Mumbai-based Institutional Investor Advisory Services (IiAS) and an international proxy advisory firm, ISS, have supported delisting of ICICI Securities, taking the total number of proxy advisors favouring the move to four.

Last week, two prominent Indian proxy advisors– Mumbai-based Stakeholders Empowerment Services (SES) and Bengaluru-based InGovern– came out with recommendation supporting the delisting of ICICI Securities by issuing shares of ICICI Bank to shareholders of ICICI Securities.

The shareholders of ICICI Securities will discuss the resolution pertaining to the delisting of the company at a virtual meeting on March 27, 2024.

IiAS has supported the resolution on the plea that the implied valuation of ICICI Securities was at a premium of 2% to the closing price on the day prior to the announcement of delisting, and at 23% to the closing price four days prior to delisting.

ICICI Securities on June 25, 2023 announced the delisting plan through a scheme of arrangement. As per the scheme, shareholders of ICICI Securities will receive 67 shares of ICICI Bank for every 100 shares they hold. If the plan goes through, ICICI Securities will become a wholly-owned subsidiary of ICICI Bank.

According to IiAS, banks in India mostly run broking business through privately held arms. To this extent, delisting of ICICI Securities and keeping it as a separate legal entity within the ICICI Bank fold will align it with market practices, it added.

The international advisory firm ISS said, given the cyclical nature of ICICI Securities’ business, being part of ICICI Bank with a larger customer ecosystem could bring stability to the stock broking company’s financial performance.

The foreign proxy advisory company found the share exchange ratio is in accordance with the required regulations and at a 15% premium to the price on June 23, 2023, one day prior to the delisting announcement. “The value assigned to the company for the purpose of the scheme is based on independent valuation reports and is broadly in line with the market peers,” the ISS report added.

The independent valuation reports were prepared by PwC Business Consulting Services and Ernst & Young Merchant Banking Services.

Given the sound strategic rationale, the resolution warrants shareholders’ support, concluded the ISS report.

Last week, InGovern and SES too published reports supporting the resolution. InGovern found that the average ratio of VWAP (Volume-Weighted Average Price) of ICICI Securities stock price to the VWAP of ICICI Bank stock in the six months before the announcement of the deal was 0.54, a 24% premium to the proposed swap ratio.

According to SES, the average ratio of market share prices of ICICI Securities to ICICI Bank for the preceding year, before the announcement of the deal, stood at 0.56 times whereas the proposed share swap ratio is 0.67:1. “Hence, it appears that shareholders of ICICI Securities are paid a slight premium vis-à-vis the market price differential,” opined SES.