ICICI Securities Ltd:Annual Report 2023-24 Analysis

ICICI Securities Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

ICICI Securities Ltd. was established in 1995 as a subsidiary of ICICI Bank. It was created to provide investment banking, institutional broking, retail broking, and financial product distribution services.

Headquarters Location and Global Presence:

The company’s headquarters is located in Mumbai, India. While their primary focus is the Indian market, they also have a presence through partnerships and international broking services.

Company Vision and Mission:

While a specific, publicly declared vision and mission statement may vary, ICICI Securities aims to empower investors with comprehensive financial solutions, leveraging technology and expertise to facilitate wealth creation. Their mission is to be a trusted partner for clients across their investment journey.

Key Milestones in Their Growth Journey:

• 1995: Inception as a subsidiary of ICICI Bank.
• Early 2000s: Expansion of retail broking operations and introduction of online trading platforms.
• Mid-2000s: Strengthening of investment banking and institutional broking capabilities.
• 2018: Initial Public Offering (IPO) and listing on the Indian stock exchanges.
• Ongoing: Continuous development of digital platforms and expansion of product offerings.

Stock Exchange Listing Details and Market Capitalization:

ICICI Securities is listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). The stock symbol is ISEC. Market capitalization is dynamic, and up-to-date information can be found on financial websites.

Recent Financial Performance Highlights:

Recent financial performance can be found on the company’s website and financial websites. Typically, key metrics to consider include revenue growth, net profit margin, earnings per share (EPS), and assets under advisory/management.

Management Team and Leadership Structure:

ICICI Securities has a well-defined management structure led by a CEO and supported by various functional heads responsible for different business segments like broking, investment banking, and distribution. Detailed information about the key management personnel is available on their website.

Notable Awards or Recognitions:

ICICI Securities has received recognition for its performance in various categories including broking services, investment banking, and research capabilities.

Their Products #

Complete Product Portfolio with Categories:

• Broking Services: Equity trading, derivatives trading, commodity trading, currency trading.
• Investment Banking: Initial Public Offerings (IPOs), follow-on public offerings (FPOs), mergers and acquisitions (M&A), private equity placements.
• Distribution Services: Mutual funds, insurance, fixed deposits, bonds, structured products.
• Wealth Management: Portfolio management services (PMS), financial planning, advisory services.
• Equity Research: Providing research reports and recommendations on listed companies.
• Financial Learning: Offers courses and learning programs.

Flagship or Signature Product Lines:

• i-Direct Platform: ICICI Securities’ online trading platform, offering seamless access to various financial products.
• Investment Banking Expertise: Strong track record in managing and executing IPOs and M&A deals.

Key Technological Innovations or Patents:

ICICI Securities continually focuses on technology-led initiatives. They constantly work on upgrading the trading platform, mobile application, and wealth management tools with features such as robo-advisory, AI-powered insights, and personalized investment recommendations.

Primary Customers #

Target Industries and Sectors:

ICICI Securities caters to a wide range of customers across various industries and sectors. Their client base includes retail investors, high-net-worth individuals (HNWIs), institutional investors (mutual funds, insurance companies, pension funds), and corporates.

Geographic Markets (Domestic vs. International):

The primary geographic market for ICICI Securities is India. While the company primarily operates within India, they may facilitate international investments through partnerships and tie-ups.

Major Client Segments:

• Retail Investors: Individuals investing in equities, mutual funds, and other financial products.
• High Net Worth Individuals (HNWIs): Wealthy individuals seeking personalized wealth management solutions.
• Institutional Investors: Mutual funds, insurance companies, and other institutional clients.
• Corporates: Companies seeking investment banking services (IPOs, M&A).

Distribution Network and Sales Channels:

ICICI Securities utilizes a multi-channel distribution network:

• Online Platform (i-Direct): Self-directed investment platform for retail investors.
• Branch Network: Physical branches across India providing advisory and broking services.
• Independent Financial Advisors (IFAs): Partner network of IFAs who distribute ICICI Securities’ products.
• Institutional Sales Team: Dedicated team catering to institutional clients.

Major Competitors #

Direct Competitors in India and Globally:

• India: HDFC Securities, Kotak Securities, Axis Securities, Motilal Oswal Financial Services, Zerodha, Upstox, Groww.
• Globally: While ICICI Securities mainly operates in India, global firms with a presence in India or offering similar services include large international brokerage firms and investment banks.

Competitive Advantages and Disadvantages:

• Advantages:
  • Strong brand reputation and association with ICICI Bank.
  • Established online trading platform (i-Direct).
  • Extensive distribution network.
  • Strong research capabilities.
  • Investment banking expertise.
• Disadvantages:
  • Higher brokerage fees compared to discount brokers.
  • Competition from tech-focused fintech brokers.
  • Dependence on market conditions.

How They Differentiate From Competitors:

ICICI Securities differentiates itself through a combination of factors:

• Full-Service Brokerage: Offering a wide range of products and services compared to discount brokers.
• Research and Advisory: Providing in-depth research reports and personalized investment advice.
• Brand Trust: Leveraging the strong brand image of the ICICI Group.
• Hybrid Model: Combining online and offline presence through branches and IFAs.

Industry Challenges and Opportunities:

• Challenges: Increasing competition from discount brokers, regulatory changes, market volatility, and cybersecurity threats.
• Opportunities: Growing financial literacy, increasing adoption of online trading, rising disposable incomes, and expansion of the Indian capital market.

Future Outlook #

Expansion Plans or Growth Strategy:

ICICI Securities is focused on:

• Expanding its digital platform to attract new customers and improve customer experience.
• Strengthening its investment banking and wealth management businesses.
• Increasing its market share in the retail broking segment.
• Expanding its presence in smaller cities and towns.
• Focus on financial literacy initiatives.

Sustainability Initiatives or ESG Commitments:

Information on the sustainability initiatives is sparse from public sources.

Industry Trends Affecting Their Business:

• Digitalization: Increased adoption of online trading and investment platforms.
• Regulatory Changes: Evolving regulations impacting the broking and investment banking industry.
• Rise of Fintech: Emergence of tech-focused fintech companies offering innovative financial solutions.
• Market Volatility: Fluctuations in the stock market impacting trading volumes and investor sentiment.

Long-Term Vision and Strategic Goals:

ICICI Securities aims to be a leading financial services provider in India, known for its comprehensive product offerings, customer-centric approach, and technological innovation. The long-term strategic goals include:

• Becoming a top player in the Indian broking and investment banking industry.
• Expanding its customer base and market share.
• Developing innovative financial solutions to meet the evolving needs of investors.
• Leveraging technology to enhance customer experience and operational efficiency.

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics #

• Revenue: Consolidated revenue increased by 47.5% year-over-year (YoY) in FY24, reaching ₹ 50,511.0 million, compared to ₹ 34,254.8 million in FY23.
• Profitability: Consolidated Profit After Tax (PAT) grew by 51.8% YoY, from ₹ 11,176.3 million in FY23 to ₹ 16,966.9 million in FY24.
• Earnings per share: Diluted EPS Increased from 34.54 in FY23 to 52.22 FY24
• Debt Equity Ratio: Increased from 3.26 in FY23 to 4.25 in FY24.
• Return on Net Worth: Increased from 42% in FY23 to 50% in FY24.

Business Segment Performance #

• Broking and Distribution: Revenue increased by 43.1%, from ₹ 31,306.6 million in FY23 to ₹ 44,811.0 million in FY24.
• Issuer Services and Advisory: Revenue showed significant growth of 119%, from ₹ 1,448.1 million in FY23 to ₹ 3,171.5 million in FY24.
• Treasury: Revenue increased by 75.3%, from ₹ 1,442.4 million in FY23 to ₹ 2,528.5 million in FY24.

Major Strategic Initiatives and their Progress #

• Customer-Centric Coverage Model: The Company continued its focus on a customer-centric model, contributing to a 3x increase in broking and allied activities revenue and a 2x increase in distribution services revenue from FY20 to FY24.
• Digital Enhancement: The Company aims to enhance customer experience with digital capabilities.

Risk Landscape Changes #

• Credit Risk: The company is managing exposure to credit risk, that is primarily from trade receivable and loans by application of its policies.
• Market Risk: Exposure to equity price risk, interest rate risk, and currency risk is managed through the Corporate Risk and Investment Policy (CRIP).
• Cyber Security: Increased focus with steps taken to enhance controls related to cyber threats.

ESG Initiatives and Metrics #

• Environmental: The Company has initiatives to reduce electricity and paper consumption. Electricity consumption was reduced by 24%.
• Social: CSR projects impacting approximately 2.02 lakh beneficiaries were implemented, focusing on healthcare, skill development, and environmental sustainability.
• Governance: ESG Framework aims to enhance the means by which the company is accountable.

Management Outlook #

• The Company expects to benefit from structural shifts in financial savings and improvements in India’s technology infrastructure.
• Focus will remain on client acquisition and service quality, leveraging synergies within the ICICI Bank Ecosystem.
• Continued to build on its client coverage and service, backed by experienced relationship team.

Detailed Analysis #

ICICI Securities Limited - Financial Position Analysis #

Balance Sheet Analysis #

3-Year Comparative Analysis of Assets, Liabilities, and Equity #

(₹ million)

Significant Changes in Major Line Items (>10% YoY) #

(₹ million)

• Assets: Significant increases are observed in “Bank balance other than cash and cash equivalents” (70.6%), “Loans” (85.9%) and “Other financial assets” (115.7%). “Securities for Trade” reduced significantly by (57.7%). Property, Plant, and Equipment, and Right-of-use-assets increased by 118.5% and 87.5% respectively.
• Liabilities: Notable increases occurred in “Trade payables” (160.9%) and “Debt securities” (86.7%). Borrowing reduced by (45.3%)
• Other Equity: Other equity showed 39.8% increase.

Asset Quality Metrics #

• Impairment Loss Allowance on Loans: Increased from ₹32.4 million to ₹34.6 million, showing a slight change on the quality of the loan portfolio.
• Impairment on trade receivables: Out of total trade receivables of ₹9,812 Million, ₹220.9 Million is overdue for a period in excess of 90 days.

Debt Structure and Maturity Profile #

• Debt Securities (Commercial Paper): Increased significantly from ₹87,886.9 million to ₹164,040.8 million, with maturities ranging from 47 to 365 days and interest rates between 7.70% and 8.79%.
• Bank Overdraft: Balance decreased to Zero
• Repo Borrowings: Decreased from ₹3,834.1 million to ₹2,755.4 million.

Off-Balance Sheet Items #

• Contingent Liabilities: Claims against the company not acknowledged as debt are ₹1,670.2 million as of March 31, 2024.

Operating Performance #

Income Statement #

Revenue Breakdown by Segment/Geography with Growth Rates #

• Broking and Distribution: Revenue increased by 43.1% from ₹31,306.6 million in FY2023 to ₹44,811.0 million in FY2024.
• Issuer Services and Advisory: Revenue increased by 119% from ₹1,448.1 million in FY2023 to ₹3,171.5 million in FY2024.
• Treasury: Revenue increased by 75.3% from ₹1,442.4 million in FY2023 to ₹2,528.5 million in FY2024.
• Geographical Revenue (FY2024):
  • India: ₹47,656.6 million.
  • Outside India: ₹2,854.4 million.

Cost Structure Analysis #

• Total expenses increased by 44.1% from ₹19,243.6 million in FY2023 to ₹27,735.8 million in FY2024.
• Finance costs rose by 84.0%, from ₹5,362.9 million to ₹9,869.5 million.
• Employee benefit expenses increased by 25.3%, and other expenses grew by 24.5%.
• Fees and commission expenses also show an increasing trend of 36%.

Margin Analysis (Gross, Operating, Net) with Trends #

• Operating Margin: Increased from 43.95% in FY2023 to 45.11% in FY2024.
• Net Profit Margin: Increased from 32.72% in FY2023 to 33.60% in FY2024.

EPS Analysis (Basic/Diluted) #

• Basic EPS: Increased from ₹34.62 in FY2023 to ₹52.51 in FY2024.
• Diluted EPS: Increased from ₹34.54 in FY2023 to ₹52.22 in FY2024.

Cash Flow and Liquidity Analysis of ICICI Securities Limited (FY2024 vs. FY2023) #

Operating, Investing, and Financing Cash Flow Components (Consolidated) #

• Operating Cash Flow (OCF): Decreased significantly from ₹ (6,741.6) million in FY2023 to ₹ (56,210.7) million in FY2024. This was primarily due to an increase in loans and an increase in the amount blocked as other bank balances, partially offset by increased profit.
• Investing Cash Flow (ICF): Increased cash outflow from ₹ (1,247.8) million in FY2023 to ₹ (2,569.3) million in FY2024, driven by increased purchase of property, plant, and equipment (including intangible assets).

Working Capital Management Efficiency #

• Debtors Turnover Ratio: Increased from 3.00 in FY2023 to 3.41 in FY2024, suggesting improved efficiency in collecting receivables.
• Current Ratio: Remained at 1.15 in FY2024, indicating good short-term liquidity and increased from the ratio of 1.20 in FY23.
• Current Liability Ratio: 0.99 both in FY24 and FY23.

Dividend and Share Buyback Trends #

• Dividends: The Company paid a total dividend of ₹ 6,866.0 million in FY2024 (₹ 29/- per share), compared to ₹ 7,263.0 million in FY2023 (₹ 22/- per share).

Debt Service Coverage #

• Debt Service Coverage Ratio: Decreased from 0.21 in FY2023 to 0.18 in FY2024. This indicates that PBT reduced as compared to FY23, the ratio is less than 1.
• Interest Service Coverage Ratio: Decreased from 3.83 in FY2023 to 3.34 in FY2024, representing a decreased ability to cover interest expenses with operating profits.

Liquidity Position #

• Liquidity Position: The Current Ratio (Current Assets/Current Liabilities) is greater than 1, indicating that current assets can meet short-term liabilities.

Segment-wise Financial Analysis of ICICI Securities Limited (Consolidated) #

Profitability Ratios (3-Year Trends) #

Return on Equity (ROE) #

• FY24: 52.51%
• FY23: 34.62%
• FY22: 49.92%

ROE Increased in FY24 due to increase in profit, but decreased in FY23 because of increase in equity.

Return on Assets (ROA) #

• FY24: 10.9%
• FY23: 7.2%
• FY22: 9.8%

ROA increase is primarily due to Profit after tax increased by 51.8% during the year.

Margins #

Operating Profit Margin #

• FY24: 45.11%
• FY23: 43.95%

Increase due to higher increase in revenue as compared to operating expenditure.

Net Profit Margin #

• FY24: 33.6%
• FY23: 32.6%
• FY22: 38%

The increase in net profit margin for FY24 is due to higher profits.

Liquidity Metrics #

Current Ratio #

• FY24: 1.15
• FY23: 1.20

A slight decrease in current ratio is observed, indicating a small reduction in the coverage of current liabilities by current assets.

Efficiency Ratios #

Receivables Turnover #

• FY24: 3.41
• FY23: 3.0

An increase indicates faster collection of receivables.

Leverage Metrics #

Debt/Equity Ratio #

• FY24: 4.25
• FY23: 3.26

The ratio increased as debt increased more rapidly than equity.

Interest Coverage Ratio #

• FY24: 3.34
• FY23: 3.83

A decrease indicates a reduced ability to cover interest expenses with operating profit, but it remains satisfactory.

Key Observations #

• ICICI Securities has increased its leverage and financial assets.
• The profitability (PAT, PBT) of the Group has improved significantly.
• The Group’s efficiency in collecting receivables has improved.

ICICI Securities Limited: FY2024 Segment-Wise Financial Analysis #

Revenue and Profitability Growth #

• Broking and Distribution: Revenue increased by 43.1% YoY, from ₹31,306.6 million in FY2023 to ₹44,811.0 million in FY2024. Segment results were ₹19,723.9 million.
• Issuer Services and Advisory: Revenue increased by 119.0% YoY, reaching ₹3,171.5 million in FY2024 from ₹1,448.1 million in FY2023. Segment results were ₹2,310.5 million.
• Treasury: Revenue rose by 75.3% YoY, from ₹1,442.4 million in FY2023 to ₹2,528.5 million in FY2024. Segment results were ₹774.5 million.

Market Share and Competitive Position #

• Retail Equity: Market share stood at 12.8% in FY2024.
• Retail Derivative: Market share was 7.4% in FY2024.
• Issuer Services: Ranked No.1 in IPO issue management in terms of fundraising and the number of deals in FY2024, managing 31 IPOs with a market share of 42.30% (in terms of issue size).

Key Products/Services Performance #

• Retail Equity and Allied Income: Grew by 45% YoY, driven by a 44% growth in allied income.
• Margin Trading Facility (MTF): The daily average MTF book grew to ₹99.33 billion in FY2024 from ₹69.68 billion in FY2023.
• Prime Plan: Subscription fees increased from ₹1,035 million in FY2023 to ₹1,166 million in FY2024.
• Mutual Funds (MF): MF revenue increased by 17% YoY, and MF AUM reached ₹837 billion in March 2024, 39% higher YoY. SIP flow increased by 17% YoY.
• Loan Products Distribution: Revenue grew by 60% YoY, from ₹232 million in FY2023 to ₹372 million in FY2024.
• Institutional Equities: The revenue increased by 91% from ₹ 1,870 Million in FY2023 to ₹ 3,578 Million in FY2024.

Geographic Distribution and Market Penetration #

• The physical presence in 65+ cities in India through a branch network of 134 branches.
• The Company also has wholly-owned subsidiaries in the US and Singapore.

Growth Initiatives and Challenges #

• Continued to build on its ‘customer-centric’ coverage model
• Focus is on client coverage and service, backed by relationship, product, advisory, service, family office and equity relationship functions.
• Leveraging digital capabilities and deeper synergies within the ICICI Bank Ecosystem to enhance customer experience.
• Challenges arising from the nature of the business and the company being dependent on the health of capital markets.
• Sensitivity to market fluctuations, including equity prices, interest rates, and foreign exchange rates.
• Regulatory Compliance risk.

Risk Assessment #

Strategic Risks #

• Severity: High. Dependence on the health of capital markets, which could be severely impacted by economic downturns and global events.
• Likelihood: Medium. Economic and geopolitical risks, rising crude oil prices, depreciating currency, and inflation are potential factors.
• Trend: Increasing. Growth in retail market participation and demat accounts, yet valuations appear stretched. Increased reliance on funding like commercial papers and credit facilities from ICICI bank, growing by 86% and 79% respectively.
• Mitigation Strategies: Focus on customer-centric coverage, product diversification (MTF, ESOP Funding, Prime plan), and expansion into new customer segments.
• Control Effectiveness: Partially effective. Revenue diversification efforts show growth in allied income and distribution services, but market volatility remains a key factor.
• Potential Financial Impact: Significant. Downturns could impact brokerage income, asset valuations (proprietary positions), and funding costs.

Operational Risks #

• Severity: Medium to High. Risks include system failures, fraud, and non-compliance.
• Likelihood: Medium. Reliance on technology and digital platforms, increasing vulnerability to cyber security threats.
• Trend: Stable. A fraud instance involving incorrect tagging of corporate accounts for commission was detected in Q1 FY24. The fraud involved employee and Authroised Person.
• Mitigation Strategies: Risk management framework, internal controls, new product approval processes by committees (Risk Management, Product, and Process Approval), and policies (Corporate Risk, Investment, Operational Risk Management, Outsourcing, Fraud Risk Management, Business Continuity, Surveillance).
• Control Effectiveness: Moderate. Internal control systems exist but the instance of fraud suggest potential gaps.
• Potential Financial Impact: Moderate. The detected fraud was around ₹ 2.8 million.

Financial Risks #

• Severity: Medium to High. Key risks are credit risk, liquidity risk, and market risk.
• Likelihood: Medium. Exposure to credit risk through margin trading facility (MTF) and ESOP funding, reliance on short-term borrowings.
• Trend: Increasing. The funding book size increased by more than 85% and borrowing position grew by 79% during the FY2024, reflecting heightened financial leverage.
• Mitigation Strategies: Corporate Risk and Investment Policy, Liquidity Risk Management Policy, credit limits, margin requirements.
• Control Effectiveness: Moderate. Policies are in place, but significant growth in lending and borrowing raises the risk profile.
• Quantitative Risk Metrics:
  • Debt Equity Ratio increased from 3.26 (FY23) to 4.25(FY24).
  • Bad debts to Account recievables is 0.95% (FY24) vs 0.51 (FY23)
• Potential Financial Impact: High. Default risk on MTF and ESOP funding, potential losses from proprietary trading positions due to market volatility.

Compliance/Regulatory Risks #

• Severity: Medium. Penalties and strictures from regulatory bodies (SEBI, NSE, BSE).
• Likelihood: Low to Medium.
• Trend: Stable. SEBI issued an administrative warning due to sharing of shareholder information with ICICI Bank.
• Mitigation Strategies: Compliance department, Whistle Blower Policy, Code of Conduct for Prevention of Insider Trading.
• Control Effectiveness: Generally effective, but the SEBI warning indicates a need for improvement.
• Potential Financial Impact: Moderate, with the warning from the SEBI and fines and penalties paid to the Exchanges for delayed reporting under various circulars and SOP.

Emerging Risks #

Cybersecurity Risk #

• Severity: High. Increasing reliance on digital platforms increases exposure.
• Likelihood: Medium to High. Constant evolution of cyber threats globally.
• Trend: Increasing.
• Mitigation Strategies: Information Technology Risk Management Policy, Information Security Management Policy, Cyber-security & Cyber Resilience Policy, investments in technology infrastructure.
• Control Effectiveness: Developing. The Company states it has taken steps to enhance controls.
• Potential Financial Impact: Potentially high, depending on the nature and scale of any breach.

Competition Risk #

• Severity: Medium.
• Likelihood: High. Mentioned competition from other brokerage houses, fin-tech companies, and investment banks.
• Trend: Stable.
• Mitigation Strategies: Focus on client coverage, service quality, and product innovation.
• Control Effectiveness: To be determined, as dependent on the success of differentiation strategies.
• Potential Financial Impact: Moderate, potential pressure on margins and market share.

Strategic and Management Analysis #

Long-Term Strategic Goals and Progress #

• Broking and Distribution: Focused on client coverage, service, and product propositions. Revenue from broking and allied activities has tripled from FY2020 to FY2024, and distribution services revenue has doubled.
• Issuer and Advisory Services: Aiming to increase deal activity and market share, with a 119% revenue increase in FY2024. Secured deals where the company was the sole banker.
• Treasury: Increased its top line by 75.3% in FY24

Competitive Advantages and Market Positioning #

• Broking and Distribution: Operates www.icicidirect.com, a leading platform, and has a physical presence in 65+ cities. The Company’s Retail Equity market share stood at 12.8% and Retail Derivative market share at 7.4%. It is also one of the largest mutual fund distributors.
• Institutional Equity: Holds high rank with domestic investors.
• Issuer and Advisory Services: Managed 31 IPOs with a 42.30% market share (by issue size) and ranked No. 1 in raising capital.

Innovation Initiatives and R&D Effectiveness #

• Broking and Distribution: Promotes SIPs through digital and customer engagement, and offers “iDirect One-Click” mutual fund baskets, demonstrating product innovation. Allied income, including Prime subscription fees, grew significantly.

Management’s Track Record in Execution #

• Broking and Distribution: Achieved a 45% increase in retail equity and allied income in FY2024, with significant growth in allied income and MTF offering.
• Issuer and Advisory Services: Revenue increased by 119% in FY2024, driven by deal activity and market share gains.
• Institutional Equity: Improved market share in the brokerage business and top procurement in IPOs.

ICICI Securities Limited (FY2024) - ESG Analysis #

Environmental Metrics and Targets #

• Targets to reduce electricity consumption by 20% and paper consumption by 35% by FY2025 (FY2019 baseline).
• FY2024 reductions (FY2019 baseline): Electricity 24%, Paper 87%, Business travel 56%.
• Transitioned all Maharashtra branches and corporate offices to “Green Energy.”

Social Responsibility Programs #

• ₹ 322.6 million invested in CSR projects, impacting ~202,000 beneficiaries. Focused on skill development, healthcare, and environmental initiatives.
• Key Healthcare Contributions: Cancer patient support, last-mile surgery and care for children, cataract surgeries, and medical equipment procurement.
• Provided access to drinkable water (impacting 1300) and sanitation facilities (impacting 144).
• Skill Development: Training for ~9000 youth from lower socioeconomic backgrounds.
• Environment Initiatives: Rainwater harvesting for ~50,000 students, organic waste management for ~1200 people.

Governance Structure and Effectiveness #

• Board composition: Five Independent Directors, two Non-Executive Non-Independent Directors, two Whole-time Directors.
• Board committees: Audit, Nomination & Remuneration, Stakeholders Relationship, Corporate Social Responsibility, and Risk Management. Majority Independent/Non-Executive Directors; chaired by Independent Directors.
• Key policies: Whistle Blower Policy, Code of Business Conduct & Ethics, Code of Conduct for Prohibition of Insider Trading.
• Executive-level ESG forum oversees sustainability issues, guided by the Board.

Sustainability Investments #

• Improvements in environmental performance (reduced energy & paper usage) and social impact (healthcare & skill development support) are highlighted.
• Skill development initiatives enhance long-term employability and economic development.

Regulatory Compliance and Policies #

• Compliance with Companies Act, 2013, and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
• Policies: Whistle Blower, Prevention of sexual harassment, Code of conduct & business ethics, Environment social & governance framework, code of conduct for prohibition of insider trading, dividend distribution, related party transactions, material subsidiaries, familiarisation programme for independent directors, compensation policy.
• Subject to regulations from SEBI, NSE, BSE, IRDA, and PFRDA.

Segment-Wise Financial Analysis: ICICI Securities Limited #

Broking and Distribution #

Management Guidance and Assumptions #

The Company’s strategy focuses on customer-centric coverage and service, leveraging its relationship teams, equity advisors, and digital platform.

Market Growth Forecasts #

Retail equity market saw recovery in FY2024 with a 38% YoY growth in Average Daily Turnover (ADTO) in the retail cash segment. Retail derivatives continued upward trend with 9% YoY growth. Customer addition (net monthly demat account addition) gained pace at 49%.

Planned Strategic Initiatives #

Continued focus on client coverage and service, deeper synergies within the ICICI Bank Ecosystem, leveraging digital capabilities to attract affluent customers, and modernizing the core technology platform.

Capital Expenditure Plans #

Implied investment in technology to support digital initiatives and platform modernization.

Efficiency Improvement Targets #

Improved customer experience and seamless delivery of products/services through digital channels are stated goals.

Potential Challenges and Opportunities #

• Challenges: Sensitivity to economic downturns and macroeconomic factors impacting capital markets, competition from other brokerage houses and fintech companies.
• Opportunities: Growing financial savings, especially in equities, and under-penetration of equity investments in India, increasing participation from retail investors. Gen Z entering earning age and being more inclined towards financial assets.

Scenario Analysis/Sensitivity #

Given its 12.8% of retail equity, and 7.4% of retail derivatives, the profitability of the segment can be impacted by market volatility.

Issuer Services and Advisory #

Management Guidance and Assumptions #

The Company aims to leverage the growth in primary market activities and its strong relationships with corporate clients.

Market Growth Forecasts #

FY2024 was a strong year for Equity Capital Markets, with significant activity in IPOs, QIPs, and other equity products.

Planned Strategic Initiatives #

Focus on managing transactions across various equity products and sectors, aiming for top procurement in IPOs.

Potential Challenges and Opportunities #

• Challenges: Dependence on the overall health and activity levels of the capital markets.
• Opportunities: Growth in the Indian economy, corporate fundraising, and increasing M&A activity can boost this segment.

Scenario Analysis/Sensitivity #

Due to a high rate of increase in revenue of 119% between FY2023 to FY2024, fluctuations in market sentiments can impact this segment disproportionally.

Treasury #

Management Guidance and Assumptions #

Manage proprietary positions and generate returns while maintaining an acceptable level of market risk.

Market Growth Forecasts #

Overall market volatility and interest rate movements impact this segment.

Potential Challenges and Opportunities #

• Challenges: Volatility in interest rates and foreign exchange rates.
• Opportunities: Effective management of proprietary positions can generate returns.

Scenario Analysis/Sensitivity #

• Sensitivity to Key Assumptions: A parallel shift in the yield curve of 2.06% could result in a P&L impact of (₹ 414.2) million for an upward shift and (₹ 520.9) million for a downward shift for FY2024. A 7.23% change in the exchange rate would have an P&L impact from (42.0) to (117.1) for FY2024.

General Notes #

The Company’s investment in technology is a cross-cutting theme, relevant to all segments. The reliance on commercial papers for short-term funding creates exposure to interest rate risk. The increase in employee benefits indicates increased spending to increase retention of key talent. The revenue from the holding company and fellow subsidiaries indicate good opportunities for growth and sales.

Segment-Wise Financial Analysis of ICICI Securities Limited #

Auditor’s Opinion and Qualifications #

• The Independent Auditor’s Report by B S R & Co. LLP issued an unmodified opinion on the standalone and consolidated financial statements, indicating a true and fair view in conformity with generally accepted accounting principles in India.
• No qualifications, reservations, or adverse remarks were reported by the Statutory Auditors. One instance of fraud, pertaining to on-boarding of Authorized Persons and buisness diversion, was identified.

Key Accounting Policies and Changes #

• The financial statements are prepared in accordance with Indian Accounting Standards (Ind AS).
• Accounting policies have been consistently applied, except where a newly issued accounting standard or a revision to an existing standard requires a change.
• No newly issued accounting standards or amendments to existing standards applicable to the Company during FY2024.

Internal Control Effectiveness #

• The auditor’s report in ‘Annexure B’ states that the Company has, in all material respects, adequate internal financial controls with reference to financial statements, and such controls were operating effectively as at 31 March 2024.
• The Statutory Auditors verified financial controls system and processes, finding them both adequate and functioning.

Regulatory Compliance Status #

• The Company has complied with the applicable Secretarial Standards.
• The Company has complied with the provisions of the Companies Act, 2013, SEBI Regulations, and other applicable laws, with some exceptions.
• The company paid penalty to the Stock Exchanges due to procedural delay and incorrect reporting under SEBI & Stock Exchange circular.
• SEBI issued an administrative warning on June 6, 2024, regarding the sharing of shareholders’ information with ICICI Bank. The company has taken steps and noted.

Legal Proceedings and Their Potential Impact #

• As at March 31, 2024, claims against the Company not acknowledged as debt amounted to ₹ 1,670.2 million.
• The Company has reviewed pending litigations and proceedings and made adequate provisions where required. The Company does not expect these proceedings to have a material adverse effect.

Related Party Transactions #

• All transactions with related parties during FY2024 were on an arm’s length basis and in the ordinary course of business.
• Approval of the Members was obtained at the AGM held on August 29, 2023, for material related party transactions with ICICI Bank Limited, exceeding the prescribed limits but not exceeding credit facilities of ₹ 60.00 billion, and for placing deposits with ICICI Bank Limited, subject to a maximum outstanding balance.
• The Board of Directors approved, subject to Member and regulatory approval, continuation of availing credit facilities and the placement of deposits with ICICI Bank Limited, which may exceed prescribed limits.

Subsequent Events #

• The Board approved the payment of a second interim dividend of ₹ 17.00 per equity share for FY2024 on April 18, 2024, which has not been recognized as a liability as of the reporting date.
• The Scheme of Arrangement for delisting the Company’s equity shares is pending approval from the Hon’ble National Company Law Tribunals, following shareholder approval on March 27, 2024.

Analysis of Accounting Quality and Regulatory Risk Assessment #

• Accounting Quality: The unmodified audit opinion and consistent application of accounting policies, suggest a high quality of financial reporting. The Company uses SAP and has General IT Controls (GITCs) to mitigate the risks and gaps related to automatic control system.
• Regulatory Risk: The Company is generally compliant with regulatory requirements, though there are areas of concern. There is a pending implementation of the delisting of equity shares, which is awaiting regulatory approval. There has been a warning from SEBI which presents the Company with regulatory risk. The penalties paid to stock exchanges for procedural reporting delays, and the SEBI administrative warning regarding shareholder information sharing, may indicate areas where enhanced compliance procedures are necessary.