About the Company
CDSL Incorporated in 1999, Central Depository Services
(India) Limited (CDSL), a subsidiary of BSE Limited operates as a securities
depository in India. They offers various services, such as account opening,
dematerialization, processing delivery and receipt instructions, account
statement, re-materialization, pledging, nomination, transmission of
securities, change in address, bank account details and SMS services for
depository participants.
CDSL also offers facilities to issuers to credit
securities to a shareholder's or applicant's demat accounts; KYC services in
respect of investors in capital markets to capital market intermediaries; and
facilities to allow holding of insurance policies in electronic form to the
holders of these insurance policies of various insurance companies.
In addition, they provides other online services, such as
e-voting, e-locker, national academy depository, electronic access to security
information, electronic access to security information and execution of secured
transaction, drafting and preparation of wills for succession, and mobile
application and transactions using secured texting. It serves investors through
intermediaries, such as depository participants, issuer companies, registrar
and transfer agents, beneficial owners, and clearing members.
BSE, SBI, Bank of Baroda and Calcutta Stock exchange
would be selling their stakes in CDSL through this IPO.
Company
Promoters:
The
promoter of company is BSE Limited, the country's oldest stock exchange.
Promoter holds 5.22 crore equity shares aggregating to 50.05 percent of
company’s pre-offer issued subscribed and paid-up equity share capital.
CDSL
Ventures Limited, CDSL Insurance Repository Limited and CDSL Commodity
Repository Limited are company's subsidiaries while Indian Clearing Corporation
and Marketplace Technologies are other group companies.
About the issue
Central
Depository Services (India) Limited (CDSL) is coming with an IPO with an offer
for sale of Rs 550 crore, comprising of 3,51,67,208 equity shares with face
value of Rs 10 each. Out of these, 7,00,000 shares are reserved for
subscription by eligible employees. The lot size consists of minimum of 100
shares. The issue will remain open from June 19 to June 21, 2017 with price
band of Rs 145-149 per share. CDSL will be listed only on the National Stock
Exchange (NSE).
Purpose of the issue
The
issue is an offer for sale and not a fresh issue. Thus, the company will not
receive any proceeds from the offer and all the proceeds will go to the
existing shareholders who are selling their stakes. CDSL, being a
well-established company, is not in immediate need of funds and is expecting to
enhance its visibility and brand image in the market and provide liquidity to
its existing shareholders.
Industry Outlook
In
India, there are only two depositories namely NSDL and CDSL. This Rs 240 crore
industry has grown at a CAGR of 12% over the last three financial years. CDSL
is promoted by BSE and NSDL is promoted by NSE. Both these depositories hold
90% of the total shares of listed companies in electronic form. Entry of any
new peer is very difficult as both these depositories have strong backing of
their parent companies, i.e. the two major stock exchanges.
Depositories
in India have good future prospects due to rising capital market participation,
new value-added service offerings, financial literacy initiatives undertaken by
SEBI and growing awareness of investments in capital markets.
|
|
Market
Share (2015-16)
|
|
|
|
CDSL
|
NSDL
|
|
Revenue
|
43%
|
57%
|
|
No.
of Demat Accounts
|
43%
|
57%
|
|
No.
of incremental demat accounts
|
58%
|
42%
|
Financial Performance
|
Particulars
(Rs. Cr.)
|
FY14
|
FY15
|
FY16
|
Sep-16
|
|
Total
revenue
|
122.83
|
127.18
|
139.42
|
87.63
|
|
Net
Profit
|
49.35
|
43.66
|
74.14
|
39.01
|
|
PAT
margin
|
40.2%
|
34.3%
|
53.2%
|
44.5%
|
|
EPS
|
4.72
|
4.18
|
7.09
|
3.73
|
We see that the company’s revenue has grown
at a CAGR of 6.54% for FY14-16. The net profit has grown at a CAGR of 22.57%
for FY14-16. Dividend paid by the company for FY14, FY15 and FY16 was Rs 2 per
share, Rs 2.2 per share and Rs 2.5 per share, respectively. Its stable growth
in revenue and profits is evident from the above financials. Its market share
with respect to incremental demat accounts has grown to 58% in FY16 from 46% in
FY12. This shows the growing participation and confidence of investors in share
market and the depositories.
Profit
in the year ended March 2017 stood at Rs 86.58 crore, degrowth of 5 percent
compared with Rs 91.12 crore in previous year.
Total
income from operations during the year increased 15.8 percent to Rs 186.85
crore from Rs 161.34 crore in last year.
It's
revenue from operations includes transaction charges, account maintenance
charges and settlement charges paid by depository participants and annual fees,
corporate action charges and e-voting charges paid by companies whose
securities are admitted to its systems.
Issue
Detail:
- Issue Open: Jun 19, 2017 - Jun 21, 2017
- Issue Type: Book Built Issue IPO
- Issue Size: 35,167,208 Equity Shares of Rs 10 aggregating up to Rs 523.99 Cr, Offer for Sale of 35,167,208, Equity Shares of Rs 10 aggregating up to Rs [.] Cr
- Face Value: Rs 10 Per Equity Share
- Issue Price: Rs 145 - Rs 149 Per Equity Share
- Market Lot: 100 Shares
- Minimum Order Quantity: 100 Shares
- Listing At: NSE
Tentative
timetable in respect of the Offer:
·
Bid/Offer
Opens On: 19 June 2017
·
Bid/Offer
Closes On: 21 June 2017
·
Finalisation
of Basis of Allotment: On or about June 29, 2017
·
Initiation
of refunds: On or about June 29, 2017
·
Credit
of Equity Shares to demat accounts: On or about June 29, 2017
·
Commencement
of trading of the Equity Shares on the Stock Exchanges: On or about June 30,
2017
Valuation
On
a consolidated FY16 EPS of Rs 7.09, with the upper price band of Rs 149, its
P/E ratio stands at 21.01x. Its price-to-book (P/BV) value ratio for FY16 stood
at 3.1x. Its consolidated return on net worth (RoNW) for FY16 was 17.99%. It
has no direct listed peer, so as per overall industry analysis, the valuations
seem to be going fair.
Depository
business has limited scope for exceptional expansion. A steady growth rate of
8-10% every year can be expected in this business. CDSL is providing dividends
on a regular basis since last few years. So, we can expect the company to
continue paying dividend going forward. Retail investors’ participation would
also increase post this IPO listing. We see that investors can earn medium
range returns and would benefit in the long run. We advise investors to
subscribe to the issue.