The RBI's approval of ICICI Securities' wholly-owned subsidiary status could benefit ICICI Bank

10 Nov 2023 , 11:53 AM

On November 10, the day after the Reserve Bank of India (RBI) gave its clearance for brokerage business ICICI Securities to become the bank’s wholly-owned subsidiary, shares of ICICI Bank are anticipated to open higher. The private bank had said in June that it was thinking about asking ICICI Securities to be delisted.

ICICI Bank possessed a 74.79% ownership in ICICI Securities as of the quarter that ended in September. The previous session saw ICICI Bank’s stock settle on the National Stock Exchange (NSE) slightly higher at Rs 936.50, and ICICI Securities close 2.78% higher at Rs 659.

‘ICICI Securities requires little capital to operate, and its internal accruals are more than sufficient to support expansion. 

In a statement outlining the reasoning behind the choice, ICICI Bank stated that it does not anticipate having to provide the company with further capital infusion.

ICICI Securities declared that it would delist in order to become the parent company’s wholly-owned subsidiary after the announcement. 

Five years after ICICI Securities made its market debut, the company has decided to delist. ‘With ICICI Securities as a 100 percent subsidiary, it is expected that both entities would be able to better capitalize on the synergies in line with the Customer 360 focus of the bank,’ ICICI Bank stated on June 26.

Since the securities broking industry depends heavily on the state of the macroeconomy and the health of the equity market, it is by nature cyclical. This was one more justification given for the delisting action.

The ICICI Bank stock has increased by about 3% so far this year, trailing the Nifty, which has increased by about 6.5% during the same period. With a gain of more than 33%, ICICI Securities has surpassed the benchmark index.

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