ICICI Securities (I-Sec), a part of the ICICI Group and India’s leading retail led equity franchise, distributor of financial products, and investment banker, today announced its financial results for quarter ending September 30th 2019 (Q2FY20).
The company reported consolidated revenue of ` 418 crore in Q2FY20, against ` 458 crore in Q2FY19, a decline of 9% due to decline in retail broking revenues and regulatory changes in Mutual Funds distribution business. Consolidated Profit after tax (PAT) for Q2FY20 stood at ` 135 crore, up 1% against same period last year.
Sequentially revenues and PAT are up 4% and 19% respectively.
Continuing with its stated objective of running an asset-light, high-RoE operations with a high dividend payout model, I-Sec declared an interim dividend of ` 4.25 per share, against Rs 3.70 per share declared in Q2FY19. The dividend payout ratio (excluding dividend distribution tax of 20%) stands at 55%. Our Return on Equity (RoE) continues to remain robust at ~ 48% (annualized for Q2FY20).
The company remains committed to pursue cost efficiency and has reduced cost by 7% YoY by undertaking a number of initiatives like rationalizing branch network (Q2FY20 branch count at 187, vs 202 in Q2FY19), centralizing certain verticals to optimize infra and manpower cost, process re-engineering, harnessing group synergies, and migrating to digital/low touch coverage model.
Business Highlights
In Broking, I-Sec has over 4.6 million operational accounts, of which about 92,000 were added during the quarter. The company has 1.3 million active clients (those who have traded in the last 12 months across any product category) and 0.9 million NSE active clients (those who have traded on the NSE in the last 12 months), accounting for 10.07% NSE market share, a 21-month high figure.
During the quarter, I-Sec’s blended equity market share grew by 90 basis points on-year to 8.7%.
The ICICI Bank-led customer acquisition arrangement is ramping up well and is helping the company target affluent and investment oriented clients. ICICI Bank sourced client activation rates was 46% in Q2FY20, up from 33% in Q2FY19. The company is intensifying its focus on acquiring the NRI diaspora, a huge and under penetrated opportunity.
With a view to make onboarding of clients more efficient, I-Sec has launched tab based (assisted model) and online (self-help) instant account opening processes, which allow customers to begin trading within 20 mins. The net client addition from these channels is encouraging.
During the quarter, total brokerage revenue (excluding interest income) stood at ` 216 crore, down 13% vs Q2FY19. Brokerage revenue contributed 52% of our total revenues. I-Sec remains India’s largest equity broker in terms of revenue.
During the quarter, Indian equity markets remained weak and volatile and there was general risk aversion. Nifty was down 3% while mid and small cap indices declined by 9% and 10% respectively. These impacted participation of retail investors. While our retail brokerage revenue declined by 16% year-on-year due to decline in delivery volumes, institutional business grew by 17%, driven by strong traction in block deals.
The company continues to receive encouraging response to its annual subscription plan ‘ICICI direct Prime’ that provides a package of privilege pricing, exclusive research and higher eATM (payout with 30 mins on selling stocks) limits per day. Prime is an attractive product proposition to source higher quality clients, a tool to activate dormant customers, and adds an annuity revenue stream to the equity business. Prime subscription fees have grown by over 90% sequentially and currently we have over 1.6 lakh Prime subscribers.
Distribution revenue stood at ` 106 crore in Q2FY20 down 17% against Q2FY19 due to the anticipated reduction arising due to changes in regulations pertaining to Mutual Fund distribution. Sequentially, distribution revenue is up 8%.
I-Sec is India’s second largest non-bank MF distributor by revenue with a 4% revenue market share (based on FY19 revenue). Average AUM of the mutual funds distributed by the company increased by 2% on-year to ` 35,800 crore in Q2FY20. The company has strong offline presence through a network of 187 ICICIdirect branches, a nationwide network of 8,000+ sub-brokers, authorized persons, IFAs & IAs.
With increased focus on other products like fixed income products, corporate bonds and deposits, life, medical and general insurance, PMS, SGBs, NPS, etc., non-MF distribution revenue rose 7% during the quarter against the corresponding quarter last year.
During the quarter, the company expanded its distribution business by launching digital distribution of retail loans. Besides building a new non-cyclical revenue stream, it also marks the company’s presence in the entire financial planning journey of a customer’s lifecycle – from investment to protection to assets. It also launched One Click Investment, a curated and customized baskets of Mutual Fund schemes. In protection products distribution, the company is digitally integrating its recently added partners like Religare and Star Health to the idirect platform.
Our Investment Banking revenue stood at ` 32 crore in Q2FY20, up 14% on year and 93% sequentially. I-Sec is ranked 1st in the IPO (incl. InvIT, REIT, FPOs) league by value in Q2FY20. The company handled 11 investment banking deals, including four advisory ones, in Q2FY20. We have an IPO pipeline (as per SEBI filling) of ~ ` 5,700 crore.
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