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ICICI Securities Ltd Q4FY21 Concall Highlights

ICICI Securities Ltd Q4FY21 Concall Highlights

Published on 28 June 2021

Q4FY21 Financial Highlights:

  • Q4-FY21 revenue stood at 7.4bn, a growth of 53% YoY.  
  • The retail brokerage revenue grew by 38%, allied broking revenue, which is a diversification initiative, grew by more than 100%. Distribution revenue grew by 22%, private wealth revenue grew by 82%, institutional equity revenue grew by 30%, and issuers services and advisory services income grew 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 cost to income ratio to 40% and increasing ROE further to 81%.

 

FY21 Financial Highlights:

  • 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:

  • 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 a plethora of tools and solutions like iTrack, iAlert, iLens, and Payoff analyzer 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 together are now 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. 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 to note 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 which is 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. The company added approximately 145k NSE active customers in March, achieving an incremental market share of ~16% in March 2021, up from ~1.5% in April 2020. 
  • Over 5.3mn new Demat accounts were opened in 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 as 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 also.
  • Cash constitutes over 50% of total Retail Broking revenue. The contribution of Delivery trades to overall cash trading revenue is over 50%. 
  • MTF yields are starting at 8.9%. ISEC’s MTF market share has risen to 19.3% from 18.5%.

 

 

Business updates:

  • 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 as compared to the industry.
  • The company launched a global investment platform that has attracted ~3,900 customers and remittances of ~$ 14Mn and also 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%. 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:  

  • The ‘NEO’ plan has helped counter competition from discount brokers as well as 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:

  • 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. 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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