ICICI Securities Ltd - Research Report

Private Client Research




Finance - Stock Broking

CMP (Rs)



ICICI Securities Ltd


March 25, 2020

Sensex: 28535.78

CNX Nifty: 8317.85


BSE: 541179

Current MCap (in Rs. Crores)
Expected MCap (in Rs. Crores)
Investment Duration
10 Years


March 25, 2020



CNX Nifty








Stock Data

CMP (Rs)
Face value (Rs)
52 Week Range (Rs)
524.65 - 195.30
Market cap (Rs Crores)
Price To Book Value (x)
P/E Ratio (x)

One Year indexed Stock Performance

ICICI Securities Ltd Sensex
ICICI Securities Ltd
Return (%)


(in %)

+91 22 6639 3000



ICICI Securities (I-Sec) is a part of the ICICI Group and India's leading retail led equity franchise, distributor of financial products, and investment banker.

I-Sec is a technology-based firm offering a wide range of financial services including institutional broking, retail broking, investment banking, private wealth management, and financial product distribution.

I-Sec operates www.icicidirect.com, India's leading virtual financial supermarket, meeting the three need sets of its clients- investments, protection, and borrowing. Through its three lines of businesses - broking, distribution of financial products, and investment banking, I-Sec serves customers ranging from the retail and institutional investors, corporate, high net-worth individuals and government.


Retail brokerage
The company’s brokerage and distribution business is anchored by its retail customers, to whom it offers products and services through the electronic brokerage platform and various distribution channels. The company earns brokerage fees based on the volume and size of its customer’s transactions. The primary brokerage products offered to customers are trading equities, equity derivatives, currency derivatives, ETFs and overseas securities.

Institutional Brokerage
The company offers domestic and international institutional clients brokerage services and is empanelled with a large cross section of institutional clients. The company provides solutions like block deals, which provide liquidity and enable its clients to trade on Indian stock exchanges as per their specific requirements.

Distribution of Financial Products
I-Sec is a leading distribution franchise, being the second largest non-bank mutual fund distributor based on revenue. The company’s distribution business primarily consists of the distribution of financial products and services offered by third-parties to its customers. These products include mutual funds, life and general insurance, corporate fixed deposits, loans, tax services and pension products. The company earns commission from third-parties for the distribution of their products.

Private Wealth Management
The Private Wealth Management business focuses on servicing the company’s high net worth clients by providing them with innovative products along with a robust execution and advisory platform.

Corporate Finance
The company’s investment banking business consists of equity capital markets (ECM) services and financial advisory services that cater to corporate clients, the government and financial sponsors.

Management Team

Mr. Vijay Chandok
He is the Managing Director & Chief Executive Officer of the Company. Prior to joining I-Sec, Mr. Chandok served as the Executive Director of ICICI Bank Limited, responsible for International Banking, Small and Medium Enterprises (SME) businesses, global markets and commercial banking businesses of the bank.

Mr. Ajay Saraf
He is an Executive Director of the company. He currently heads the investment banking and institutional broking divisions at the company. He has over 25 years of experience and has been associated with the company for over eight years. He has previously worked with ICICI Bank Ltd. for nine years in corporate banking and SME banking verticals.

Mr. Harvinder Jaspal
He is Chief Financial Officer of the company. He has over 18 years of experience. He has previously occupied the position of Head-Finance & Accounts at ICICI Prudential Life Insurance Co. Ltd.

key beneficiary of consolidation in industry, stricter SEBI norms and financialization of savings

Enhancing experience and deepening engagement with customer’s
I-Sec has aligned its business model with the changing aspirations and needs of the customer by focussing on the twin strategies of customer acquisition and engagement.
With the objective of faster client on-boarding, I-Sec has deployed T20 digital process of client acquisition, resulting in customers being able to trade within 20 minutes in Equity and MFs as compared to two days through the physical mode.
With digital integration emerging as a vital pillar of customer connect in the new-age business environment, I-Sec has launched a new website interface which is aligned to changes in customer behaviour, and focuses on asset allocation and tools to assist in decision-making.

Increase in market share of large brokers
Investors have lost confidence after the Karvy Stock Broking and BMA Wealth Creators fraud where clients securities were pledged without their consent. Such scam will expedite consolidation in the broking industry. Investors are likely to do business with trusted brands with strong governance practices. I-Sec can be one of the biggest beneficiaries of this consolidation.

Huge opportunity in tapping ICICI Bank’s existing customers
I-Sec has recently entered into a revenue-sharing arrangement with ICICI Bank to boost its client acquisition efforts, both quantitatively and qualitatively, similar to a business partner channel agreement. This move has helped augment customer acquisition and improve quality of customers by tapping existing bank customers, while the bank will benefit from revenue addition and liability pool.

Expansion of product portfolio
During 2019, I-Sec expanded its product portfolio by foraying into PMS (portfolio management service) and health insurance through tie-ups with Religare Health Insurance co. ltd. and Star Health and Allied Insurance co. ltd.

Wide distribution network
The company is a leading distribution franchise, being the second largest non-bank mutual fund distributor. I-Sec has one of the largest pan-India distribution networks of around 200 ICICIdirect offices in over 75 cities, 7,100+ sub-brokers, authorised persons, Independent Financial Associates (IFAs), Independent Associates (IAs) and presence in 3,750+ ICICI Bank branches.

Innovative offerings
ETF - Intelligent Portfolios (EIP)
I-Sec recently launched a unique investment product called ‘EIP’, that invests in a multi-asset basket of low cost Exchange Traded Funds (ETF) based on the client's risk profile. The investments in this portfolio are monitored daily and the allocations are adjusted based on market conditions so that the investor remains within his or her risk tolerance limit at all points of time.

SIP Protect
SIP Protect is Systematic Investment Plan (SIP) with added Term Cover without any extra cost for Investors. I-Sec has recently launched a unique investment plus protection product ‘SIP Protect’, which offers life insurance cover based on the investors SIP investments. I-Sec is amongst the first online distributors to offer this product, which is being made available through the icicidirect.com platform.

To address the immediate liquidity requirements of retail customers, this new product allows customers to receive payouts into their linked bank account within 30 minutes of their trade, which otherwise takes over two days. This facility comes at no additional cost and has a daily limit of Rs.50,000.

I-Sec has launched a unique offering for its private wealth clients, called Direct2U, under its investment advisory services. This offering leverages the powers of technology, advisory and transparent pricing to enable clients to invest digitally in direct schemes of mutual funds, through the ICICIdirect platform for a fee. Direct2U brings to clients process-based risk assessment, defined asset allocation strategies and active investment advisory.

Rising commitment to MF investments through Systematic Investment Plans (SIPs)
Continuous investor education via industry body Association of Mutual Funds in India (AMFI), by individual MFs, as well as SEBI has contributed to a significant awareness amongst retail investors about mutual funds and SIPs as a convenient and disciplined approach to investing in equities on a periodic (weekly, fortnightly, monthly) basis. Under guidance from SEBI, industry umbrella body AMFI began the ‘Mutual Funds Sahi Hai’ (‘Mutual Funds Are Good’, also translates as ‘Mutual Funds Are the Right Choice’) campaign. Over the past two years, the campaign has penetrated multiple media platforms through its eye-catching adverts explaining various aspects of MF investing.
I-Sec’s SIP count saw robust growth over the years growing from 2 lakhs as on March 31, 2015 to 6.3 lakhs as on March 31, 2018 and to 6.7 lakhs at March 31, 2019.

Beneficiary of fundamental transformation in the Indian savings environment
India has historically been and is expected to remain a savings economy. The gross domestic savings rate (as a percentage of GDP) is higher than those of major economies such as the US, the UK, France, Japan and Germany. Indians traditionally have been great ‘savers’ but not good investors. Both the terms used to be confused with each other and most of the savings went into gold, real estate and fixed deposits. However, what is happening now is nothing short of a revolution with people preferring more of financial assets as compared to physical assets and within the realm of financial assets, the allocation towards smarter investment products like mutual funds, PMS, is increasing compared to fixed deposits.

Covid-19 impact
SEBI and the government have decided to keep markets open as usual and states like Maharashtra, Gujarat and Rajasthan have declared stock broking as an essential service. Increased market activity triggered by high volatility will benefit brokerages.
Because of unprecedented fall in stock markets coupled with present lockdown leading to liquidity crunch and credit freeze, it is difficult for small brokers to fulfil their settlement obligation with increased mark-to-market pressure. We believe that players with strong digital capabilities will gain market share from this pandemic.


Market Risk
In case of extreme volatility, the upfront margin collected from clients may not be sufficient to cover the losses arising out of market movements which may in turn lead to losses to the company. I-Sec also carries some market risk pertaining to its proprietary trading activities.

Credit Risk
I-Sec is exposed to credit risk on account of investments by treasury group in fixed income instruments. The company is also exposed to credit risk arising out of receivables from its customers.

Competition from discount brokers
Broking industry is currently facing pressure on account of increased competition from discount brokers.

Increased adoption of direct mode of investing in mutual fund schemes
A greater number of retail investors are using the direct route to invest in equity schemes (9 per cent in 2019 from 5 per cent in 2015). Accelerated adoption of direct mode will have a negative impact on distribution income.


Broking Industry in India
The average daily traded volumes (ADTO) for the equity markets during FY2019 stood at Rs.9.93 lakh crore, up 46% YoY from Rs.6.79 lakh crore in FY2018. The overall Cash market ADTO reported growth of 7% YoY at Rs.35,180 crore in FY2019. However, the absolute growth was affected due to decrease in delivery-based trade, which saw de-growth of 8.2% YoY to Rs.8,854 crore v/s 26% growth in FY2018. Amongst cash market participants, retail constitutes 53% of total cash volume, institution constitutes 25% of total cash volume and proprietary constitutes 20%. The increase in demat accounts during the year stood at 12%. Further, despite the high competition, the brokerage industry over the years has consolidated in favour of larger brokers. As a result, the market share of the top five brokers increased from 15% of the trading turnover in the NSE cash equities market in FY2015 to 22% in FY2019. The top 25 brokers accounted for 54% of the trading turnover in the NSE cash equities market in FY2019.

Distribution of Retail Financial Products
Post demonetization, there has been a continued shift from savings in physical to financial assets, which is reflected in the strong domestic inflows in markets. Mutual Funds (Equity) witnessed 22.0% growth in Average Assets under Management (AAUM) in FY2019 despite market volatility primarily due to persistent SIP inflows. The key highlight of FY2019 was the surge in the number of folios and persistent SIP inflows.
In the life insurance space, new business premiums during FY2018-19 grew by 8.99% within which private sector life insurance industry registered a growth of 12.49%. In the Health Insurance space, premiums grew by 37% YoY in FY2019.
FY2019 saw NBFCs resort to long term borrowings. Issuances of Non-Convertible Debentures (NCDs) increased to 24 in FY2019 with issue size of close to Rs.524 billion as compared to 7 issues in FY2018 with an issue size of Rs.80 billion.

Wealth Management Industry in India
The Indian Wealth Management industry is one of the most rapidly growing industries in India. The huge potential of this industry can be established through the rapidly expanding High Net worth Individuals (HNI) base in India. The Indian Wealth Management market is on a sustained path of growth, given India’s long-term economic prospects, positive demographics, rising income levels and current low penetration of this industry. India is currently ranked among the Top 10 nations in terms of total private wealth held as per Capgemini’s World Wealth report. The aggregate wealth held by Indian HNIs is expected to grow at a CAGR of 27% for next five years.

PMS Industry in India
Portfolio Management Services (PMS) is a most versatile investment vehicle. It is the most suitable investment vehicle for meaningful/concentrated, benchmark-agnostic, bottom-up stock picking. This merit has led to PMS being the vehicle of choice for investors, who are seeking differentiated portfolios based on bottom-up stock picking.
On a five-year CAGR, PMS service providers across categories (large cap, mid cap, small cap and multi cap) on an average have outperformed benchmark returns and delivered anywhere between 3.5 per cent and 9 per cent excess returns over the benchmark index. The strong performance over this period fuelled further inflows.


Profit & Loss Statement

(Rs Crores)

Particulars FY17 FY18 FY19 FY20 FY21 FY22 FY30
Net Sales 1404.23 1861.01 1705.65 1708.61 1872.19 2039.74 4387.49
Growth % 27.00% 33.00% -8.00% 0.20% 10.00% 9.00% 9.00%
Employee Cost 484.66 550.35 554.49 546.76 580.38 611.92 1316.25
Operating Expenses 222.50 258.03 229.09 170.86 187.22 203.97 438.75
Other Expenses 130.61 135.44 130.00 136.69 149.78 163.18 351.00
Total Expenditure 837.77 943.82 913.58 854.30 917.38 979.08 2105.99
EBITDA 566.46 917.19 792.07 854.30 954.82 1060.67 2281.49
EBITDA Margins % 40.00% 49.00% 46.00% 50.00% 51.00% 52.00% 52.00%
Depreciation 15.48 15.30 14.95 56.00 57.47 59.00 73.17
EBIT 550.98 901.89 777.12 798.31 897.34 1001.66 2208.32
Other Income - - 22.45 17.22 - - -
Interest 28.94 49.50 42.34 94.26 106.79 125.93 366.10
Profit before Tax 522.04 852.39 757.23 721.27 790.55 875.74 1842.22
Provision for Tax 183.45 298.92 266.50 180.32 197.64 218.93 460.56
Profit after Tax 338.59 553.47 490.73 540.95 592.91 656.80 1381.67
EPS 4.20 17.18 15.23 16.79 18.41 20.39 42.89
Source: Stockaxis Research, Company Data

Balance Sheet

Share Capital 161.07 161.07 161.07 161.07 161.07 161.07
Total Reserves 686.59 886.20 1061.26 1288.46 1537.48 4762.75
Shareholder's Funds 847.66 1047.27 1222.33 1449.53 1698.55 4923.82
Trade Payables 611.68 2336.20 854.30 936.10 1019.87 2193.74
Borrowings 672.42 447.30 1380.14 1587.16 1825.24 5583.44
Provisions 53.47 66.36 60.14 63.84 67.31 144.79
Other financial liabilities 167.67 234.72 187.95 205.94 224.37 482.62
Other non-financial liabilities 520.95 532.74 512.58 561.66 611.92 1316.25
Total Liabilities and Equity 2873.85 4664.59 4217.45 4804.23 5447.26 14644.66
Net Block 40.62 46.32 198.48 203.89 209.48 261.61
CWIP 1.51 1.24 3.09 3.09 3.09 3.09
Sundry Debtors 310.10 476.98 461.32 505.49 550.73 1184.62
Cash and Bank 1545.97 3148.63 2002.18 2325.07 2674.93 7420.08
Loans & Advances 616.15 659.58 1210.65 1392.25 1601.08 4897.75
Other Financial assets 125.29 84.49 102.52 112.33 122.38 263.25
Other non-financial assets 234.21 247.35 239.21 262.11 285.56 614.25
Total Assets 2873.85 4664.59 4217.45 4804.23 5447.26 14644.66

Cash Flow Statement

Particulars FY18 FY19 FY20 FY21 FY22 FY30
Profit Before Tax 852.39 757.23 721.27 790.55 875.74 1842.22
Adjustment 80.11 69.11 133.04 164.27 184.93 439.27
Depreciation 15.30 14.95 56.00 57.47 59.00 73.17
Interest Expeses 48.33 41.26 77.04 106.79 125.93 366.10
Other Adjustments 9.17 7.85 - - - -
Changes In working Capital -539.26 1755.47 -2328.62 -215.31 -236.83 -663.26
Cash Flow after changes in Working Capital 393.24 2581.81 -1474.32 739.51 823.83 1618.24
Tax Paid -322.11 -292.52 -180.32 -197.64 -218.93 -460.56
Cash From Operating Activities 71.13 2289.29 -1654.63 541.87 604.90 1157.68
Cash Flow from Investing Activities -21.04 -20.77 -4.43 -5.41 -5.59 -7.32
Cash from Financing Activites 6.35 -561.48 524.83 -243.66 -268.80 -439.19
Net Cash Inflow / Outflow 56.44 1707.04 -1134.24 292.80 330.51 711.17
Opening Cash & Cash Equivalents 120.63 177.07 1884.11 749.87 1042.67 4665.72
Closing Cash & Cash Equivalent 177.07 1884.11 749.87 1042.67 1373.18 5376.89


I-Sec has emerged as a financial conglomerate engaged in various businesses from broking, wealth management to lending. Despite intense competition in the broking industry, the company has retained its market leadership position. I-Sec has built a strong distribution book and is rapidly building loan assets which will drive earnings going forward and reduce the cyclicality of capital markets in earnings. The company is one of the leaders in ECM (Equity Capital Market) while it is strengthening its advisory practice. We believe that I-Sec will be a key beneficiary of consolidation in industry, stricter SEBI norms and financialization of savings.

I-Sec is a strong franchise, run by strong management team with focus on innovation and adding value to its services. With huge headroom available for growth, market leadership position, and successful diversification, we expect I-Sec to grow 10x from its current market capitalization.