We all woke up to this 11.52PM exchange filing that the board of ISEC is going to consider a voluntary delisting on June 29,2023. This is a most strange corporate development from the stable of ICICI Bank which has never attempted such a move for any of its listed subsidiaries, let alone itself. So here is my rational and what I believe might be the course or events.
Firstly, for those of us who remembered the failed Vedanta delisting story will recall that the trigger for such a move is depressed price behaviour. Vedanta went up 3.5x in the next one year following the failure of its delisting offer at ₹87/- share. So one primary trigger is that ISEC is horribly undervalued and I have long held that view in multiple earlier blogs.
Now let’s discuss the motive. Vedanta has a promoter who wanted to gain at the cost of minority shareholders but in this case, promoter is ICICI Bank, an institution with no one person or a group of persons as beneficiary. Also, the management with hefty ESOPs can only make money if they can exercise the right to sell for which a listing is essential. Otherwise, all your ESOPs are worth a lot but essentially locked and illiquid. Second, once you delist, you can’t relist for another three years at least. So the current management will be extremely foolish to give up its liquidity for a better life.
The second point is negated to the extent that this is a swap delisting and not a cash for share one. So in the swap ratio to be decided in the board meeting, we will get ICICI Bank’s shares in return.
One thing is certain- Unless the price at which ICICI securities is delisted, if it does get delisted, is at a significantly high premium to today’s price, yes even today’s 620₹ is nothing; the premium ICICI Bank gets for its corporate governance will erode tremendously. Simply because the bank shares are at a lifetime high while the securities shares are trading at the pit bottom. So if they cash out at the retailer’s cost, forget about the potential ICICI AMC listing.
The fact stands that the company is marching ahead at this point and the eyes are on the outcome of the June 29th meeting. I opine that unless they announce a 1:1 swap, valuing the company at around ₹900, there will be a disappointment and it will be seen as a steal deal. I’m not sure if I really know how it will play out but I for certain has been a big believer in the ISEC potential and feel a bit cheated for we are at the beginning of a revival and the shares would have taken care of themselves!
Coming back to what the markets are sensing- today, over 1.6 crore shares worth ₹1000crore plus traded hands and the stock still closed up 11%. On a decent day, hardly one lakh shares used to trade. I believe we’re going to witness at least a ₹100 move more going into the 28th for anybody and everybody, including the institutions who wanted to sell have sold today. 1.6crore is 20% of the available float and is more than 80% of the total shares held by public. So it just wasn’t the retail fishing today. Someone big went in to buy big. I can smell 💰 here! So exciting times ahead!
Life is all about Compounding! 