ICICI Securities Ltd- Playing the financialization theme

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Because of the competition faced from discount brokers, the yield has declined as full service broker such as ICICI Securities Ltd also have reduced their commission. But given the factors mentioned above in the “Future growth drivers”, their overall revenue growth is likely to continue more likely with the market. As of now the growth in the level of transaction is just cushioning the drop in yields. The full potential will be seen when the market stabalizes and gets into a bull phase. With Schemes such as ‘Prime’, ‘Prepaid’, ‘eATM’ and ‘Options 20’, they are trying to ring fence their customers. 

AND MOST OF THE NEW INITIATIVES HAVE BEEN TAKEN IN THE LAST 1-1.5 YEARS. IT WILL TAKE SOME TIME TO SEE HOW THOSE GIVES OUT RESULTS. SINCE, THEY ARE TAKING A LARGE NUMBER OF INITIATIVES, A FEW WILL BE DEFINITELY START GIVING RESULT, PUSHING THE GROWTH OF THE COMPANY. Prime has already started to show results(As on Q4FY20, it had 3.1 lakh prime members).

This is a cyclical business which moves with the market phases. But the company is trying to reduce the cyclical part by introducing lending, distribution products. Given the diverse product portfolio the company has, they focus on cross-selling its various products to its customer. Also, trying to bring in recurring revenue sources: The share of recurring revenue has been increasing and stood at 58% as of FY20(which includes regular SIPs, Insurance premium, prepaid plans etc). A higher share of recurring revenue reduces volatility of earnings.

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Strong parentage of ICICI Bank and ICICI brand name helps to win over competition to some extent. Also, the focus of the parent to grow the subsidiary business is of immense value. Reaching out to existing customer of ICICI Bank(specially wealthy ones) to open an account with I-sec is likely to source quality clients and can be a potential game changer. Opening the ICICI direct platform to other bank’s customer opens up a big untapped opportunity.

The company is rightly placed with all the products and have been able to grow despite the headwinds. Everyday 1000+ accounts are getting added and of which 30% are different bank account holders other than ICICI which is an encouraging sign. 

A large part of the business is similar to lending business of NBFCs/Banks/ Gold financing. Not much differentiation in products. EVERYTHING BOILS DOWN TO EXECUTION & VALUE ADDITION. They have brought various counter products to tackle the competition by tech only platforms.

Going forward they want to be viewed as a one-stop shop for anyone’s financial need and have products across all age groups and classes rather than just a brokerage houses. 

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I would say, it is not an exceptional company as there can only be a few but a good company with good scope for growth if bought at right prices.

Whether I invest or not but I am definitely going to open an account with them.

 



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Shekhar Yadav
It was only during the third semester in Engineering that Shekhar overheard a Gujarati guy in his class discussing stocks. After a few discussions with him, he realized that this was what he wanted to do in his life.
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