icici bank to consider delisting of icici securities. Looks it will be share swap with icici bank, not the cash one.
Interestingly this announcement was posted today only but stock went up by 9% on Friday itself.
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Questions for the community:
What is the rationale behind this proposal?
What are the scenarios that can play out from here on, and what is the most likely scenario according to you?
i think rationale is to indicate to market that ISEC is undervalued and parent is happy to buy investors out at this price. this is similar to what happened in Vedanta couple of years backā¦
Delisting itself is complex and would requiere 90% investor approval and will take some timeā¦
my guess is that most lilkely scenario is that the Delisting price declared becomes the new base and delisting itself may not happen.
Disclosure - Invested pre delisting news
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Hi Govind,
Yes, the share price started appreciation started from Thursday onwards, And a big jump was seen in the Friday trading that too almost near the market end . Which indicates people entered knowing the internal news and the news came out public before Monday opening.
Sold most of the shares as volatility due to uncertainties. But future is looking bright as ICICI Bank is closing the gap with hdfc bank and which will be beneficial for the icici securities also.
Disclosure - Invested pre delisting news (Sold most of the shares)
Thanks,
Deb
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How is delisting (or rather a merger?) supposed to impact a share price? How does the market decide to reward or punish a stock? The merger ratio isnāt announced yet.
Parent saw the multiples the brokerage companies are getting in the public markets and realized that it would be better to consolidate. Iām guessing watching HDFC twins merge, might have triggered something within ICICI.
Notification says it is delisting. Doonāt understand the rationale behind it as delisting is difficult. It is difficult to reach mandatory 90% ownership level, as market forces/speculation generally creates hype and create exaggerated expectations.They could have gone for merger, which is easier to approve . As it is, they are going for share swap. So it may actually be a merger.
Would request domain experts and seniors to throw light on it.
I heard itās share swap. But what share swap we get is it ICICI . On what ratio swapped ?
My assumption & rational regarding merger.
According to press release, icicisec will get delisted and as per Scheme of Arrangement with ICICI Bank Limited, listed Holding Company, under Chapter VI Part C, Regulation 37 of SEBI (Delisting of Equity Shares) Regulations, 2021.
- you will get icici bank shares in say XX ratio.
Now letās say most likely 3:2 (2 shares of ICICI bank with 3 share of ICICIsec)
Current price ~ icici sec 600 & icici bank 900.
4:3 & 1:1 ratio will provide better deal for icici sec share holders.
Disc : holding before announcement
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Hi,
the merger ratio is
100 Icici Securities shares will translate to 67 Icici Bank shares.No premium to current trading prices.
adee1a4d-d60f-4678-9907-146758f3fbf1.pdf (bseindia.com)
Thanks,
Deb
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The merger ratio is indeed 2:3 i.e. 67 shares of ICICI Bank for every 100 shares of I-Sec.
ISEC_29062023144353_Outcomeofboardmeeting.pdf (nseindia.com)
The bank is side-stepping the reverse book building process by doing the delisting under a special provision where the holding company and the subsidiary company are āin the same line of businessā. But are ICICI Bank & I-Sec in the same line of business? Not sure how this is interpreted legally, and whether there is any such precedent.
It seems the delisting will require approval of twice the number of non-promoter shareholders than those opposing it. So if more than 1/3rd of minority shareholders oppose it, the delisting will not go through. See page 24 of the attached document.
(Disc: No positions)
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Hi,
I have one doubt, non-Promoter also includes FII & DII (holding around 14% of shares). If they vote along with Board will the merger go through, even if the retail investors (holding around 11%, assuming around 8% vote) voting against it?
I am not sure what will be the equations considering the non-promoter holding pattern. Please suggest.
Thanks,
Deb
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this looks unfair to the icici securities shareholders. There should have been reverse book building and shareholders should have been paid better value. Also i am still not able to understand, why they didnāt go for merger? Is it because merger is long process and requires more approval?
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Since the ratio is 67:100 and you have 25 shares of I-Sec, you are entitled to get 16.75 shares of ICICI Bank (2/3rd). So in reality you will get 16 shares of ICICI Bank and a small amount (around Rs.600) will be credited to your bank account for the fractional component (0.75 shares).
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Actually you canāt blame the management. They are not avoiding anything, rather they are forced to adopt new provisions. Otherwise they could have gone for merger, which would have gone through because of their holding.
The present proposal is tricky. For approval, they have to take help of LIC, Mutual funds and FII. As I understand, LIC aquisition price is above 750. So for approval they have to sweeten the offer. My expectation will be minimum 80-90 Icici bank shares for every 100 shares of Isec.
why not blame the management? They didnāt take the decision in interest of minority shareholders at all. They launch the IPO at absurd valuations, stocks didnāt do anything for 5 years but the business has improved a lot and profit more than doubled. Now you want to take it back at the same price, howās that fair? They launched IPO at 20P/B but now they want to take it back at below 7P/B when there is so much improvement. If you are delisting it because itās undervalued, then give the fair value to minority shareholders and delist.
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I donāt know if we can blame them yet. Weāre not forced to sell because the minority shareholders will need to vote for the proposal. Itās natural to want to buy cheap and sell high. Itās upto the shareholders if they want to tell them to go to hell.
If I am not mistaken, if you have 100 shares of ICICI Securities Ltd, it will get converted into 67 shares of ICICI Bank Ltd. Once the proposal goes through, ICICI Securities Ltd share holders will not have to do anything for the above to happen. Correct?
price of ICICI Sec and ICICI share are linked in ratio of merger only 2.8% gain if you hold ICICI sec share