CDSL IPO Opens Today. Here’s All You Need To Know

The initial public offering of securities depository Central Depository Services (India) Ltd (CDSL) opens on Monday. Promoter BSE will sell 26 percent stake in the security depository via the IPO to comply with market regulator SEBI’s shareholding requirement. The exchange needs to bring down its stake in CDSL from the current 50.05 percent to 24 percent by June 30 after it missed the previous deadline to meet the regulatory shareholding norm by March 31, 2017.

Here’s all that you need to know about the CDSL IPO:

• Opens on June 19 and closes June 21
• Price band fixed at Rs 145-149
• Issue size: Rs 510-524 crore
• Global co-ordinators and lead managers include Axis Capital, Edelweiss. Nomura and SBI Capital Markets
• Listing on NSE (SEBI rules bar stock exchange companies from self-listing)
• Valuation: 16.65-18.15 FY17 price-to-equity

IPO Details

• The issue is an offer for sale up to 3,51,67,208 equity shares
• Up to 7,00,000 shares reserved for employees
• Offer constitutes up to 33.65 percent of the fully diluted post-offer paid-up equity share capital of the company

Use Of Proceeds

CDSL will not receive any proceeds of the offer which will go to the selling shareholders in the proportion of the equity shares offered by them.

Promoter Holding

Promoter BSE holds 52,297,850 equity shares aggregating to 50.05 percent of the pre-offer issued subscribed and paid-up equity share capital.

Selling Shareholders

In addition to BSE, SBI and Bank of Baroda will also reduce their shareholding while Calcutta Stock Exchange will sell the 1,000,000 shares it owns.

BSE will offload its 26.04 percent, State Bank of India, Bank of Baroda and Calcutta Stock Exchange will sell 4.57 percent, 2.08 percent and 0.96 percent stakes, respectively, through the IPO.

About The Company

• One of the two securities depositories in India, the other being National Securities Depository Ltd. (NDSL).
• CDSL is the leading securities depository based on the incremental growth of beneficial owner accounts over the last three fiscals and by the total number of registered depository participants (DPs), as at the end of fiscal 2016, according to a CRISIL report. However, in terms of market share, NDSL is the largest depository in India.
• Initially promoted by the BSE which subsequently divested a part of its stake to leading Indian banks.
• CDSL has connectivity with clearing corporations of all the leading Indian stock exchanges including the BSE, NSE and Metropolitan Stock Exchange of India.

Financials

On a consolidated restated basis, CDSL’s revenue from operations grew at a compounded annual growth rate of 11.5 percent from Rs 105.3 crore in the financial year 2014-15 to Rs 146 crore in 2016-17 and net profit grew at a CAGR of 14.6 percent from Rs 57.5 crore in FY15 to Rs 86.6 crore in FY17.

CDSL’s revenue from operations includes transaction charges, account maintenance charges and settlement charges paid by depository participants (DPs) and annual fees, corporate action charges and e-voting charges paid by companies whose securities are admitted to CDSL systems.

Peer Comparison

CDSL’s only competitor is NSDL which is also an unlisted entity.

Key Risks, According To Brokerages

• Insufficient systems capacity and systems failures, inability to adapt to rapid technological change in industry in order to compete and vulnerability of electronic platform, networks and those of third-party service providers to security risks and cyber-attacks.
• Intense competition and regulatory oversight on pricing.
• Large proportion of the business is transaction-based and dependent on trading volumes.
• Fraud due to unauthorised transfer of securities or service deficiency could result in losses.

CDSL could be a play on the increase in penetration of the financial markets in the country and shift from physical savings to financial savings.