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ICICI Securities Stock Analysis Q4FY21 - ICICI Securities Share Analysis | Invest Yadnya

ICICI Securities Ltd Q4FY21 Concall Highlights

Published on 28 June 2021 Views 31 Comments 0

Q4FY21 Financial Highlights: ICICI Securities Analysis, ICICI Securities Research Analysis & ICICI Securities Fundamental Analysis 

  • Q4-FY21 revenue stood at 7.4bn, a growth of 53% YoY.  

  • The retail brokerage revenue grew by 38%, allied broking revenue, a diversification initiative, grew by more than 100%. In addition, distribution revenue grew by 22%, private wealth revenue grew by 82%, institutional equity revenue grew by 30%, and issuers services and advisory services income increased by more than four times.

  • EBITDA stood at 4.8 bn, a growth of 92% YoY.

  • Profit after Tax stood at 3.3bn, a growth of 111% YoY.

  • The company continued to focus on enhancing operating leverage, resulting in a reduction in branch and employee count, consequently bringing down the cost to income ratio to 40% and increasing ROE further to 81%.

FY21 Financial Highlights: ICICI Securities Analyst Report 

  • Total revenue increased 50% YoY to 25.8 bn.

  • Profit before Tax stood at 14.3bn, a growth of 90% YoY.

  • EBITDA stood at 15.9 bn, a growth of 77% YoY.

  • Profit after Tax stood at 10.6bn, a growth of 97% YoY.

  • The client base has increased to 5.4mn in FY21.

  • Assets of clients with the company grew by 85% to over 3.8 trillion.

Strategy: ICICI Securities Brokerage 

  • The company has adopted a multi-pronged approach/twin strategy for this important business segment. First, they have launched Neo, an extremely competitive plan targeted at attracting this price-sensitive trading segment. 

  • Second, they have launched many tools and solutions like iTrack, iAlert, iLens, and Payoff analyser, which are important enablers for this segment.

  • It may take a few quarters to witness the impact of measures to gain volume market share.

  • The company has diversified its sourcing mix with non-ICICI Bank sourcing channels, i.e. digital sourcing, business partners channel, and own RM network, contributing more than 55% of accounts sourced.

  • The persistent focus on quality has helped the company to achieve an activation ratio of 84% for the quarter ended Mar 31, 2021.

Digitalization:

  • More than 96% of mutual fund transactions and virtually all equity transactions are done online.

  • The company now distributes more than 50 products and services through the platform. In addition, digital sourcing engines have started adding customers at a faster pace and have helped the company more than triple monthly sourcing run rates.

  • It is also interesting that ~52% of the customers acquired in FY21 were below 30 years of age, and more than 65% came in from tier II & III cities.

  • The management said ISEC holds the float in the digital acquisition model.

Growth Numbers: 

  • The company added ~3.5 lac customers in the current quarter, driven by the digital channel adding ~ 2.25 lac customers, up from ~38,000 in Q3FY21.

  • NSE active client base growing by 47% YoY to 1.58 million as of Mar 31, 2021. In March, the company added approximately 145k NSE active customers, achieving an incrementalmarket share of ~16% in March 2021, up from ~1.5% in April 2020. 

  • Over 5.3mn new Demat accounts were opened this quarter, and equity and derivative ADTO increased by 70% and 120% YoY, respectively.

  • Buoyancy in equity capital markets continued and saw 45 deals in the current quarter compared to 13 in Q4-FY20.

  • Leverage, tools, and pricing are the three competitive vectors in the F&O segment. Historically, ISEC used to compete on leverage, but now it will work on the other two.

  • Cash constitutes over 50% of total Retail Broking revenue. The contribution of Delivery trades to overall cash trading revenue is around 50%. 

  • MTF yields are starting at 8.9%. As a result, ISEC’s MTF market share has risen to 19.3% from 18.5%.

Business updates: ICICI Securities Share Price  & ICICI Securities Share Target 

  • Industry cash ADTO moderated in Mar’21 (when the regulatory norms on margin funding further tightened) while F&O ADTO remained unaffected.

  • A slight decline in market share in the F&O segment in Mar’21 is due to higher leverage and a greater share of intraday products than the industry.

  • The company launched a global investment platform that has attracted ~3,900 customers and remittances of ~$ 14Mn and expanded its portfolio by launching commodities, where they have added 50k customers since its launch.

  • Partnership with Federal Bank for offering 3-in-1 accounts will add momentum to the diversification of new account sourcing going forward.  

  • The management said that a one-click investment for MFs on its app is the key reason for market share growth in SIP.

  • ARPU for active retail customers reported 16% growth to 10.1k YoY in FY21 from 8.7k in FY20.

  • The minor loss in cash volumes market share is due to intraday trades rather than delivery trades.

  • The company is disbursing INR5b loans per month v/s INR2-2.5b earlier. It has tie-ups with eight different financiers. Typically, ISEC earns 75-125bp as fees on these disbursements.

  • The sustainable employee cost-to-income ratio would be 25-27%. Therefore, the overall C/I ratio would not be sustainable at 4QFY21 levels of 40%.

  • ISEC expects the customer acquisition run-rate of 100k per month to continue.

NEO Plan: ICICI Securities Stock Analysis 

  • The ‘NEO’ plan has helped counter competition from discount brokers and some traditional brokers who offer discount plans. The digital sourcing model gains strong traction in terms of customer acquisition.

  • The NEO plan is being offered to all customers where they charge 20 for intraday equity, 20 for intraday options, and zero for futures.

  • About 60k customers have subscribed to the plan so far. There is a one-time fee of INR300.  

Other updates: ICICI Securities Share Analysis & ICICI Securities Swot Analysis 

  • During the down cycle of the past two years, the company took several initiatives to make its business leaner and well-geared for the upcycle. As a result, initiatives such as the tie-up with ICICIBC, ‘Prime’, ‘Prepaid’, and ‘Options 20’ models, etc. have started to yield results.

  • Post COVID-19, the Retail Brokerage segment in India has benefitted from tailwinds of increased trading activity from retail customers, especially in Tier II and III cities.

  • Customer acquisition for the industry has seen an upsurge over the past nine months. ISEC is well-placed to benefit from sectoral tailwinds

  • Tie-up with FB for a 3-in-1 account is similar to that with ICICIBC. The customer float remains with the bank and not with ISEC. Revenue share with FB is the same as that with ICICIBC (35%/25% of revenue sharing in the first/second year).

  • Annual subscription revenue from Prime clients stands ~INR600m.

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