ICICI Securities Shares in Spotlight: 16 Fund Houses Support Delisting, 7 Oppose

ICICI Securities delisting process encountered another setback as the National Company Law Tribunal or NCLT opted to postpone the case until July. This delay arose due to concerns voiced by minority shareholders regarding potential privacy breaches and manipulation of the voting procedure by the company.

Background: ICICI Bank's Approval and Shareholder Concerns

The delisting plan was set in motion when ICICI Bank's board approved the delisting of ICICI Securities on 29 June 2023. Under the scheme public shareholders of ICICI Securities were slated to receive 67 equity shares of ICICI Bank for every 100 shares of ICICI Securities, effectively making ICICI Securities a wholly owned subsidiary of ICICI Bank upon delisting.

However, from the outset concerns emerged regarding the depressed valuation and share swap ratio of ICICI Securities. Market participants and shareholders questioned the fairness of the deal particularly given the disparity between the initial public offering price of ICICI Securities in 2018 and its delisting offer.

Resistance and Regulatory Hurdles

Minority shareholder Manu Rishi Gupta along with over 500 shareholders rallied against the delisting resolution highlighting the valuation gap between the IPO and the delisting offer. Despite opposition ICICI Securities's delisting plan received regulatory approvals from the Reserve Bank of India and stock exchanges BSE and NSE.

However, discontent among investors became more vocal during a post earnings analyst conference call in January 2024. Shareholders expressed concerns about the swap ratio and advocated for ICICI Securities to remain listed. Nevertheless ICICI Bank received NCLT approval for the shareholders's voting process.

Delisting Approval Amidst Controversy

Despite resistance from retail investors the delisting of ICICI Securities was ultimately approved on March 28, 2024 with 71.89 percent of votes in favor of merging ICICI Securities with ICICI Bank. However concerns persisted regarding vote manipulation and breaches of shareholder privacy.

About 16 domestic mutual funds supported ICICI Bank's proposal to delist its broking arm while roughly 7 mutual fund houses opposed the plan.

Among those opposing the delisting were Mahindra Manulife, Kotak, Samco, Quantum, ITI, LIC and Baroda BNP. However, asset management companies like UTI, Aditya Birla, Axis, HDFC, Nippon, ICICI Prudential, SBI, Mirae Asset, DSP, Bandhan, Sundaram, NJ and others stood in favor of it.

Allegations and Investigations

Allegations surfaced of ICICI Bank employees contacting ICICI Securities shareholders under the guise of awareness campaigns to garner support for delisting. A group of shareholders led by an investment manager from Bengaluru approached NCLT alleging breaches of shareholder privacy.

Furthermore market regulator SEBI launched an investigation into allegations of vote manipulation. Minority investors filed numerous complaints with SEBI and its online grievance platform SCORES.

Current Status and Outlook

With the NCLT deferring the case to July ICICI Securities delisting saga remains under intense scrutiny and debate. In the past three months, ICICI Securities shares have declined by over 9 percent contrasting with a 1.4 percent rise in the benchmark Nifty 50 index. The outcome of the investigations and proceedings will likely have implications for the future of ICICI Securities and the broader regulatory landscape.