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On October 16, 2023, ICICI Securities Limited announced strong Q2FY24 results, featuring an impressive 45% year-onyear (YoY) revenue growth and a substantial 34% increase sequentially. These results can be attributed to effective diversification efforts and a customer-centric coverage model. Throughout the quarter, most performance indicators continued to trend upward, and the company saw noticeable gains in market share. Notably, the wealth management segment showed a 7% growth on a sequential basis and a remarkable 20% increase on a YoY basis. Furthermore, the company maintained its leading position in the MTF segments, commanding a significant 22% market share. In terms of cost management, the company achieved a decline in the cost-to-income ratio, which now stands at 41.9%. However, it's worth noting that due to the promoter's intention to delist ISEC, the stock has been placed 'Under Review.'

Revenue growth across business segments:

• Total revenue for the period reached Rs. 12,490 million, reflecting a substantial 45% year-on-year (YoY) growth. Meanwhile, the Profit after Tax (PAT) amounted to Rs. 4,236.3 million. • Equity revenue experienced remarkable growth, surging by 51% YoY and an impressive 50% quarter-on-quarter (QoQ).

• Derivative revenue also saw substantial gains, increasing by 43% YoY and 28% QoQ.

• Distribution revenue expanded by 13% YoY and 11% QoQ.

• Mutual Fund (MF) and other distribution revenue displayed robust growth, with 14% YoY and 27% QoQ increases, respectively.

• During Q2FY24, the company distributed loans worth Rs. 14.6 billion, marking a notable 66% YoY and 25% QoQ increase.

• Allied revenue experienced substantial growth, rising by 47% YoY and 41% QoQ.

• The MTF (Market Trading Fund) book continued its impressive performance, growing by 44% YoY and maintaining its leadership in market share 

Improving market share:

In Q2FY24, the company saw a notable strengthening of its market presence across various parameters. Year-on-year, the retail cash equity market share surged from 58 basis points to 12.8%. Meanwhile, the retail derivative market share showed a slight increase of just under 10 basis points, reaching 3.7%. Furthermore, the company made significant gains in the commodity market share, improving by 60 basis points. In the competitive MTF (Margin Trade Fund) segment, the company maintained its dominant position with an impressive 22% market share. The management's primary focus remains on attracting high-quality clients to enhance the Average Revenue Per User (ARPU) for the company.

Diversifying the revenues and reducing cyclical component:

In Q2FY24, the Company demonstrated its dedication to diversifying its revenue sources, thereby reducing its dependence on cyclical elements. Notably, the equity business accounted for 27% of the total revenue. Derivatives revenue now represents 12% of the overall revenue, while Allied revenue makes up 26%, and the Distribution business contributes 14%. These segments exhibit a lower sensitivity to market fluctuations and are less cyclical, showcasing the Company's effective initiatives in establishing a more stable and resilient revenue stream. 

Outlook: While encountering short-term challenges in the broking business, the company's proactive efforts to reduce dependence on cyclical factors and diversify revenue streams have introduced a level of stability to its overall revenue growth. Ongoing investments in technology and franchise development are anticipated to play a pivotal role in establishing a scalable franchise for ISEC. Nevertheless, in light of the recent announcement regarding ISEC's delisting, we have initiated a review of the ISEC stock.

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