Analyst Corner: Maintain ‘buy’ on ICICI Securities with TP of Rs 915

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Updated: October 01, 2021 8:29 AM

In 1QFY22, nearly 60% of the clients acquired were below 30 years of age, and ~80% were from tier 2 and tier 3 towns.

ICICI bankIn the past couple of years, ICICI Bank’s share in client sourcing has reduced significantly (from 100% to 35%).

ICICI Securities (ISEC) hosted the second edition of ICICI Securities Digital Day to showcase the initiatives on building “a digitally integrated financial marketplace”. Here are our key takeaways from the interaction:

Customer sourcing: In the past couple of years, ICICI Bank’s share in client sourcing has reduced significantly (from 100% to 35%). A large portion of the remaining share has come from digital sourcing. In 1QFY22, nearly 60% of the clients acquired were below 30 years of age, and ~80% were from tier 2 and tier 3 towns.

Other key metrics: While sourcing has surged, it has come with sharp improvement in the activation rate to ~70% (from 34%). Moreover, during this phase, the cross-sell ratio has improved steadily to 1.8x (from 1.6x). Among ISEC’s key strengths has been the longevity of its clients – 36% of the clients that were active 15 years ago continue to trade with the company.

Non-broking key data: There has been a sustained rise in the MTF + ESOPn book, while loan disbursements have been increasing at a healthy pace (1.2x). Its share in the SIP book has risen to 4.1% (from 3.3%). In terms of distribution, partnerships such as Federal Bank, HSBC, and threen partnerships in the pipeline would start to contribute meaningfully after a few years.

Future digital plans: Through a new APP, ISEC plans to target the millennial population vian offerings such as goal-based investing and the extending of loans. These customers have high credit scores and are a good fit for ISEC’s future plans. The other customer segment it is targeting comprises HNIs and the Mass Affluent. This category is further segregated into Family Offices, Ultra HNIs, High Salaried, and Retired. ISEC plans to curate a different strategy for each of these sub-categories.

Valuation and view: Post the implementation of 100% margin norms from Sep’21, we expect some slowdown in cash volumes. Nevertheless, this could be partially offset by a surge in options volumes. Over the medium term – as seen empirically in the earlier phases of the margin norms – volumes are expected to recoup. ISEC, with its tech capabilities, is poised to see revenue and PAT CAGRs of 13.3% and 12.4%, respectively, over FY21–24E. We maintain our BUY rating and TP of `915.

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