Quantum Mutual Fund opposes ICICI Securities merger with ICICI Bank

Quantum Mutual Fund has taken a firm stance against the proposed merger of ICICI Securities (ISEC) with its parent company, ICICI Bank, citing concerns over potential undervaluation and negative implications for unit holders' interests.

As a direct-to-investor fund house committed to safeguarding the interests of its investors, Quantum Mutual Fund has decided to vote against the resolution, asserting its dedication to protecting unit holders' rights and ensuring fair market practices, the fund house said.

Quantum Long Term Equity Value Fund and Quantum ELSS Tax Saver Fund, both shareholders of ICICI Bank and ISEC, have raised objections to the proposed merger. They argue that the merger proposal by ICICI Bank, offering a swap ratio of 0.67 shares of ICICI Bank for every one share in ISEC, significantly undervaluing ISEC.

The fund's calculations suggests that the proposed swap ratio results in a discount to ISEC's true value compared to its IPO price and peer valuations. For instance, had a reverse merger swap ratio been set on the day of ISEC's listing, it would have represented a premium ranging from 146 per cent to 183 per cent compared to the current offer.

Moreover, based on consensus earnings forecasts for the fiscal year ending March 2024, the proposed merger ratio values ISEC at a discount of 30 per cent to 77 per cent relative to its listed peers. Even when considering the lowest PE multiple among its peer set, the merger offer would still be significantly higher.

The estimated impact of the merger on unit holders is substantial, with Quantum Mutual Fund estimating a net loss of approximately Rs 6.08 crore to its unit holders due to the undervaluation of ISEC in the proposed merger.

In light of these concerns and to uphold the interests of its unit holders, Quantum Mutual Fund has decided to oppose the resolution and vote against the proposed merger. The fund remains committed to its core principle of prioritizing investor interests and advocating for fair market practices.