ICICI Securities, the largest domestic brokerage in terms of broking revenues, kicked off its Rs 4,017-crore initial public offering (IPO) on Thursday.
With about 38 lakh operational accounts and 7 lakh active accounts – the highest in the industry – ICICI Securities is seen gaining big from the two trends. On the other hand, the brokerage’s focus on diversifying its business to non-broking services such as cross-selling of third-party financial products is seen gradually de-risking the brokerage from the market volatility.

IIFL Holdings, BofA Merill Lynch, Citi, CLSA, Edelweiss, SBI Capital Market are the book running lead managers to the offer. The registrar to the offer is Karvy Computershare.

At the price band of Rs 519-520 the issue is priced at 34.8x its TTM-Dec-17 earnings and 24.8x its book value as on Dec-17.

The company has delivered exceptional sales and PAT CAGR of 20% and 56% over the past 3 years with return on equity ratios in excess of 30% for each year since FY13 and far superior compared to listed peers.

The issue is priced at a premium compared to its peers, we believe it limits the scope of gains in the short term and hence advise investors with a long-term investment horizon to subscribe to the issue.

Should you Subscribe ICICI Securities IPO

• The company faces intense competition in its businesses, which may limit its growth and prospects. It relies on brokerage business for a substantial share of its revenue and profitability.
• Global economic and political conditions may also adversely affect the Indian economic conditions.
• Brokerage business, which accounts for a significant portion of its revenue, is highly dependent upon the levels of activity in the securities markets in India.
• Given the high valuations, investors can subscribe to the issue from a long term perspective. It must be noted that since the issue is being offered at expensive valuation, listing gains may be capped.