Quantum MF objects to ICICI Securities’ merger plan with ICICI Bank

Quantum Mutual Fund has objected to the plan to merge ICICI Securities with parent ICICI Bank, saying it is “flawed and riddled with irregularities” and will adversely affect the brokerage firm’s minority shareholders.

Last month, ICICI Securities announced that around 72 percent of its shareholders voted in favor of its delisting and subsequent merger with ICICI Bank, while a majority of retail investors were against the plan.

“The merger plan is flawed and riddled with irregularities,” said Jimmy Patel, MD and CEO of Quantum Mutual Fund, in his letter written to ICICI Bank last week and forwarded to market regulator Sebi and the stock exchanges.

In the eight-page letter, Patel said the scheme will have a significant and adverse impact on the interests of the Quantum Mutual Fund scheme holders and the minority shareholders of ICICI Securities.

Highlighting irregularities, Quantum Mutual Fund has cited four major reasons for objecting to the scheme such as valuation concerns, alleged fraudulent means used by ICICI Bank to garner votes, conflict of interest of independent directors and violation of norms for delisting from the stock exchange.

“The valuation reports obtained on June 29, 2023 could not have been used to determine the swap ratio or serve as a basis for the vote by the ISec shareholders on March 27, 2024, because the valuation reports do not take into account the various dynamic market changes which took place over the nine-month period from June 2023 to March 2024.

“This resulted in the provision of inaccurate and unreliable valuation reports. There has been no independent application of mind by the merchant bankers and the fairness reports have not delved deep into the valuation exercise,” the letter said.

On March 28, the stockbroker’s shareholders voted on the proposal to delist the company and make it a wholly owned subsidiary of parent ICICI Bank. Moreover, 83.8 percent of institutional investors voted in favor of the plan, while 67.8 percent of non-institutional investors voted against it.

A total of 72 percent of public shareholders voted in favor of the delisting plan.

Under the scheme, shareholders of ICICI Securities would receive 67 shares of ICICI Bank for every 100 shares in ICICI Securities.

Last year, the boards of both entities approved the delisting and merger plan. There were reports that some investors in ICICI Securities were against the scheme due to valuation issues.

In the letter, Quantum Mutual Fund alleged that the scheme was not in compliance with delisting rules as ICICI Bank and ICICI Securities do not operate in the same industry.

The fund house also objected to ICICI Bank management reaching out to retail shareholders of ICICI Securities and asking them to vote in favor of the plan.

Quantum MF had voted against the delisting resolution, saying the swap ratio is valued at a lower valuation and is detrimental and detrimental to the minority shareholders, including the fund house’s shareholders.

“The swap ratio will result in a net loss of at least about Rs 17,767 million to the minority shareholders of ISec, including at least about Rs 61 million (Rs 6.1 crore) to the scheme holders of Quantum Mutual Fund.

The fund house has also asked ICICI Bank not to take any further steps or take any action towards implementation of the merger plan, failing which appropriate legal procedures will be followed, including filing applications before the NCLT and other regulatory authorities.

First print: April 16, 2024 | 12:16 pm IST