Business Presentation - ICICI Securities...Business Presentation. Safe harbor 2 Except for the...

November 2020

Business

Presentation

Safe harbor

2

Except for the historical information contained herein, statements in this release which contain words or

phrases such as 'will', ‘would’, ‘indicating’, ‘expected to’, etc., and similar expressions or variations of such

expressions may constitute 'forward-looking statements'. These forward-looking statements involve a

number of risks, uncertainties and other factors that could cause actual results, opportunities and growth

potential to differ materially from those suggested by the forward-looking statements. These risks and

uncertainties include, but are not limited to, the actual growth in demand for broking and other financial

products and services in the countries that we operate or where a material number of our customers reside,

our ability to successfully implement our strategy, including our use of the Internet and other technology, our

growth and expansion in domestic and overseas markets, technological changes, our ability to market new

products, the outcome of any legal, tax or regulatory proceedings in India and in other jurisdictions we are or

become a party to, the future impact of new accounting standards, our ability to implement our dividend

policy, the impact of changes in broking regulations and other regulatory changes in India and other

jurisdictions as well as other risk detailed in the reports filed by ICICI Bank Limited, our holding company with

United States Securities and Exchange Commission . ICICI Bank and ICICI Securities Limited undertake no

obligation to update forward-looking statements to reflect events or circumstances after the date thereof.

This release does not constitute an offer of securities.

Agenda

• ISEC Franchise

• Business Environment

• Strategy & Way forward

ICICI Securities: A Strategic Component of the ICICI Ecosystem

4

Incorporated in 1995, as JV between ICICI Bank and JP Morgan

Promoted by ICICI Bank (77.2% holding)

• ICICI Bank is a leading private sector bank in India

• Listed on BSE & NSE in India & its ADRs are listed on the NYSE

• ICICI Bank is also engaged in insurance, asset management, securities

business and private equity fund management through specialized

subsidiaries

ISEC - Sole equity securities arm of the ICICI Group

5

One of the largest Equity franchise

Total assets* of ` 2.9 tn+ Private wealth clients’ assets of ` 1.15 tn+**

ICICI Securities has built an enviable franchise…

Affluent franchise

Client base at 4.96mn1

from 2.48mn in FY14

Overall active clients at 1.56mn1

from 0.73mn in FY14

NSE active clients at 1.20mn1

from 0.50mn in FY14

Scale

6 year Revenue CAGR 13% (FY14 to FY20)

6 year PAT CAGR 35% (FY14 to FY20)

6 year Dividend CAGR 44% (FY14 to FY20)

ROE consistently around 50% (FY14 to FY20)

Free cashflow generating high

operating leverage model

Equities business blended market share at 8.9%1

from

4.5% in FY14

MF Revenue market share at 4.5%2

from 2.9% in FY14

Consistently ranked amongst top ECM players3

Strong position across businesses

₹

1. As at Q2-FY21, Active clients are for trailing 12 months 2. FY20 data, Source AMFI 3. ECM market share source Prime Database

* Assets of our clients including equity demat assets maintained with ICICI Bank and excluding promoter holding

** Assets of our clients with more than 1 cr AUM at individual level including equity demat assets maintained with ICICI Bank and excluding promoter holding

…a sticky, diverse & multifaceted client base…

6

37% of clients active more than 14 years ago are still active with us1

>65% revenues in each of financial years (FY14 to FY20) was contributed by customers

who have been with us for more than 5 years2

In last 3 years millennials form 70% of active customers1

0.97 mn clients3

with 2 or more products, up from 0.58 mn in FY16

1. As at FY20

2. Based on retail broking revenues

3. As at Q2-FY21

Not only are we able to attract millennials

but also able to retain our vintage clients

…on back of strong Cultural Anchors, …

7

Strong

customer

focusCultural

Anchors

InnovationNurturing

Talent

Agility

&

Execution

Governance

& Risk

Management

ISec is a 20 year old Company

but a 5 year young Enterprise

Multiple first to market offerings

Catering to Life cycle

Financial needs of

customers

Nuanced insights of

customer behaviour

Nurturing high quality, diverse

talent pool with an ability to

attract & retain talent

Ability to respond rapidly

quickly to any situation

Strong emphasis on rapid

execution

Independent Chairman

Separate posts of Chairman & MD/CEO

Board governed company with strong

Independent Director representation

Proactive and real-time risk

management

…a robust business model enjoying strong brand equity

8

Strong Digital

Platform

Wide range of products under one digital

platform

Investments, debt, deposits and protection

Product offering of 45+ products and services

Scalable digital capabilities and infrastructure

99% equity transactions performed online

95% mutual fund transactions performed online

80% of our client sourcing is Digital

Resilient

Business model

Diversified Business

Open Architecture

Low credit and receivables risk

Virtually no inventory and supply chain risk

Strong liquidity position

High Return on Equity

Asset light model

Low capital consuming and high ROE business model

Agenda

• ISEC Franchise



Our businesses

10

Issuer Services

& Advisory

~4% of total FY20 revenue

Services include M&A

advisory, structured

products, private equity,

restructuring advisory etc.

across US, Europe, Asia and

India

We earn financial advisory

fees based on the type and

scale of transactions and

the scope of our services

Distribution

business

Equities

business

~55% of FY20 revenue

Offering services to retail

customers and institutional

clients for trading equities,

equity derivatives, currency

derivatives, ETFs and

overseas securities

We earn brokerage fees

based on the volume and

size of transactions

~25% of total FY20 revenue

Distribution of financial

products like MFs, life and

general insurance,

corporate fixed deposits,

loans, etc. and services

offered by third parties

We earn commission from

third-parties for the

distribution of their

products

Interest income: ~12% of FY20 revenue

Includes interest on our MTF & ESOP funding and on FDs placed with exchanges as margin

Key factors shaping our business environment

Global remittances

• Inward- USD 83 bn

(CY2019)5

• Outward- USD 18.75

bn (FY2020)6

Share of affluent rising1

• 16% in 2025

(8% in 2016)

Growing ecosystems

MF AUM2

• ₹ 28.3 tn (Oct-20)

• ~2x increase in 5Y

Life Insurance AUM2

• ₹ 40.2 tn (June-20)

• ~2x increase in 5Y

Internet users in India3

• 566 mn users

• 38% penetration

• Expected to grow by

40% till 2023

Data costs are down by

95%+ since 20134

Digital India –

“Aadhaarisation”

Financialisation

of savings

Increase in

digital

Widespread

affluence

Indians making

global imprints

1. Annual Gross Household Income of greater than $15 thousand, Source:BCG CCI Proprietary Income & BCG Analysis

2. MF AUM from AMFI, LI AUM from Life Insurance council

3. Digital Trend : Kantar IMRB ICUBE Report 2018

4. Source: Mckinsey

5. Inward remittance – World Bank report on Personal Remittances

6. LRS- RBI report on Outward remittance under LRS for resident Individuals

Tailwinds of increasing affluence, financialisation and digitisation

11

Key factors shaping our business environment

Traditional investment

houses

Branch and sub-broker

driven outreach,

Diversified presence into

NBFC/HFCs/AMCs and

wealth

Bank affiliated

investment houses

Focused on leveraging

synergies with the bank

New generation

discount brokers

Low barriers to entry

Potential emergence of

ecosystem players/

techfins

Product expansion, not

fundamentally a financial

player

Evolving nature of Competition

12

Emphasis on lowering of intermediary margins to enhance customer returns

Greater focus on transparency and risk management

Increased emphasis on compliance

Regulatory direction

Agenda

• ISEC Franchise



Broadening the positioning by focusing on strategic anchors

To reposition the company to participate in the financial services opportunity in

Investments, Protection & Distribution of lending products for

Retail Indian in an open architecture format powered digitally

Protection

Wealth &

Investments

14

Assets &

Loans

Distribution

Imperatives:

• Broad basing business model

• Diverse and granular revenue streams

Strategy: Strengthening the core and building the future

E. Operating leverage

through cost efficiency

15

A. Ramping up scale and value

by augmenting and aligning

growth engines

D. Robust technology and

digital agility

C. Improving customer

experience

B. Monetize client value and

broad basing revenue streams

Multichannel open architecture & product propositions have

helped scale up and diversify sourcing of quality clients…

Quality of Sourcing

16

Activation rates = % of New client acquisition (NCA) who have traded during the quarter

* NCA is percentage change in new clients acquired year on year

Digital Sourcing Business Partners

Diversified our client sourcing

channel mix, largest sourcing

channel now contributing about

55% in Q2FY21 vs 80% in FY200.10

0.16

0.24

0.32

0.380.42

Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21

Prime customer base (mn)

34%

44%

57%

68%

58%63%


Activation rates

7,500+8,000+

8,600+

9,400+

12,100+

13,600+

16% 23% 45% 73% 266% 251%


Business partner network NCA* (% chg)

Additionally, focusing on creating

partnerships with ecosystem

players for client acquisition


Sourcing mix

ICICI Bank Digital Sourcing

Business Partner Others

…resulting in increase in clients, market share and assets

8.7%

7.3%

10.7%

8.9%

11.1%

8.8%

Equity Derivative

Q2 FY20 Q1 FY21 Q2 FY21

17

1. Combined market share for retail and institutional clients

2. Assets of our clients including equity demat assets maintained with ICICI Bank and excluding promoter holding

Period: Q1-FY2021 vs Q1-FY2020, Source: NSE, BSE

Volume Market Share1

Total Assets2 (tn)

1.4

1.8

2.22.4

2.1

2.9

FY16 FY17 FY18 FY19 FY20 Q2 FY21

New Client Acquisition (‘000)

9892 94

106

83

113


Client Base (mn)

4.524.60

4.684.77

4.864.96


18

*Yields are on average assets for the current & preceding period, Quarterly yields are annualized

Recurring assets –Revenue generated on a recurring basis by virtue of assets Eg. Mutual Fund, PMS, etc.

Transactional assets – Revenue generated only when a transaction is made by the client and not by virtue of assets Eg. – Equity, Fixed income, etc.

Enhanced focus on Wealth Management Business…

55 68 109159 192 178 208 215

346395

574

747798

654

791938

401463

683

906990

832

999

1,153

FY15 FY16 FY17 FY18 FY19 FY20 Q2

FY20

Q2

FY21

Recurring Transactional

Assets (` bn)

0.62 0.46

0.89

1.33 1.36 1.51

0.320.49

0.72

0.70

0.81

1.03 0.82

1.08

0.22

0.52

1.34

1.17

1.71

2.36

2.18

2.59

0.54

1.01

0.76%

1.01% 0.99%

0.77% 0.82%

0.62%

0.94%

0.19% 0.17% 0.16%0.11% 0.15% 0.11%

0.24%

0.27% 0.30% 0.30% 0.23%0.28%

0.22%

0.38%

-3.00%

-2.50%

-2.00%

-1.50%

-1.00%

-0.50%

0.00%

0.50%

1.00%

-

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

FY15 FY16 FY17 FY18 FY19 FY20 Q2

FY20

Q2

FY21

Recurring Transactional

Yield on Recurring Assets Yield on Transactional Assets

Yield on Total AUM

Revenue (` bn) & Yields

Home grown Wealth Management franchise

Brand, Proposition & RM-led engagement model

Sharp focus on target client segment

(Entrepreneurs/ Professionals/ CXOs)

Leveraging technology to enhance customer experience

Stickiness: ~50% of revenue comes from clients acquired 10 years ago

Digital & Scalable Wealth Management

Focus on increasing yields on transactional assets and grow overall assets

…and expanded product suite strengthening our offer to

retail clients...

MTF & ESOP book* (` bn)

19

5.36.8

11.5

5.8

15.0

18.7


Home Loans disbursed (` bn) Own PMS AUM (` bn)

*Funded value at the end of the period

At the end of Q4-FY20, we proactively scaled down our MTF & ESOP books owing to the heightened market volatility and our risk assessments

New Initiatives

Launched Commodity

Global Investment platform launched:

provides a unique completely digital solution

for offshore investing

Online offering of group insurance & family

health insurance

Expanded our Loan portfolio to 12 products

2.5 2.4 2.42.1

0.9

3.0


0.1

0.5

1.1 1.1

1.3

1.6


…and broad basing revenue streams in Institutional business

20

Build capabilities on advisory and other non IPO revenue streams

Leverage strong research and corporate access

Increased focus on flow business & strengthening of

franchise amongst FIIs

Capitalise and build on DMA capabilities

01

05

04

03

02

Continue to improve traction in Block deals

Reduce dependence on Capital market products to

smoothen revenue trajectory and create predictability

Institutional

Business

Focus Areas

Deepening relationships

to enhance life time value

Increase cross sell ratio

Win back clients who have

stopped trading

Activate clients who have

never traded

Our key initiatives and diverse array of solutions are helping

deepen client relationships…

Identify transaction behavior

Over 400 product combinations formed,

top 23 clusters identified for personalization

For better quality acquisition and engagement

Make product experience for the customer unique to usage

Consolidated portfolio analysis

One click Investments in Equity & MF

ETF Intelligent Portfolios

Prime & eATM

Option pricing plan (Option 20)

E-mandate for multi payment gateway system for SIP

Tax services tie ups for online tax filing

Personalize information within the clusters

Seamless execution

Increasing wallet share in mutual funds

21

…resulting in increase in client activity and engagement

Overall Active clients (mn)

Clients with 2 or more products (mn)

0.870.88

0.910.93

0.950.97


1.31 1.33

1.39

1.481.51

1.56


22

NSE Active Clients (mn)

0.88 0.910.96

1.08 1.121.20


Digital agility for enhancing customer experiences

Secure, Stable and Reliable system

• 4.0 mn order + trades processed

• 95k+ concurrent users

3-tier recovery system and strong business

continuity processes

Open architecture & partnership

• Use API architecture to onboard fintech

partners

• Partner with fintech to offer customer

centric solutions

23

Robust technology

platformDigital Agility

Client engagement platform

New website interface launched

Reengineering our mobile application

Mutual fund only application to be launched soon

Partnership with Fintechs for digital experiences

Trading strategy formulation tool for derivatives

Comparison tool for insurance

One click portfolios

Continue to provide Secure, Stable, Reliable and Responsive platform

with an emphasis on enhancing client experience

Our focus on cost efficiency has helped us improve

operating leverage

198187 178 172 171

156


Number of Branches

4,2984,077 3,955 3,790 3,729 3,669


Head count

56% 56% 56% 57%

53%

45%


Cost to Income ratio

41%48% 51%

55%59%

76%


Return on Equity

24

Way forward

Core components of strategy remain intact

25

We continue to focus on all five stated areas of our strategy, there are four areas that require special attention

Invest in next gen technology capabilities to remain cutting edge

Advanced analytics, CRM capabilities, cyber security, capacity enhancement, use of AI/ML tools as well as UI/UX

interfaces to improve user experience

Digitize & decongest processes and products

Increased focus on cost

Exploring moving certain teams to completely work from home

Need for branch infrastructure may further reduce

Fortifying our talent pool

Talent acquisition in all areas of focus

Broad basing ESOPs

Leverage stability and brand of the company to attract right talent

The recent market disruption has reaffirmed our strategy of providing

comprehensive financial services to a retail Indian powered digitally

Thank you

Annexures

Revenue & PAT

28

1. Other revenues include interest income from FDs placed as margin with exchanges

Revenue (` mn) FY14 FY15 FY16 FY17 FY18 FY19 FY206Y

Q2'20 Q2'21 %chg

CAGR

Retail Equities 4,621 7,027 6,070 7,016 9,174 8,154 8,187 10% 1,832 3,534 93%

MTF & ESOP Interest 87 180 156 474 746 770 970 49% 199 447 125%

Prime Fees 9 196 NA 40 129 223%

Retail Equites and Allied 4,708 7,207 6,227 7,486 9,920 8,933 9,354 12% 2,072 4,110 98%

Allied revenues as % of Retail Equities and Allied 2% 3% 3% 6% 8% 9% 13% 12% 14%

Institutional Equities 339 527 537 740 1,069 1,174 1,289 25% 326 386 18%

Life Insurance Revenue 261 210 272 333 483 474 490 11% 123 97 -21%

Mutual Fund Revenues 789 1,540 1,117 1,657 2,847 2,695 2,263 19% 556 571 3%

Distribution 1,899 2,711 2,579 3,529 4,675 4,640 4,229 14% 1,062 990 -7%

Issuer Services and Advisory 593 638 834 1,198 1,440 991 764 4% 323 623 93%

Treasury 140 386 372 277 288 265 398 19% 49 149 204%

Other Revenues1

444 626 699 812 1,218 1,267 1,216 18% 350 547 56%

Total Revenue 8,123 12,095 11,246 14,042 18,610 17,270 17,249 13% 4,182 6,805 63%

Profit After Tax 908 2,939 2,387 3,386 5,535 4,907 5,420 35% 1,351 2,782 106%

Cost to Income Ratio 82% 63% 67% 63% 54% 56% 56% 56% 45%

Dividend Payout 400 1,611 1,611 2,050 3,028 3,028 3,544 44%

Dividend Payout Ratio 47% 55% 67% 61% 55% 62% 65%

Key operating metrics

29

1. Excludes proprietary volumes, source: NSE, BSE

2. Combined market share for retail and institutional clients ex proprietary

3. Source: AMFI, published yearly

Particulars FY14 FY15 FY16 FY17 FY18 FY19 FY20

6Y

Q2'20 Q2'21 %chgCAGR

Client Base (mn) 2.5 2.8 3.2 3.6 4.0 4.4 4.8 12% 4.6 5.0 8%

Overall Active Clients (mn) 0.7 0.8 0.8 1.0 1.2 1.3 1.5 12% 1.3 1.6 17%

NSE Active Clients (mn) 0.5 0.6 0.6 0.6 0.8 0.8 1.1 14% 0.9 1.2 32%

Equity market ADTO1 (bn) 103 169 160 204 278 276 300 19% 273 470 72%

Derivative market ADTO1 (bn) 867 1,199 1,365 2,205 3,866 5,975 9,370 49% 9,403 12,145 29%

Total market ADTO (bn) 970 1,368 1,525 2,409 4,143 6,251 9,670 47% 9,676 12,615 30%

ISEC Equity ADTO (bn) 8 12 12 15 21 21 26 23% 24 52 119%

ISEC Blended Equity market share2

7.5% 7.4% 7.4% 7.1% 7.4% 7.7% 8.7% 8.7% 11.1%

ISEC Derivative ADTO (bn) 36 53 89 173 352 512 737 66% 687 1,066 55%

ISEC Blended Derivative market share 4.1% 4.4% 6.5% 7.8% 9.1% 8.6% 7.9% 7.3% 8.8%

ISEC Total ADTO (bn) 44 65 101 187 372 533 764 61% 711 1,118 57%

ISEC Blended market share 4.5% 4.7% 6.6% 7.8% 9.0% 8.5% 7.9% 7.3% 8.9%

Mutual fund average AUM (bn) 76 120 160 212 302 347 362 30% 358 352 -2%

Mutual fund average Equity AUM (bn) 43 75 108 143 218 258 268 36% 263 262 0%

Mutual fund commissions market share3

2.9% 3.4% 3.0% 3.5% 3.7% 4.0% 4.5%

Life Insurance Premium (mn) 4,129 5,625 6,816 8,390 9,038 8,868 7,983 12% 1982 1,729 -13%

Consolidated P&L

30

(` million)

Period: Q-o-Q: Q2-FY2021 vs Q1-FY2021; Y-o-Y: Q2-FY2021 vs Q2-FY2020

Particulars Q2-FY20 Q1-FY21 Q2-FY21 % Q-o-Q Y-o-Y%

Revenue 4,182 5,464 6,805 25% 63%

Operating Expenses 244 305 425 39% 74%

Employee benefits expenses 1,339 1,728 1,796 4% 34%

Other expenses1

579 608 576 (5)% (1)%

Total operational expenses 2,162 2,641 2,797 6% 29%

Finance Cost 179 229 285 24% 59%

Total expenses 2,341 2,870 3,082 7% 32%

Profit before tax 1,841 2,594 3,723 44% 102%

Tax 490 663 941 42% 92%

Profit after tax 1,351 1,931 2,782 44% 106%

Other Comprehensive Income (OCI) (16) 2 (6) - -

Total Comprehensive Income (TCI) 1,335 1,933 2,776 44% 108%

Balance sheet : Assets(` million)

31

ASSETS At Sep 30, 2019 At March 31, 2020 At Sep 30, 2020

Financial assets (A) 31,030 39,861 55,288

Cash/Bank and cash equivalents 15,322 24,114 30,188

Securities for trade & Derivatives financial instrument 5,642 8,351 4,439

Receivables 2,457 887 1,213

Loans 6,797 5,709 18,627

Investments 27 25 27

Other financial assets 785 775 794

Non-financial assets (B) 4,986 4,567 4,022

Deferred tax assets (net) 571 596 683

Right-of-use assets 1,662 1,529 1,124

Fixed assets, CWIP & Intangible assets 517 532 562

Current tax assets & other non financial assets 2,236 1,910 1,653

Assets (A+B) 36,016 44,428 59,310

Balance sheet : Equity and Liabilities

(` million)

32

EQUITY AND LIABILITIES At Sep 30, 2019 At March 31, 2020 At Sep 30, 2020

Financial liabilities (A) 19,892 26,193 37,258

Payables 5,650 6,926 5,668

Derivative financial instruments - - 3

Debt securities 10,143 14,975 23,724

Borrowings (Other than debt securities) - - 270

Lease liabilities 1,654 1,574 1,199

Deposits & Other financial liabilities 2,445 2,718 6,394

Non-financial liabilities (B) 5,366 6,140 7,331

Equity (C) 10,758 12,095 14,721

Equity share capital 1,611 1,611 1,611

Other equity 9,147 10,484 13,110

Equity and Liabilities (A+B+C) 36,016 44,428 59,310

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