 2023 vis-a-vis decrease in profits by 19.2% from 13,826.0 million in FY 2022 to 11,176.3 million in FY 2023

SUBSIDIARY PERFORMANCE

Overview

The Company has a 100% owned subsidiary ICICI Securities Holdings, Inc. and a step-down subsidiary ICICI Securities, Inc. ICICI Securities Holding, Inc. is the holding company of our indirect subsidiary ICICI Securities, Inc., which through its offices in US and Singapore, is engaged in referring foreign institutional clients to us for transactions on the Indian stock exchanges.

Financial performance

The revenues of ICICI Securities, Inc. on standalone basis increased by 13% from 196.2 Million in FY2022 to 222.3 Million in FY2023 and the standalone PAT increased from 29.9 Million in FY2022 to 58.3 Million in FY2023. The total assets increased from 382.5 Million at March 31, 2022 to 435.5 Million at March 31,2023.

Financial assets increased from 360.2 Million at March 31, 2022 to 408.3 Million at March 31, 2023 primarily due to increase in cash and cash equivalents other bank balances and trade receivables.

Non-Financial assets has increased from 22.3 Million at March 31,2022 to 27.1 Million at March 31,2023.

Financial liabilities decreased from 22.1 Million at March 31, 2022 to 9.7 Million at March 31, 2023 primarily on account of decrease in trade payables.

OPPORTUNITIES AND BUSINESS OUTLOOK

Our businesses are expected to benefit from the structural shifts in the financial savings environment as well as improving technology infrastructure of India. Some of the broad trends which underline the opportunities facing our businesses are:

Macroeconomic construct is favourable to financial services business

• I ndia is expected to remain a relatively high growth economy in the medium to longer term and that augurs well for the capital markets in India.

• India has been traditionally and is expected to continue to be a high savings economy. The young working population is expected to increasingly channelise a higher share of their savings into financial assets. Increasingly the preference of retail investors to participate in equity as an asset-class coupled with the relative underpenetration in terms of both market capitalisation to GDP ratio or ratio of investments in shares and debentures to GDP signify a positive outlook for equity-based businesses in India.

• I ncrease in overall economic activity, scaling up of domestic corporate institutions and professionalisation of promoter-driven set-up would continue to fuel demand for capital raising and advisory services.

Demographic factors are creating of new and large pools of prospective clients

• There is growing section of Gen Z who are beginning their economic life and it is expected that approximately 15 Million young Indians would be entering earning age every year. These are digital natives and are more inclined towards financial assets, thereby building strong investment asset pools.

• As the baby boomer generation is approaching retirement, they are looking at preservation and eventually intergenerational transfer. Hence, they have become a prime segment for wealth managers.

• The cities beyond the top 15 cities are increasingly witnessing strong demand for financial products (like mutual fund) as awareness and access improves leading to expansion of distribution footprint, most prominently through digital channels. ^•

• Growing affluence is a structural trend as Indians move up the wealth pyramid.

• As per industry reports, the count of adults with wealth over US$ 1 Million in India, is expected to reach 1.3 Million by 2025 from 0.7 Million in 2020. While for adults with wealth more than US$ 1,00,000, the count has increased from 15 Million in 2019 to over 20 Million in 2020. This underscores the growth and opportunity size of wealth management in India. (Source: Credit Suisse Global Wealth Report 2021)

• I ndia continues to outpace global High Net worth Individuals (HNIs) growth, mirroring the economic growth in the country. With the incremental allocation of wealth to financial assets as compared to physical assets, the wealth management industry is emerging as a big beneficiary.

Consumer preferences are evolving including rapid adoption of digital services

• Advances in technology, increasing smartphone penetration and increasing digitisation at systemic level are expected to propel more retail consumers to avail financial services through electronic media

• Technology is a key driver for enhancing customer experiences, engaging them digitally and in providing personalised solutions.

• With evolved platforms, digitally-savvy customers, are comfortable to do business in Do-It-Yourself (DIY) mode.

• The personal finance space is going through a digital transformation worldwide. The rise of evolved digital platforms has given an impetus to this trend. At the same time, there is a conscious shift from product- based to solution-based positioning, with a holistic approach for client engagement.

• Passive investing is gaining prominence in India. Products like ETF, index funds and factor-based portfolios will emerge as a new category. ESG investment opportunities are also gaining popularity. These trends are conducive to digital platform businesses garnering scale.

Implications for our businesses

Our retail equity, distribution and wealth management businesses are expected to benefit from rising income levels of our target and existing customer segment, being young working class and self-employed professionals, entrepreneurs and increasing financialisation and equitisation of savings.

Online retail equity business is expected to benefit from rising retail participation and also the trend of consolidation in the industry. Amidst tightening regulatory framework and competition, industry over the years, has consolidated in favour of larger and digital players. As a result, the market-share of the top five brokers, based on the total number of active clients is ~74%.

Our distribution and wealth management business

would benefit from growing democratisation of wealth management by providing hyper personalised solutions, delivered digitally. For the higher end of the client spectrum, where there is a need for relationship support. A hybrid model of Relationship Management (RM) and digital engagement is emerging. Execution is moving to digital-first delivery mode.

We expect our advanced digital platform along with associated technical capabilities, domain expertise in developing in-house products and solutions, experienced relationship managers, research capabilities and our trusted brand would continue to help us in attracting and retaining customers.

Our institutional equity business would benefit from expected inflows from FIIs as well as increasing flows into DIIs, predominantly mutual fund, insurance, etc. Our research, corporate access and deep-rooted relationships with institutional investors particularly DIIs will help us expand our institutional equity businesses.

Our Issuer services and advisory business is expected to benefit from the positive momentum for IPOs likely in FY2024. Our IPO (incl. FPO/ InvIT /REIT) pipeline remains strong, with 29 deals amounting over 503 billion, in addition to mandate of 17 deals where the amount is yet to be decided (as on March 31,2023). Other capital market products like rights, OFS, QIPs, blocks etc. are expected to witness robust activity as well. On the advisory front, we expect to see strong activity driven by consolidation, platform plays, deployment by Private Equity (PE) funds, etc.

Our sector expertise and relationships with corporates and financial sponsors are expected to hold us in good stead to maintain our leadership position in capital market transactions and grow our advisory business.

HUMAN RESOURCES

The number of permanent employees on Company payroll as on March 31, 2023 was 4,494. For details on our HR ethos and practices, please refer to page 56-61.

INTERNAL CONTROL SYSTEMS

The internal control system of the Company is designed to suit the complexity of its business operations. Based on the criteria of essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls, the Company has established and maintained internal financial controls. This enhances the reliability of financial reporting and robustness of preparation of financial statements. Internal control systems are driven through various policies, procedures and certifications. An internal committee periodically reviews the processes and controls. Any deviations observed in the process of evaluation are highlighted to the Board, which initiates prompt corrective measures. The internal control system ensures strict adherence to all applicable statutes and regulations governing the business operations. The internal financial controls with reference to financial statements as designed and implemented by the Company are adequate. The internal financial control procedure adopted by the Company is adequate for safeguarding its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information. Further, the statutory auditors have verified the systems and processes and confirmed that the internal financial controls over financial reporting are adequate and operating effectively.

RISKS, CONCERNS AND THREATS

As the Companys performance is dependent on the health of capital markets, it faces the risk of downturn in the event of slowdown of economic growth and/or worsening macro-economic environment. Many events which impact the broader economy like rising crude oil prices, depreciating currency, worsening current account deficit, rising inflation, a bad monsoon, slowdown in corporate earnings, rising NPAs, slowdown in foreign investment inflows etc. impact the capital market, thereby pose risks to the Company. Other challenges which may drive away the DIIs include rising real estate and gold prices, which may provide other attractive investment options.

Global events also pose challenges to the growth of the Company as it directly impacts foreign inflows and indirectly will have a bearing on the Indian economy. Risks from geo-political tensions, global financial market volatility and the threat of trade protectionism all pose significant risks to the operations of the Company.

The Company also faces significant competition from companies seeking to attract its customers/clients financial assets. In particular, it competes with other

Indian and foreign brokerage houses, discount brokerage companies, fin-tech companies, specialist wealth management firms and M&A advisory firm, investment banks, public and private sector commercial banks and asset managers, among others, operating in the markets in which it is present. The Company competes on the basis of a number of factors, including execution, depth of product and service offerings, innovation, reputation, price and convenience.

The Company also faces threats from the tightening and ever-evolving regulatory framework and any unfavourable policy changes like introduction of long-term capital gains tax may affect the performance of the Company. Internal threat to the Company arises from failure to complying or overlooking of any misrepresentations/fraud in the operations of the Company.

During the FY2023, we witnessed a significant decline in the COVID-19 cases and its overall impact on the economy. However, the Company ensured the COVID-19 guidelines are strictly adhered to. Further, on a cautious approach, the Company extended the facility of working from home and office in a hybrid manner. Further, continued geopolitical developments relating to the Russia-Ukraine conflict also resulted in an increase in the volatility in the markets. The Company has focussed on proactive and real-time risk management in wake of high volatility in the capital markets.

There is an increase in the cyber security threat due to adoption of remote access to the systems, increased

focus on new-age digital solutions and integration with various service providers and constantly evolving cyber threat landscape globally. The Company has taken steps to enhance controls related to cyber threats and risks.

CAUTIONARY STATEMENTS

In this Annual Report, we have disclosed forward-looking information to enable investors to comprehend our prospects and take investment decisions. This report and other statements - written and oral - that we periodically make contain forward-looking statements that set out anticipated results based on the managements plans and assumptions. We have tried, wherever possible, to identify such statements by using words such as anticipate, estimate, expects, projects, intends, plans, believes and words of similar substance in connection with any discussion of future performance.

We cannot guarantee that these forward-looking statements will be realised, although we believe we have been prudent in our assumptions.

The achievements of results are subject to risks, uncertainties and even inaccurate assumptions. Should any known or unknown risks or uncertainties materialise or should the underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. Readers should keep this in mind. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.