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Post weak listing, how should investors approach ICICI Securities stock?

While experts unanimously highlight the valuation concerns, there are multiple views on whether it is a good time to invest at current prices.

April 04, 2018 / 03:40 PM IST
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Even as ICICI Securities witnessed a tepid listing on Tuesday, it questions the valuation of the stock. So how should investors approach it now?

The stock on Wednesday made a weak debut on D-Street at Rs 453.8 on the National Stock Exchange (NSE), down around 13 percent against the issue price of Rs 520. It fell more than 16 percent in pre-opening trade.

While experts unanimously highlight the valuation concerns, there are multiple views on whether it is a good time to invest at current prices.

Also Read: ICICI Securities: Strong beneficiary of financial savings trend but available at a premium

“At the market capitalisation of Rs 14,500 crore and with the discount at opening, the stock is a play from 1.5-2 year perspective. The valuations are fair and with cross-selling of products along with the big brand’s backing, the stock can be taken a look at,” said Sanjiv Bhasin, Executive Vice-President, Markets, at IIFL told Moneycontrol.


Having said that, there are some market voices who feel that one needs to take a look at it later, given the corrective phase.

“Between 2015 and 2018, there was a sustained boom in IPOs, during which valuations kept increasing due to continuous success stories. A few such as HDFC Life and D-Mart were exceptional as they delivered higher returns post listing, too," AK Prabhakar, Head of Research at IDBI Capital told the website.

If the recent ones do not perform going forward, there could be some destruction as the market, too, is entering a corrective phase for the next 6-8 months. So, ICICI Securities, I believe is not attractive and would wait 2-3 quarters for a fresh investment into this stock,” he said.

Meanwhile, analysts also believe that the recent news around ICICI Bank and its CEO is likely to have hit investor sentiment. A further clarity on this could probably change these prospects, they said.

“At the higher end of issue price of Rs 520, the stock was offered at 31.5 times nine months FY18 annualised earnings. Retail brokerage revenue contributes around 90.5 percent in the total brokerage revenue in FY17," a banking analyst at Arihant Capital Markets said.

"The securities arm has wide national presence through its own branches & through branches of ICICI Bank. It has strong technology platform. The recent ICICI Bank-Videocon case may be hurting investor sentiment. Some more clarity on this case will help in improving this.”

Case File

The broking subsidiary of ICICI Bank raised Rs 3,515 crore at the issue price of Rs 520 per share through initial public offering last week.

The public issue closed on March 26 after three days of bidding in a price band of Rs 519-520.

ICICI Securities had reduced the size of its initial public offer (IPO) to little over Rs 3,500 crore after the sale elicited a sluggish response, especially from high networth individuals.

Brokerages such as Prabhudas Lilladher, SSJ Finance and Choice Broking, among others, had highlighted the issue’s valuation and in fact recommended either avoiding the issue or subscribing with caution.

The share sale of the leading brokerage firm - which was to raise up to Rs 4,016 crore - received around 88 percent subscription, including the anchor portion, on the last day of the bidding.

At 14:58 hrs, ICICI Securities was quoting at Rs 445.00, down Rs 75.00, or 14.42 percent.

Uttaresh Venkateshwaran
first published: Apr 4, 2018 03:22 pm

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