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Voting advisory firms Stakeholders Empowerment Services (SES) and InGovern have recommended a 'for' vote for the delisting of ICICI Securities (ISec). InGovern has said the delisting will help shareholders of the brokerage benefit from enhanced liquidity and better price discovery by holding shares of ICICI Bank. Whereas SES concurs with the company's rationale that the evolving competitive and regulatory environment could have an adverse impact on the business of ISec if it continues to remain listed separately.
ISec is the first company to use a newly-introduced provision in the Securities and Exchange Board of India regulation that grants an exemption from the strict reverse book building (RBB) process for the delisting of a listed wholly-owned subsidiary.
However, the delisting bid would still require 'for' votes by ISec's public shareholders to exceed the 'against' votes by at least two times. Also, the parent ICICI Bank will require a simple majority from its public shareholders to approve the scheme. Under the scheme, the public shareholders of ISec would be allotted 67 shares of ICICI Bank for every 100 shares held in the brokerage. If the delisting goes through, ICICI Securities will once again become a wholly-owned subsidiary of ICICI Bank after six years. The shareholders will be allowed to cast their votes between March 22 and March 27.
“The combined entity with the strategic imperative of combining wealth management, broking services with banking services will fuel growth and profitability. Investors will get a share in a diversified business portfolio. The amalgamation also offers compelling revenue and cost synergies,” InGovern has said in its note.
The SES note also says that it hasn't identified any major concerns with regards to the valuations. On the question being raised on why ISec didn't opt for the RBB route, the proxy advisor says the delisting route isn't a big issue as the present shareholders will continue to be the owner of the existing business.
“In the instant case, there is no unfair intention of any shareholder, valuation is fair both being listed entity and process is as prescribed by law. It is a management decision as to which route they opt for delisting. Shareholders are given an opportunity to vote. SES cannot base its opinion on what could have been reverse book building discovered price as it is hypothetical,” said SES.
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