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Review By Dilip Davda on June 12, 2017

Central Depository Services (India) Ltd, popularly known as CDSL is the leading securities depository in India by incremental growth of Beneficial Owner ('BO') 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 the CRISIL Report. However, in terms of market share, CDSL is the second largest depository in India.

It offers services to the clients viz.

(1) Depository Participants and other capital market intermediaries: offer dematerialization for a wide range of securities including equity shares, preference shares, mutual fund units, debt instruments, government securities. As a securities depository, the company facilitates 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 of the securities. The Registrar and Transfer Agents ('RTAs') and Clearing Members ('CMs') are the other intermediaries involved in the process of issue and transfer of securities on our electronic platform.

(2) 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 offering.

(3) Capital market intermediaries: It offers KYC services in respect of investors in Indian capital markets to capital market intermediaries including to mutual funds.

(4) Insurance Companies: The Company offers facilities to allow holding of insurance policies in electronic form to the holders of these insurance policies of several insurance companies.

(5) Others: It 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). CDSL also regularly conducts investor meetings and other awareness programs. All these services are offered by the subsidiaries of CDSL i.e. CDSL Ventures Limited ('CDSL Ventures'), CDSL Insurance Repository Limited ('CDSL Insurance'), CDSL Commodity Repository Limited
('CDSL Commodity').

The company is coming out with a maiden IPO of 35167208 equity share of Rs. 10 each as offer for sale through book building route. It has fixed the price band of Rs. 145-149 and likely to mobilize Rs. 509.93-523.99 crore based on lower and upper price band. Issue opens for subscription on 19.06.17 and will close on 21.06.17. Minimum application is to be made for 100 shares and in multiples thereon, thereafter. It has reserved 700000 equity shares for eligible employees and from the rest; it has reserved 50% for QIBs, 15% for HNIs and 35% for retail category. The offer shall constitute up to 33.65% of the fully diluted post offer paid up equity share capital. Post allotment, shares will be listed only on NSE. Through this offer, CDSL is providing exit route to its current stake holders and also to explore listing benefits. BRLMs to this issue are Axis Capital Ltd, Edelweiss Financial Services Ltd, Nomura Financial Advisory & Securities (India) Pvt. Ltd, SBI Capital Markets Ltd, Haitong Securities Indi) Pvt. Ltd., IDBI Capital Markets & Securities Ltd, Yes Securities (India) Ltd. Link Intime India Pvt. Ltd. is the registrar to the issue.

On performance front, CDSL has (on consolidated basis) reported total income/ net profits of Rs. 145.47 cr. / Rs. 57.49 cr. (FY15), Rs.161.34 cr. / Rs. 90.99 cr. (FY16) and Rs. 186.85 cr. / Rs. 85.78 cr. (FY17). This issue being offer for sale, its paid up equity remains at the same level of Rs. 104.50 cr. (Entire equity is issued at par). BSE Ltd that holds 50.05% of the paid up equity in CDSL will reduce its holding to 24% post this offer. It has posted an average EPS of Rs. 7.93 (on consolidated basis) with an average RoNW at 16.68% for last three fiscals. It has no listed peer to compare with. The asking price at the upper band is at a P/E of 18 plus and at a P/BV of 2.92 which appears reasonable.

On merchant banker's front, 7 BRLMs associated with this offer have handled 32 issues in past three years out of which 8 issues closed below the issue price on listing date.

Conclusion: Investors may consider investment for short to long term in this first mover IPO from the depository segment which is happening for the first time in the world in advanced/emerging markets of such a magnitude. (Subscribe)

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