ICICI Securities (ISEC)’s annual report offers insights into the company’s strategy going forward. The focus is on five key points, creating scale, increasing average revenue per user (ARPU), improving customer experience, increasing digitisation, and further improving operational efficiency. The company took some key steps to increase customer acquisition and retention, including: a) a tie-up with ICICIB, and b) subscription plans such as ‘Prime’ and ‘Prepaid’. These initiatives resulted in the number of active/NSE-active clients growing 16%/27% to 1.4m/1.0m. The company increased its market share in terms of NSE-active clients by 40bp to 10%.
Other focus areas for the management comprise growing the partnership network and improving technology. ISEC’s network of independent financial advisors (IFAs), sub-brokers, etc grew 32% Y-o-Y to 9,400+ and further to 12,500+ in 1QFY21. With the enhancement of digital capabilities, the platform was able to handle a peak of 3.2m+ trades per day v/s the earlier peak of 2m and over 64k concurrent customers v/s the earlier peak of 48k.
ISEC is on the cusp of ‘twin’ benefits, stemming from tailwinds to the sector from increased retail trading activities and initiatives undertaken by the management that are turning fruitful. While the distribution segment is facing some challenges, we believe it should stabilise in near term. The plan to implement cost-cutting is going well — we expect a 400bp reduction in the C/I ratio to 52% by FY23E. This should result in a 19% PAT CAGR over FY20–23E.
Recent regulatory changes may accelerate consolidation in the industry, and ISEC could be a major beneficiary. Reiterate ‘Buy’.