ICICI SECURITIES LtdIPO

Price Band : ` 519 –` 520

Our Recommendation

“SUBSCRIBE”

THE OFFERIssue Open : 22 Mar 2018 to 26 Mar 2018

»» Issue Type: Book Built Issue IPO

»» Issue Size:

› Offer for Sale 77,249,508 Equity Shares @ ` 5aggregating up to ` 4016.97 Cr

»» Face Value: ` 5 Per Equity Share

»» Issue Price: ` 519 - ` 520 Per Equity Share

»» Market Lot: 28 Shares

»» Minimum Order Quantity: 28 Shares

»» Listing At: NSE, BSE

CAPITAL STRUCTUREThe share capital of Company, is set forth below:-

(Amount in ` except share data)

Authorized Share Capital :-

400,000,000 Equity Shares @5 Aggregate value 2,000,000,000

5,000,000 Equity Shares @100 Aggregate value 500,000,000

Issued, subscribed and paid up capital before the Issue :-

322,141,400 Equity Shares @5 Aggregate value 1,610,707,000

Present Issue:-

Offer for Sale 77,249,508 Equity Shares @ 5 aggregating up to

` 4016.97 Cr

OBJECT OF THE OFFERThe objects of the Offer are:

Promoter selling shareholder ICICI Bank will be entitled toentire proceeds of the offer after deducting the offerexpenses and relevant taxes thereon. Hence, ICICI Securitieswill not receive any proceeds from the offer.

To achieve the benefits of listing the Equity Shares on theStock Exchanges.

The company expects that the listing of equity shares willenhance its visibility and brand image and provide liquidity to itsexisting shareholders.

COMPANY OVERVIEWICICI is a leading technology-based securities firm in India that offers a widerange of financial services including brokerage, financial product distributionand investment banking and focuses on both retail and institutional clients. Ithas been the largest equity broker in India since fiscal 2014 by brokeragerevenue and active customers in equities on the NSE(Source: CRISIL),powered by significant retail brokerage business, which accounted for90.5% of the revenue in fiscal 2017.Headquartered in Mumbai, and operate offices in India, the United States,Singapore and Oman, the company is a part of the ICICI Group, one of thelargest financial conglomerates in the country and promoted by ICICI Bank,India’s largest private sector bank in terms of consolidated total assets with anasset base of ` 10.5 trillion as at December 31, 2017.Company offers its retail customers a wide range of products and services inequities, derivatives and research, and also distribute various third-partyproducts including mutual funds, insurance products, fixed deposits, loans,tax services and pension products. Moreover, it also offer s its customersa wide variety of advisory services, including financial planning,equity portfolio advisory, access to alternate investments, retirementplanning and estate planning.

Continue…Company provides domestic and foreign institutional investors with brokerageservices, corporate access and equity research. Its Investment banking businessoffers equity capital markets services and other financial advisory services tocorporate clients, the government and financial sponsors.

Retail brokerage and distribution businesses are supported by nationwidenetwork, consisting of over

200 own branches,

over 2,600 branches of ICICI Bank through which electronic brokerageplatform is marketed and

over 4,600 sub-brokers, authorised persons, independent financial associatesand independent associates as at December 31, 2017.

The ICICI Group includes the largest Indian private-sector life insurancecompany by retail weighted received premiums, the largest Indian private-sectorgeneral insurance company by gross written premium, each in fiscal 2017, thelargest Indian asset management company by average AUM in India for thequarter ended December 31, 2017 (Source: AMFI), and other companies involvedin home finance, private equity, primary dealership and other businesses.

ROAD MAP AHEADCompany’s objective is to achieve a leading market positionin India in the range of businesses that it operates in,through the following strategies:

Strengthen Leadership Position in the Brokerage Business

Strategically Expand Financial Product DistributionBusiness Through Cross-Selling

Continue Investing in Technology and Innovation

Diversify Revenue Streams and Continue Reducing RevenueVolatility.

Leverage Leadership in Equity Capital Markets toStrengthen Financial Advisory Businesses

STRENGTHS Largest Equity Broker in India Powered by Our

Proprietary Technology Platform: ICICIdirect

Strong and Growing Distribution Business with an“Open-Source” Distribution Model.

Natural Beneficiary of Fundamental Transformation inthe Indian Savings Environment

Superior Customer Experience through Product andTechnology Innovation.

Strategic Component of the ICICI Ecosystem

Leading Institutional Platform

Strong Financial Performance with SignificantOperating Efficiency

INDUSTRY OVERVIEWIndian EconomyAccording to EIU forecasts, the Indian GDP is expected to grow at anaverage of approximately 7.7% (in real terms) between fiscal 2017and fiscal 2020, which is higher than the expected real GDP growthrates for China and the world.

Government InitiativesIn the recent past, the Government of India has introduced widerange of structural reforms that are expected to increase theeconomic growth and improve the overall business environment inIndia, enhancing productivity and stimulating higher foreign anddomestic investments. Some of the key reforms are demonetization,Aadhaar programme, GST, recapitalization package of PSBs, theIBC, financial inclusion, direct benefits transfer, affordable housingand BMPS. In addition, the Government’s focus on fiscal disciplinethrough prudent monetary and fiscal policies is expected to result insustainable higher growth.

Continue…

According to CRISIL Research, the smartphone penetration rate in India isexpected to increase rapidly over next few years, reaching 66% by the end offiscal 2022. In addition, the share of mobile data subscribers is projected toincrease from 34% in fiscal 2017 to 66% by the end of fiscal 2022. With theincrease in smartphone penetration and faster data speeds, consumers areincreasingly finding digital platforms more convenient.In addition, as compared to historical trends, the industry has witnessedsignificantly higher growth recently, with total AUM having increased at aCAGR of 40.1% from March 31, 2016 to September 30, 2017, as a result ofincreased financial savings and improving investor awareness about mutualfunds as an asset class.Indian Equity MarketMoreover, the Indian equity brokerage industry revenues are projected toincrease at 15% - 18% CAGR in the next five years and are expected to reach ₹300 billion by fiscal 2022, driven mainly by the continued uptick in tradingvolumes and increasing retail investor participation.

A high share of working population, coupled with rapidurbanization and rising affluence, is expected to propel thegrowth of the Indian financial services sector

FINANCIAL PERFORMANCETotal revenues increased from `705.8 crores in fiscal 2013 to ` 1404.23 crores in fiscal2017 and ` 1344.69 crores in the nine months ended December 31, 2017, representing aCAGR of 18.8%.

In fiscals 2017 and the nine months ended December 31, 2017, revenue from brokeragebusiness represented 62.6% and 63.6% of total revenue.

In fiscals 2017 and the nine months ended December 31, 2017, revenues frominvestment banking business accounted for 8.4% of total revenue, The revenuefrom investment banking business has increased from ` 70.1 crores in fiscal 2013 to` 119.48 crores in fiscal 2017, at a CAGR of 14.2%, and stood at ` 113.44 crores in thenine months ended December 31, 2017.

Company’s retail customers accounted for 90.5% and 89.1% of the revenue frombrokerage business in 2017 and the nine months ended December 31, 2017, respectively

Revenues from the distribution business have increased from ` 162.14 crores in fiscal2013 to ` 350 crores in fiscal 2017 and was ` 328 crores in the nine months endedDecember 31, 2017.

PAT stood at ` 338.59 crores and ` 399.09 crores in fiscal 2017 and the nine monthsended December 31, 2017, representing a CAGR of 47.4%.

Key Highlights Company have an established track record of delivering returns to shareholders.ROE has exceeded 30.0% past two years & for fiscal 2017, ROE stood at 69.2%.

As of December 31, 2017, had 0.8 million active customers who had traded on theNational Stock Exchange in the preceding 12 months

Cost ratio has decreased 62.8% in fiscal 2017 to 54.4% in the nine months endedDecember 31, 2017

The Net Asset Value per Equity Share as of December 31, 2017 and March 31, 2017stood at ` 20.76 and ` 14.99.

The net worth as on December 31, 2017 stood at ` 668.8 crores.

As of December 31, 2017, had ` 8,60.71 crores of outstanding short-term borrowings.

Aggregate contingent liabilities at ` 130.67 crores as on December31, 2017.

SNAPSHOT – CONSOLIDATED

RISK FOR THE BUSINESS The operation of businesses is highly dependent on

information technology and are subject to risks arising fromany failure of, or inadequacies in, IT systems.

General economic and market conditions in India andglobally could have a material adverse effect on business &financial condition.

Reliance on ICICI Bank for many aspects of business

Extensive statutory and regulatory requirements andsupervision

Operational risks associated with the financial servicesindustry

A significant decrease in liquidity could negatively affectbusiness and reduce customer confidence.

VALUATIONICICI being one of the pioneers in the e-brokerage business in India, alongwith its strong brand name, large registered customer base, wide rangeof products across asset classes, complimentary advisory services, strongfinancial performance, delivering higher ROE, enable it to stand out of thecrowd amongst its peers.

A high share of working population(estimated 90% below the age of 60by 2020) in India, coupled with rapid urbanization and risingaffluence, is expected to propel the growth of the Indian financialservices sector.

Company’s business looks quite attractive as it has delivered superiorreturns but high valuations at current level would fail to provide gainfor short term in the company.

On the upper price band of ` 520 with annualized EPS of H1 FY18, thestock is being valued at 31.5x .

we recommend to SUBSCRIBE the IPO for long term gains.

DISCLAIMERS

This Research Report (hereinafter called report) has been prepared and presented by RUDRA SHARES & STOCK BROKERS LIMITED, which does not constitute any offer or advice to sell or does solicitation to buy any securities. The information presented in this report, are for the intended recipients only. Further, the intended recipients are advised to exercise restraint in placing any dependence on this report, as the sender, Rudra Shares & Stock Brokers Limited, neither guarantees the accuracy of any information contained herein nor assumes any responsibility in relation to losses arising from the errors of fact, opinion or the dependence placed on the same.

Despite the information in this document has been previewed on the basis of publicly available information, internal data , personal views of the research analyst(s)and other reliable sources, believed to be true, we do not represent it as accurate, complete or exhaustive. It should not be relied on as such, as this document is for general guidance only. Besides this, the research analyst(s) are bound by stringent internal regulations and legal and statutory requirements of the Securities and Exchange Board of India( SEBI) and the analysts' compensation was, is, or will be not directly or indirectly related with the other companies and/or entities of Rudra Shares & Stock Brokers Ltd and have no bearing whatsoever on any recommendation, that they have given in the research report

Rudra Shares & Stock Brokers Ltd or any of its affiliates/group companies shall not be in any way responsible for any such loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Rudra Shares & Stock Brokers Ltd has not independently verified all the information, which has been obtained by the company for analysis purpose, from publicly available media or other sources believed to be reliable. Accordingly, we neither testify nor make any representation or warranty, express or implied, of the accuracy, contents or data contained within this document. Rudra Share & Stock Brokers Ltd and its affiliates are engaged in investment advisory, stock broking, retail & HNI and other financial services. Details of affiliates are available on our website i.e. www.rudrashares.com.

We hereby declare, that the information herein may change any time due to the volatile market conditions, therefore, it is advised to use owndiscretion and judgment while entering into any transactions, whatsoever.

Individuals employed as research analyst by Rudra Shares & Stock Brokers Ltd or their associates are not allowed to deal or trade in securities,within thirty days before and five days after the publication of a research report as prescribed under SEBI Research Analyst Regulations.

Subject to the restrictions mentioned in above paragraph, we and our affiliates, officers, directors, employees and their relative may: (a) from time to time, have long or short positions acting as a principal in, and buy or sell the securities or derivatives thereof, of Company mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or profits.

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