The Securities and Exchange Board of India (Sebi) has come down hard on ICICI Bank’s ‘outreach programme’ for shareholders of ICICI Securities (I-sec), citing attempts made by the bank’s employees to influence shareholders to vote in favour of the delisting.“While your bank has submitted that the ‘outreach programme’ was undertaken merely to explain the scheme and for maximising shareholders’ participation, however based on the examination of the investor complaints, it was observed that some of the officials of your bank have gone beyond the outreach programme by making repeated calls, asking for screenshots of voting etc,” Sebi said in a letter to ICICI Bank. 

In one of the call recordings shared, the letter said, the bank official was observed telling the shareholder that opting for the scheme would be beneficial. This was  “ clearly beyond an outreach programme. As such, it appears from the complaints that your bank officials went beyond the remit of the outreach programme” the letter added. Sebi’s letter puts ICICI Bank on a sticky wicket, given that more than 100 minority shareholders of I-Sec have filed a class action suit with the National Company Law Tribunal (NCLT) against the delisting plans. They claim that the bank is undervaluing the company’s business. The next hearing in the case is expected in July.The regulator also countered the bank’s claims that it reached out to public shareholders to ensure they have a balanced factual position, saying it was not correct as the bank was an interested party and held 74% stake in the company.

The heightened outreach programme on the last day of voting citing holidays and weekend, too, appears to be inappropriate, Sebi said. The markets regulator also did not agree with ICICI Bank’s claims that shareholders were not aware of the e-voting process. It said the entire e-voting process was already explained in detail in the explanatory statement accompanying the notice to the shareholders, along with the dedicated helpline numbers of NSDL and CDSL. “This has been viewed seriously. You are, therefore, warned to be careful in future and improve your compliance standards to avoid recurrence of such instances, failing which action may be initiated in accordance with the provisions of Sebi Act, 1992 and the Rules and Regulations framed thereunder,” the letter said. On June 29, 2023, the board of I-Sec approved delisting of the company’s shares for it to become a wholly owned subsidiary of ICICI Bank. Under the proposed transaction, 67 equity shares of ICICI Bank will be allotted for every 100 shares of ICICI Securities, translating into a share swap ratio of 0.67.

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According to Manu Rishi Guptha, a minority investor in ICICI Securities, during ICICI Securities’ IPO in March 2018, ICICI Bank sold nearly 25% of the shares of the brokerage to minority shareholders at Rs 520 per share. The brokerage generated a profit of Rs 340 crore in FY17, he said. However, currently the business of ICICI Securities has grown much larger and the company generated a net profit of Rs 465 crore in September-December FY24, alone. “As per the delisting scheme, I-Sec shareholders will be required to surrender their shares and will in exchange receive ICICI bank shares in the proportion of two ICICI Bank shares for every three I-Sec shares — that is, at an effective price of around Rs 730 per share — a mere 40% higher than the IPO price, while profits have climbed multi-fold since the IPO,” he posted on microblogging site X.  ICICI Bank said the Sebi letter would not have any impact on the financial, operations or other activities of the bank. Shares of ICICI Bank ended 0.2% higher at Rs 1,110.70 apiece on the BSE on Thursday, while those of I-Sec ended 0.8% up at Rs 713.80 per share.