Proxy advisors give thumbs up to ICICI Securities delisting
Two proxy advisory firms have given their thumbs up to the delisting of ICICI Securities Ltd even as many shareholders continue to band together to prevent the proposal from going through.
InGovern and Stakeholders Empowerment Services (SES) have given their ayes to the resolution that will see the brokerage firm become a fully owned subsidiary of its parent ICICI Bank. Shareholders will get 67 shares of ICICI Bank for every 100 ICICI Securities shares they hold.
The resolution now hangs in the balance, with investors getting a narrow window between 22 and 26 March to vote. Only minority shareholders of ICICI Securities, who collectively own 25.23% of the company, can vote on the resolution. ICICI Bank holds the remaining 74.77% shares of the company.
To go through, the resolution needs more than twothirds of the votes cast to be in its favour.
The verdict of proxy advisors assumes importance as nearly 17% of ICICI Securities shares are held by institutions like mutual funds, insurance companies and foreign portfolio investors. Institutional investors generally rely on the recommendations of proxy advisors when voting on company resolutions.
“The broking business is inherently volatile with revenue and profits being high during bullish times and getting depressed with bearish markets. By being offered shares of the comparatively stable shareholding in parent company, shareholders of (ICICI Securities) gain from enhanced liquidity and better price discovery,” InGovern noted in its report.
While proxy advisors have green-lighted the deal, many minority shareholders remain unhappy. Their bone of contention remains the valuation that the 67:100 swap ratio ascribes to the ICICI Securities shares.
“The valuation has been prepared by reputed independent valuers and confirmed by reputed investment bankers. A detailed valuation report has also been published and forms a part of the notice to the shareholders," an ICICI Securities spokesperson said in response to Mint's queries.
In its report, InGovern noted that over six months before the resolution was declared, the average ratio of the volume weighted average price of the ICICI Securities stock to that of ICICI Bank was 0.54. The swap ratio of 0.67 translated to a premium of 24% over this, as per InGovern.