Quantum MF asks ICICI Bank to stall ICICI Sec delisting over irregularities

Citing irregularities, Quantum Mutual Fund (MF) has initiated steps to stall the delisting of ICICI Securities. The asset manager has shot a letter to parent ICICI Bank and market regulator Securities and Exchange Board of India (Sebi) stating that the delisting is against the interest of minority shareholders.

It has asked ICICI Bank to “refrain from taking any further steps or do any act towards implementation of the scheme of merger..failing which we will adopt appropriate legal proceedings including filing applications before the NCLT and other regulatory bodies."

Last month, the delisting bid was approved by shareholders of both ICICI Bank and ICICI Securities. The Mumbai-based brokerage and investment banking firm had secured nearly 72 per cent of the minority shareholders’ vote in favour of the delisting, surpassing the required majority of two-third votes needed to pass a resolution under the delisting regulation.

Quantum MF, which has only 0.09 per cent stake in ICICI Securities, had cast an “against” vote on the delisting resolutions.

In the eight-page letter, the fund house has highlighted four “discrepancies”. These include outdated valuation reports, fraudulent means to garner votes, conflict of interest of independent directors and non-compliance of delisting regulations.

“The valuation reports procured in June 29, 2023 could not have been used to determine the swap ratio or made the basis of voting by the ISec shareholders in March 27, 2024, as the valuation reports fail to account for the various dynamic market changes that took place for the nine month period of June 2023 to March 2024. This resulted in providing inaccurate and unreliable valuation reports…there has been no intendent application of mind by the merchant bankers and the fairness reports did not deep dive into the valuation exercise,” the letter said.

The letter goes on to say that the merger ratio has valued ISec shareholders at a 30 per cent to 77 per cent discount to its listed peers based on consensus earnings forecast for fiscal year ended March 2024. Quantum MF has compared ISec price-to-earnings valuations to peers such as Angel One, 360 One and Anand Rathi Wealth.

The fund house has said that it was shocked to learn that the management of ICICI Bank contacted retail shareholders of ISec to coax them to vote in favour of the scheme merger. “This disclosure of confidential shareholder data on the part of ISec to ICICI Bank shows the mala fide conduct of ICICI which vitiates the shareholders meeting and votes.”

Quantum MF letter observes that independent directors of ISec hold shares of ICICI Bank and have voted in favour of the scheme “despite the obvious conflict of interest.”            

ICICI Bank has used the recently-introduced rule that allows a parent to delisting a subsidiary in the same line of business, Quantum MF has alleged non-compliance with delisting regulations.

“Admittedly, ICICI Bank and ISec are not in the same line of business and delisting has been proceeded with by feigning ignorance of delisting regulations.”