Hamstrung by the depressed primary markets which has resulted in a 90 per cent slide in its net profits for 1995-96, the securities arm of the Industrial Credit & Investment Corporation of India (ICICI) has taken an in-principle decision to venture into the secondary market for the first time.
The decision comes in the wake of the company's poor performance in issue management as the number of primary issues has gone for a tailspin since last year.
The I-Sec top brass, it is understood, have realised that the company has to venture into new arenas to prop up its performance in the current fiscal.
I-Sec, in which J P Morgan has a 40 per cent stake, will buy select blue-chip equities and offload them to institutional investors. Equity trading is a high-risk business with high returns. Given the technical back-up from J P Morgan, we will be in a better position to earn handsome spreads, a highly-placed source said.
In fact, the decision to venture into equity trading also stems from J P Morgan's expertise in this specialised business.
Their international experience in this line of business will be of immense help, the source added.
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The proposed diversification is also a fall-out of the company's satisfactory performance in securities trading. It is now laying more emphasis on fund-based activities and is targeting provident funds of corporates and banks for purchase and sale of government securities. Also, it is planning to provide an array of financial services to overseas and domestic clients. In fact, the I-Sec top brass have already initiated dialogues with partner J P Morgan to devise a turnaround strategy for the fledgling outfit.
ICICI managing director and chief executive officer K V Kamath admitted that discussions are on with J P Morgan for improving the all-round performance of its securities subsidiary.
I-Sec has also been selected by the Reserve bank of India as a primary dealer in gilts.