InvestorQ : How did ICICI Securities report such a sharp growth in profits in the Dec-20 quarter?
Mitali Bhutta made post

How did ICICI Securities report such a sharp growth in profits in the Dec-20 quarter?

2 years ago

You are absolutely right. In fact, the ICICI Securities Q3 PAT nearly doubled to touch a level of Rs.267 crore as the broking business gave a real boost to the company. In terms of top line, the company reported 46.9% growth in revenues at Rs.620 crore for the Dec-20 quarter on a consolidated basis. The sharp growth in revenues was an outcome of a 50% growth in broking revenues and a 30% growth in issuer services.

It needs no reiteration that ICICI Securities has one of the strongest retail franchises in the Indian broking industry and that helped leverage the big capital market proclivity in the current year. Operating profits were up 93.29% at Rs.358 crore as stock broking is a fairly scale-sensitive business and therefore the operating profits tend to magnify income growth as fixed costs observed more efficiently.

In terms of important ratios of profitability, ICICI Securities saw smart growth in the operating margins and also in the net profits or PAT margins. For example, OPM expanded sharply from 43.84% in Dec-19 quarter to 57.70% in Dec-20 quarter. At the same time, the PAT margins also expanded from 32.50% in Dec-19 to 43.06% in Dec-20. This was largely driven by much better operating metrics as the network got better leveraged.

There were some important shifts that happened in the company balance sheet during the quarter in terms of the impact of debt on its balance sheet and its coverage ratios. For example, the debt equity ratio shifted between Mar-20 and Dec-20 from 1.24X to 1.54X. Consequently, the debt service coverage ratio or the DSCR also shifted from 0.53X to 0.45X while the interest coverage ratio or the ICR moved from 11.42X to 15.32X on quarter basis.

In terms of business spread, the company attained some key milestones during the quarter. ICICI Securities had some key milestones in the quarter. The overall active client base moved up 17% to 16.30 lakhs even as the total registered client base crossed 50 lakhs. This led to the in equity market share moving up 160 bps in the quarter to 10.5% across India. As a bonus, the wealth management AUM also grew 45% to Rs.147,000 crore in the quarter.