ICICI Securities’ (I-Sec) merger with parent ICICI Bank could hit a roadblock, with reports suggesting that Norwegian pension fund manager Norges Bank and an Indian PMS provider are set to vote against the proposal citing concerns over the low valuation.
The minority shareholder and PMS provider, Manu Rishi Guptha of MRG Securities, has urged other shareholders to oppose and vote against the delisting, according to reports on Thursday. Norges Bank Investment Management’s Government Pension Fund Global holds 3.13 percent stake in ICICI Securities.
When contacted, an ICICI Bank spokesperson said: “The Bank appointed and relied upon the valuation report provided by a reputed independent valuer and fairness opinion provided by a reputed independent merchant banker. The valuers arrived at the share exchange ratio based on a relative equity valuation of ICICI Bank and ICICI Securities after considering various internationally accepted valuation standards and approaches, particularly the income approach and the market approach.”
I-Sec stock rose by 5% during the trading session. It finally closed at Rs 635.45, up 2.37%. ICICI Bank’s share price closed up marginally by 0.57% at Rs 962.95.
According to the bank, the proposed share exchange ratio is at a premium of Rs 77 to the market price of ICICI Securities shares (Rs 552 volume weighted-average price) as on June 23. It is also higher than the floor valuation prescribed by Sebi (60 days’ volume weighted-average price from the date of the board meeting), which amounted to Rs 583.60.
The brokerage had in June announced that it would delist and become a wholly-owned subsidiary of ICICI Bank. As of June 2023, ICICI Bank held a near-75% stake in ICICI Securities.
Though the ICICI Bank and ICICI Securities have given their nod to the proposal, approvals from the shareholders and creditors of both entities, Reserve Bank of India, the National Company Law Tribunal, and the stock exchanges are still pending.Besides the prescribed majority, it requires approval of a 2/3rd majority of the public shareholders of ICICI Securities under regulatory norms.
It was reported at the time that public shareholders would be allotted 67 equity shares of ICICI Bank for every 100 shares of I-Sec. This was has been determined based on the valuation report by independent valuers, and in compliance with Sebi’s delisting regulations, according to an ICICI Bank spokesperson.
“ICICI Securities’ public shareholders would also receive a more liquid stock, which is owned by public shareholders”, the I-Sec filing had stated.
According to the ICICI spokesperson, while there are business synergies between ICICI Bank and ICICI Securities, a consolidation by way of merger is not permissible on account of regulatory restrictions on a bank from undertaking securities broking business departmentally.
Thus, the companies have proposed the current scheme which will result in ICICI Securities becoming a wholly owned subsidiary of ICICI Bank. ICICI Bank offers a comprehensive suite of banking services and ICICI Securities offers a comprehensive suite of investment and personal finance services.
Both the companies would be able to leverage the strong composite proposition to provide holistic financial services to existing and new customers.