Rationale

The ratings factor in ICICI Securities Limited's (ISec) strong parentage, being a subsidiary of ICICI Bank Limited (rated [ICRA]AAA (Stable)/[ICRA]A1+; 75% stake in the company), its significant operational linkages with the parent and the shared brand name. ISec's strategic importance to the parent is evident from the managerial and operational support received by it, including senior management transfers (from ICICI Bank), customer-sourcing and cross-selling support, and access to the bank's retail clientele, branch network and infrastructure. The ratings also take into account the company's leading position in securities broking, its strong retail franchise supported by its position as a bank brokerage house, its track record in the investment banking business, and its healthy financial profile. The ratings also factor in the inherent volatility in ISec's primary business of equity broking, the risks associated with capital markets related businesses and the competition in this space. While assigning/reaffirming the ratings, ICRA has taken note of the increasing prominence of the company's secured margin trade funding (MTF) business. The enhanced limits are expected to be utilised for funding this business and the company's gearing (2.3 times as of June 2021) is expected to increase with the scaling up of the MTF book. The MTF book remains exposed to market risk, given the nature of the underlying assets. However, ISec's risk management systems provide comfort. The Stable outlook reflects ICRA's expectation that the company would maintain its earnings profile supported by its strong retail franchise and its position as a bank brokerage house.