ISEC - ICICI Securities Limited Share Price

The management of ICICI Securities provided the following outlook and key points during the earnings call:

Outlook:

• The medium-to-long-term industry outlook remains positive, driven by structural factors like financialization of savings and digital adoption. However, short-term uncertainty persists due to global macroeconomic headwinds and India's general elections in H1 2024.
• Revenue growth in Q3 was driven by cyclical upturns in cash equity brokerage, issuer services, and advisory businesses, particularly in December.
• Expenses will remain elevated due to continued investments in technology (30%+ YoY increase in tech spending) and talent (employee count expected to rise ~20% YoY by FY24-end). These investments aim to enhance customer experience, regulatory compliance, and franchise value.

Major Points:

1. Market Share Trends:

   • Retail cash equity ADTO market share rose 30 bps QoQ; retail options premium ADTO (new metric) improved 23 bps QoQ and 56 bps YoY.
   • Derivative ADTO market share declined 30 bps QoQ due to industry reporting changes; migration of clients to lower-yield plans (e.g., Prime 999) also impacted brokerage revenue.

2. Business Highlights:

   • Client additions remained stable QoQ, with customer assets growing due to MTM gains and inflows.
   • MTF business contributed ~12% to PAT but requires diversified funding for scalability, subject to regulatory and group-level capital constraints.
   • Insurance distribution was scaled back to focus on life-stage needs; emphasis shifted to loans, mutual funds, and equities.

3. Strategic Priorities:

   • Focus on quality client acquisition, market share gains in revenue-generating segments, and enhancing digital capabilities (e.g., integrating Mintr's tech into ICICIdirect).
   • Strengthening distribution (loans, mutual funds) and private wealth management.

4. Regulatory & Operational Updates:

   • ESOP book reduced to Rs.300 crore post-regulatory adjustments.
   • Delisting process (merger with ICICI Bank) aims to leverage synergies in customer ecosystem, liquidity, and technology.

Key Risks: Cyclicality of capital markets, regulatory changes, and funding constraints for MTF growth.

Question 1:
"Just wanted some understanding on why would the derivatives market share kind of drop for you in Q3 and could you help us understand as to what really transpired there in this quarter that led to this market share loss?"
Summary: The decline in reported derivative market share was attributed to changes in industry reporting metrics (now focusing on retail options premium ADTO), where ICICI Securities showed improvement. The drop in the older metric was due to shifts in customer migration to competitive pricing plans (e.g., Prime 999) and fewer trading days in Q3.

Question 2:
"On the distribution side, is there any strategy where you are completely exiting out of insurance? How do we read this life insurance distribution revenue just at Rs.68 million in this quarter?"
Summary: ICICI Securities clarified it is not exiting insurance but pivoting to focus on life-stage needs (e.g., retirement solutions) rather than aggressive sales. Insurance revenue reflects this strategic shift toward quality, long-term customer relationships.

Question 3:
"What is the objective behind going for delisting?"
Summary: Delisting aims to merge synergies between ICICI Securities and ICICI Bank, leveraging shared customer ecosystems, technology, and liquidity. The move aligns with regulatory constraints and industry trends, with shareholders receiving ICICI Bank stock post-delisting.

Question 4:
"Do you need a majority of the minority or is ICICI Bank allowed to vote for the resolution of the delisting and when is the vote coming up?"
Summary: The delisting vote requires a two-thirds majority of minority shareholders (ICICI Bank excluded). The timeline depends on NCLT approval, likely taking a quarter post-regulatory processes.

Question 5:
"How do you view the assessment of the derivative segment in your internal framework? Could you explain the 0.3% decline in derivative market share?"
Summary: Despite record customer growth, derivative market share metrics were impacted by legacy reporting (including non-retail segments). Retail options premium ADTO, a newer metric, rose 23 bps QoQ. Focus areas include platform speed and pricing plans.

Question 6:
"Since delisting, you have sounded cautious. Is the merger influencing strategic initiatives? If delisting fails, would strategy change?"
Summary: The cautious tone reflects market highs, not delisting. Strategy remains focused on franchise strength and revenue metrics. Delisting outcome won't alter plans, which prioritize customer quality and cyclical adaptability.

Question 7:
"The retail cash market share rose 260 bps YoY. What drove this amid competition?"
Summary: Growth stemmed from app enhancements, research tools, and targeted plans (e.g., Neo, Prime). Revised NSE reporting inflated gains, but underlying growth reflected quality customer acquisition and retention efforts.

Question 8:
"Distribution income from others is nearly half of mutual fund revenue. What comprises it?"
Summary: Non-mutual fund distribution income includes loans (primary contributor), fixed income products, PMS, and AIFs, reflecting diversified revenue streams beyond traditional equity products.