Mutual funds have been buying shares of ICICI Securities, even as the company plans to delist from the stock market. This decision has raised eyebrows because the funds paid a premium for these shares compared to what they would receive if the delisting happens. For every 100 shares of ICICI Securities, shareholders will receive 67 shares of ICICI Bank, which is a share swap ratio of 0.67.
Despite this, ICICI Securities shares traded at a higher price than this swap ratio during February. This means mutual funds may be expecting the delisting to fail, which is why they are investing in the brokerage firm.
Some market watchers suggest that mutual funds might be hoping that shareholders will vote against the delisting, as they believe ICICI Securities is more valuable as a standalone company. If this happens, the price of ICICI Securities shares will likely rise, benefiting the funds’ clients.
However, the spread between ICICI Securities and ICICI Bank shares was negative in February, which meant there was no opportunity for arbitrage.
Several mutual funds, including UTI Banking and Financial Services Fund, Kotak ELSS Tax Saver Scheme, and Axis Quant Fund, bought shares of ICICI Securities in February, worth over ₹75 crore. Interestingly, these funds did not have any exposure to ICICI Securities before February.
The delisting proposal by ICICI Securities is up for a vote between March 22 and March 26, with a meeting scheduled for March 27. Only minority shareholders, who collectively own 25.23% of the company, can vote on this resolution, while ICICI Bank holds the remaining 74.77%.
Proxy advisory firms have supported the delisting, but many public shareholders are unhappy with the valuation. Retail shareholders have expressed opposition to the delisting on various social media platforms.
Despite the concerns, some experts believe that the delisting could still happen and may benefit minority shareholders in the long run. After delisting, ICICI Securities will become a wholly-owned subsidiary of ICICI Bank, providing stability during market downturns and access to additional services like wealth management and lending.
Overall, the fate of the delisting resolution remains uncertain, pending the outcome of the shareholder vote.
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