The ICICI Securities delisting saga faced another setback when the National Company Law Tribunal (NCLT) postponed the case until July amidst concerns from minority shareholders regarding the company's potential breach of shareholders' privacy and manipulation of the voting process.
Last month, over 100 shareholders of ICICI Securities, led by Manu Rishi Gupta, initiated a class-action lawsuit against the company's delisting and its merger plan with ICICI Bank.
The lawsuit claimed that ICICI Securities had disclosed confidential shareholder information to ICICI Bank, compromising the privacy and independence of investors. Now, let's take a look at what the story has been so far!
ICICI Bank board approves ICICI Securities delisting on June 2023
ICICI Bank's board approved the delisting of ICICI Securities on June 29, 2023. According to the scheme, public shareholders of ICICI Securities would receive 67 equity shares of ICICI Bank for every 100 shares of ICICI Securities, resulting in ICICI Securities becoming a wholly-owned subsidiary of ICICI Bank upon delisting.
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Currently, ICICI Bank holds a 74.73 percent stake in ICICI Securities, with public shareholders owning the remaining shares. Notable among these public shareholders are Norway's Norges Bank Investment Management, with a 3.2 percent stake, followed by Life Insurance Corporation and California-based Capital Group.
Investors raise concern about depressed valuation, share-swap ratio
At the time of announcement, ICICI Securities share price was hovering just above its intial public offering (IPO) issue price of Rs 520, igniting debates about the stock's true value.
As the proposal progressed, concerns regarding the depressed valuation and share-swap ratio of ICICI Securities intensified. Market participants and shareholders questioned the fairness of the deal, especially given the stock's low price relative to its potential.
Manu Rishi Gupta, a minority shareholder and SEBI registered PMS provider, rallied over 500 shareholders to oppose the delisting resolution. Gupta highlighted the significant disparity between the valuation during ICICI Securities' IPO in 2018 and its delisting offer.
"During the ICICI Securities IPO in 2018, the shares were offered at a valuation of 30x trailing earnings. At the time of delisting today, ICICI Bank is offering just 18x of FY23 earnings," he said.
ICICI Securities delisting plan passes regulatory hurdles - RBI, BSE, NSE give nod
The good news came in for ICICI Bank after ICICI Securities delisting proposal passed its first regulatory hurdle. The Reserve Bank of India (RBI) gave nod to delist ICICI Securities on November 9, 2023, to make it ICICI Bank's wholly-owned subsidiary, subject to certain conditions.
Later, it also received 'no objection' letters from stock exchanges BSE and NSE for delisting shares of the broking arm on November 29, 2023.
Discontent grows, investors spell concern at public forum for the first time
However, discontent among investors surfaced in a post-earnings analyst conference call on January 16, 2024, where shareholders expressed concerns about the swap ratio and argued for the company to remain listed. Despite this, ICICI Bank received NCLT approval for the shareholders' voting process on January 18, 2024.
But this also came to no avail. On January 18, 2024, ICICI Bank informed exchanges that it has received NCLT approval for shareholders' voting process in March.
Shareholders give ICICI Securities delisting approval
Ultimately, the delisting of ICICI Securities was approved on March 28, 2024, with 71.89 percent of votes in favor of merging ICICI Securities with ICICI Bank, despite resistance from retail investors. However, concerns about vote manipulation and breaching of shareholder privacy persisted.
Around 16 domestic mutual funds voted in favour of ICICI Bank's proposal to delist its broking arm. However, around 7 mutual fund houses opposed the plan.
Mutual fund houses such as Kotak, Mahindra Manulife, Samco, Quantum, ITI, LIC, and Baroda BNP voted against the delisting proposal. However, asset management companies like UTI, Axis, Aditya Birla, HDFC, ICICI Prudential, Nippon, Mirae Asset, DSP, SBI, Sundaram, Bandhan, NJ, among others.
Vote manipulation, breaching of shareholder privacy concerns dial up
In spite of the delisting nod, clamour grew over ICICI Bank meddling with votes and calling ICICI Securities shareholders in the guise of 'awareness' campaigns to gain support for delisting.
Voicing these concerns, a group of shareholders led by Bengaluru-based investment manager then approached NCLT last month.
According to lawsuit filed by Gupta and fellow minority shareholders, ICICI Securities was alleged to disclose confidential information to ICICI Bank, compromising shareholders privacy.
NCLT defers ICICI delisting vote manipulation case to July
In the latest development, NCLT has deferred the case to July for further deliberation and the matter remains poised for intense scrutiny and debate.
Market regulator Sebi is also investigating allegations of ICICI Bank employees contacting ICICI Securities in an attempt to influence them before a vote on delisting proposal in March.
As Moneycontrol reported earlier, it is believed that minority investors of ICICI Securities filed 60-70 complaints with the SEBI and also complained on the SCORES platform about vote manipulation grievances. SCORES is SEBI's online platform for filing grievances.
In the past three months, shares of ICICI Securities have tumbled over 9 percent, underperforming the 1.4 percent rise in the benchmark Nifty 50 index.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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