Institutions vote in favour of ISec merger, ICICI Bank says it is in shareholders’ interest

Shareholders of ICICI Securities has approved the proposed merger with parent ICICI Bank. However, the green signal was largely driven by support from institutional investors even as majority retail shareholders voted against the proposal.

The voting result showed that 71.89 per cent shareholders voted for the delisting. Of the institutional investors, 83.8 per cent voted positively, swinging the vote in their favour. On the other hand, only 32 per cent of retail shareholders were in favour of the delisting.

Reacting to the shareholder approval, shares of ICICI Securities fell up to 4.5 per cent in early trade to an intraday low of ₹708.55. The stock later pared some losses to end 1.8 per cent lower at ₹728.95 on the NSE.

Share exchange ratio

Per the proposed terms of agreement, shareholders of ICICI Securities will get 67 shares of ICICI Bank for every 100 shares held. Following the merger, ICICI Securities will become a wholly-owned subsidiary of ICICI Bank, which currently holds 74.8 per cent stake.

Foreign and domestic institutional investors account for 16.68 per cent of ICICI Securities’ share capital, whereas non-institutional public shareholders hold 8.55 per cent stake as of December 2023.

Following reports of retail shareholders feeling pressured by ICICI Bank staff to support the merger, complaints surfaced regarding relentless solicitation on social media, including persistent calls and messages, inquiries for voting details, and efforts to sway voting decisions. In response, ICICI Bank said that given the large number of retail shareholders, the bank and the broking subsidiary had been reaching out to shareholders to explain the proposed scheme and the e-voting process with the “objective of maximising participation”.

The share exchange ratio has been decided as per the joint valuation exercise conducted by two independent valuers, and two merchant bankers delivered independent fairness opinions to ICICI Bank and ICICI Securities separately. Further, ICICI Bank and ICICI Securities have received no adverse observations/ no-objection letters regarding the proposed merger, and four independent proxy advisory firms also recommended voting in favour of the resolution, it said.

Shares of ICICI Securities were listed on April 4, 2018 at ₹432, at a 17 per cent discount to the IPO price of ₹520. A reverse merger at that time, would have entailed a swap ratio of 1.65 ICICI Bank shares for every share of ICICI securities, also a premium of 146 per cent to the current offer.

In a recent note, Quantum Mutual Fund — a shareholder of both ICICI Securities and ICICI Bank — said that it will be voting against the delisting as the swap ratio is detrimental to the interests of minority shareholders. It estimated the loss for unitholders across two schemes at ₹6.08 crore.

“The current swap ratio values ICICI Securities at a 30-77 per cent discount to its other listed peers based on consensus earnings forecast for fiscal year ending March 2024,” the fund house had then said, adding that had the IPO price been used as the benchmark, the share swap ratio would have been 1.9 shares of ICICI Bank for every share of ICICI Securities, a premium of 183 per cent to the current offer.

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