CDSL IPO Analysis: No room for Second Thought

Central Depository Services (India) Limited (CDSL)
, a leading securities depository in the country is coming out with Public issue of 35,167,208 Equity Shares by way of an Offer for Sale. This Offer would constitute up to 33.65% of the post-Offer paid-up capital of the company. CSDL IPO is coming in quick succession to IPO of its promoter company BSE Ltd. CDSL was originally promoted by BSE, which subsequently divested part of its stake to leading banks who acted as its sponsors. A quick review of CDSL IPO has been attempted.

CDSL IPO: Issue Details
Issue Period Monday, June 19, 2017 to Wednesday, June 21, 2017
Price Band Rs. 145-149
Minimum Bid Lot 100 Equity Shares 
Issue Size  Offer for Sale of 35,167,208 Shares
Total Issue Size ( Rs.) Rs. 523.99 crores (at upper end of Price Band)
Issue Structure :  
QIB 50% of the Net Offer- Rs. 256.78 Cr
NIB 15% of the Net Offer Rs.  77.03 Cr
Retail 35% of the Net Offer  Rs.  179.75 Cr
Lead Manager Axis Capital, Citigroup Global Markets, Edelweiss Financial, Nomura Financial
Registrar Link Intime India Pvt. Ltd.
CDSL IPO Schedule 

16th June – Anchor List
19th June – Offer Opens
21st June – Offer Closes
29th June – Finalisation of Basis of Allotment
29th June – Unblocking of ASBA
29th June – Credit to Demat Accounts
30th June – Listing on NSE ONLY

About CDSL

CDSL began depository business in 1999 with the objective of providing convenient, dependable and secure depository services at affordable cost to all market participants. CDSL was initially promoted by the BSE which subsequently divested a part of its stake to leading Indian banks. The top 10 shareholders of CDSL at end of 2016 are BSE (50.05 per cent), SBI (9.57 per cent), HDFC Bank (7.18 per cent), Standard Chartered Bank (7.18 per cent), Canara Bank (6.45 per cent), Bank of India (5.57 per cent), Bank of Baroda (5.07 per cent), LIC (4.15 per cent), Union Bank (1.91 per cent) and Bank of Maharashtra (1.91 per cent). Promoter BSE, which holds 50.05% in CDSL will hold 24% post the offer in line with SEBI guidelines. SBI which holds 9.57% now will hold 5% while Bank of Baroda holding will come down to 2.99% from 5.07% currently . Calcutta Stock Exchange’s which holds 0.96% will have no stake after the IPO

CDSL has connectivity with clearing corporations of all the leading Indian stock exchanges including the BSE, National Stock Exchange (“NSE”) and Metropolitan  Stock Exchange of India. It has also entered into MoUs with depositories globally including with DTCC, JASDEC and Euroclear. CDSL derives its revenue from operations which includes transaction charges, account maintenance charges and settlement charges paid by DPs and annual fees, corporate action charges and e-voting charges paid by companies whose securities are admitted to its systems. Its major services offered to clients are:

  • Depository Participants and other capital market intermediaries: CDSL offers dematerialization for a wide range of securities including equity shares, preference shares, mutual fund units, debt instruments, government As a securities depository. CDSL facilitate holding of securities in electronic form and enable securities transactions (including off-market transfer and pledge) to be processed by book entry. The DPs act as its agent and offer depository services to the BO (Beneficial Owners) of the securities. The Registrar and Transfer Agents are the other intermediaries involved in the process of issue and transfer of securities on its electronic platform.
  • Corporates: CDSL offers facilities to issuers to credit securities to a shareholder’s or applicant’s demat accounts to give effect to a range of non-cash corporate actions such as bonus issue, subdivision of holdings and conversion of securities in a merger, amalgamation or in an initial public
  • Capital market intermediaries: CDSL offers KYC services in respect of investors in Indian capital markets to capital market intermediaries including to mutual funds
  • Insurance Companies: CDSL offers facilities to allow holding of insurance policies in electronic form to the holders of these insurance policies of several insurance companies.
  • Others: CDSL also offers other online services such as e-voting, e-Locker, National Academy Depository, easi (Electronic Access to Security Information), easiest (Electronic Access to Security Information and Execution of Secured Transaction) drafting and preparation of wills for succession (myeasiwill), mobile application (myeasi, m-voting) and Transactions using Secured Texting (TRUST). We also regularly conduct investor meetings and other awareness

As of April 30, 2017 CDSL had 589 DPs servicing across 29 states and 7 union territories including two overseas centres. The number of service centres grew at 21.35% from 11,877 in Fiscal 2015 to 17,489 in Fiscal 2017. Its BO(Beneficiary owner) accounts grew at a CAGR of 12.98% from 9,610,002 in Fiscal 2015 to 12,267,432 in Fiscal 2017.


Fiscal 2015

Fiscal 2016

Fiscal 2017

April 30, 2017

Live Companies





Depository Participants





Service Centres





BO Accounts





As of April 30, 2017, CDSL had:

  • Over 4 million investor accounts. In Fiscal 2017, we held a 59% market share of incremental BO accounts with a net growth in BO accounts of 13.68% from Fiscal 2016 to Fiscal 2017.
  • Over 253 billion securities of 9,934 issuers under our custody representing a total value of `3 trillion.
  • 589 registered DPs who had over 17,000 service centres across
  • Over 15 million KYC records with a market share of approximately 67%. 

In addition to securities depository services, CDSL Ventures is registered with the SEBI and the Unique Identification Authority of India, UIDAI as both an AUA (AADHAAR Authentication User Agency) and KUA(KYC User Agency. CDSL Ventures undertakes common Know Your Client “KYC” services for investors in the capital markets including to the mutual fund industry. As of November 30, 2016, it held over 14 million capital market investor records under the KRA representing approximately 67% market share.

Comparison of NSDL & CDSL

In terms of revenue, CDSL holds an approximate market share of 43% while NSDL’s market share is 57%.

The revenue of NSDL has grown at a CAGR of 12% over the previous four fiscals as opposed to CDSL’s 11%.
CDSL IPO: Growth
In terms of market share of demat accounts, CDSL has been growing at a higher rate with a CAGR of 9%, compared with 5% for  NSDL.CDSL has experienced a growth in market share from 39% in Fiscal 2011 to 44% in Fiscal 2017.



Objective of the IPO:

  1. Achieve the benefits of listing the equity share on NSE
  2. Enhance its visibility and brand image and provide liquidity to its existing shareholder

  ( Rs.  In Crores)
2017 2016 2015 2014
Net Revenue from Operations 146 122.85 105.28 88.9
Revenue Growth (%) 18.84% 16.69% 18.43%  
EBITDA  79.4 63.9 45.2 32.7
EBITDA Margin (%) 54.38% 52.01% 42.93% 36.78%
Profit Before Tax 116.56 131.31 80.8 69.6
Net Profit  86.59 91.13 57.49 49.4
Net Profit  Margin 59.31% 74.18% 54.61% 55.57%
Face Value 10 10 10 10
Share Capital 104.5 104.5 104.5 104.5
Other Equity 428.82 374.82 311.54 249
Net worth 533.32 479.32 416.04 353.5
RoNW (%) 16.24% 19.01% 13.82% 13.97%
NAV Per Equity share (Rs.) 51.04 45.87 39.81 33.8
EPS (Rs.)  8.21 8.71 5.52 4.70
IPO Price 149
PE ratio 18.15
P/BV ratio 1.70
ROE % 16.10% 22.10% 15.60%
Cagr  Renevue   3 years 17.98%
Cagr Net Profit 3 years 20.57%
Market Cap in Rs. Crore 1557
Market Cap/Sales Ratio 12.67
  • CDSL is India’s leading securities depository and has shown with the highest share of incremental growth of BO (Beneficial Owner) accounts. 
  • While NSDL enjoys better revenues, In terms of market share of demat accounts, CDSL has been growing at a higher rate higher rate with a CAGR of 9%, compared with 5% for  NSDL.CDSL has experienced a growth in market share from 39% in Fiscal 2011 to 44% in Fiscal 2017.
  • CDSL enjoys excellent Profit Margins. Its Net Profit in general has been more than 50% for most of the years. CDSL derives a large proportion of its revenues from sales of it’s services to investors through DPs and service centers of DPs and present lower penetration of market and heightened activity in preceding period bodes well for CDSL.
  • While SBI and BOB are trimming down their stake in CDSL, Some other large holders like HDFC Bank (7.18 percent), Standard Chartered Bank (7.18 percent), Canara Bank (6.45 percent), Bank of India (5.57 percent), LIC (4.15 percent) are not selling their stake which indicates good confidence in growth prospect of CDSL.
  • CDSL has  a high stability of operating income from the fixed DP  charges  and transaction- based fees collected from DPs.
  • CDSL has put in place a State-of-the-art technology and robust infrastructure and IT systems which should help it to meet growing demand.
  • CDSL Dividend payout has been increasing over the years. 
  • Presently NSDL & CDSL are leading players in this segment and entry for other players is not easy. 
  • CDSL has been doing some diversification and expansion into related areas. CDSL is now in the process of applying for registration as a registrar and transfer agent.
  • CDSL has considerable investments in debt securities. The yield on these investments may be affected by falling interest rates and could consequently result in lower contribution.
  • GoI has authorized CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest of India) to act  and perform the functions of, the central KYC records registry under the Prevention of Money Laundering Rules 2005, including receiving, storing, safeguarding and retrieving the KYC records in digital form. This may adversely affect business of CDSL subsidiary, CDSL Ventures.
  • CDSL electronic platform, networks and those of its  third-party service providers may be vulnerable to security risks and cyber-attacks.
  • FII Holding in all depositories including CDSL is capped at 49%. However with BSE and sponsors holding more than 50% this is not a issue at this juncture.
CDSL IPO: Overall Assessment
  • CDSL has a  Stable revenue base due to repeat business in multiple offerings in the Indian securities and financial services market. Further CDSL has high economies of scale leading to steady growth in profitability. CDSL offers convenient and dependable depository services at competitive prices for a wide range of securities.
  • Depository market in country is a duopoly with CDSL & NSDL being the only players nature and near term challenge to their dominance appears remote. The low penetration and expected growth rate  leaves enough room for both players to co-exist and grow significantly. Also CDSL business model can be expanded with minimum investments. 
  • BSE the promoter of CDSL have a good dividend payout record. CDSL with good cash flow generation, can be expected to give higher dividend payouts:
  • CDSL IPO is priced at a PE of 18.27x and  considering its unique position and prospects for capital marketsvthe IPO price band looks  reasonable even though it is 30% above the initial estimates of market.
  • CDSL IPO size being small, investors may get tough allotment.
  • There are lot of positives which make this IPO quite attractive.

Standard disclaimer:  I am not a SEBI registered analyst. I may have vested interest in every stock I discuss. Please do your own due diligence as stock market investments have high degree of inherent risk. 

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