ICICI Securities IPO recommendations: Expensive but analysts positive


ICICI Securities – India’s largest equity brokerage house – is scheduled to launch its maiden public offer today. The company behind ICICIdirect brand has priced the offer in the range of INR519 – 520 per share and applications can be made for 28 shares or its multiples thereafter. The offer is purely a sale by ICICI Bank and the company will not get any funds from the IPO. Several brokerage houses have come up with their research reports on the IPO and the recommendations are largely positive. Although several analysts have highlighted the IPO’s high pricing as a negative, they have noted that the company stands to gain further from retail investors’ growing interest in equity markets. Here is a quick overview of ICICI Securities IPO recommendations by major brokerage houses.

GEPL Capital sees several positives for India’s biggest equity broker including benefits from financialization of household savings and distribution of other financial products. “ICICI Securities Ltd (I-Sec) stands to gain from operating leverage. At a P/E of 32xs of annualized FY18 EPS. We believe that I-Sec is at a discount compared to its peers. We assign a Subscribe rating to the IPO,” said the brokerage house in its IPO review.

Jatin Damania of Kotak Securities has put a subscribe rating on the upcoming IPO. “At the higher end of the issue price of Rs 520 per share, the stock is being offered at 31.5x 9MFY18 annualized earnings. In the past two years, the broking industry in India has witnessed growth in terms of increase in new accounts, higher income from distribution business and sharp rise in primary market transactions. Activities in the capital markets business will remain a direct beneficiary of an improving macro environment, shift from physical assets to financial assets and stable government and its policies. Given ICICI Securities presence across the different segment and its customer base helps the company to explore new opportunities. We recommend Subscribe to the issue,” recommended its research note.

Asit C Mehta is also positive on the public offer while pointing out full valuations at the current price. It has recommended investors to Subscribe for Long Term. “ICICI Securities is one of the leading broking houses with highly integrated technology based platform, ICICIdirect. They offer diversified range of financial products and services and have forte in retail broking services, which have ample growth opportunities with increasing investments from the households. At an upper price band of Rs.520, the asking price of ICICI Securities’ stock is at a P/E of 31.55x on FY18E EPS of Rs.16.48 making it fully valued. We recommend to SUBSCRIBE the issue with a long-term perspective,” said the brokerage house’s note on ICICI Securities IPO review.

Way2Wealth is also in the list of brokerage houses with positive ICICI Securities IPO recommendations, although it warned gains might be limited due to premium pricing. “At the price band of `519-520 the issueis priced at ~34.8x its TTM-Dec-17 earnings and ~24.8x its book value as on Dec-17. ISL 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. However, as 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,” noted analyst Chintan Gupta in his analysis of ICICI Securities IPO.

Canara Bank Securities is bullish on ICICI Securities’ prospects. “ICICI Securities Ltd has an EPS of 10.51 and book value of 14.99 for FY17 earnings and at the upper end of the price band the company would trade at P/E of 49.47x and P/B of 34.69. Considering the past growth rate and huge untapped potential, one may subscribe to the IPO for long term gains,” said its IPO note.

ICICI Securities IPO recommendations: Not everyone is bullish

Fair valuations leave little upside for investors, argues SSJ Finance & Securities which has an Avoid rating on the IPO. “ICICI Securities has reported a CAGR of 18.8% and 47.4% on revenue and net profit fronts respectively over FY2013-2017. On its upper band of price of Rs 520, the issue is priced at PE ratio of 31.5x of its 9MFY2018 EPS of Rs 12.4. We believe IPO is fairly valued giving little upside to investor. Hence, we recommend to Avoid the IPO,” said the research house.

As one can see, equity research analysts are bullish and there is a small premium in grey market as well but consensus is towards limited gains. Feel free to visit this page to see what fellow investors think about the company and the IPO.


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