Central
Depository Services (India) Limited – CDSL - is India’s
leading depository in terms of incremental Beneficial Owner (BO)
accounts over the last 4 years and by number of registered Depository
Participants (DPs). In terms of market share, CDSL stands second to its
only competitor i.e. National Securities Depository Limited (NSDL) with
44% BO account market share compared to 56% market share enjoyed by the
latter as of FY17-end. On revenue market share, CDSL commands 42% share
vs. 58% enjoyed by NSDL.
CDSL
offers dematerialisation for equity and preference shares, MF units,
debt
instruments and G-Secs. As agents of CDSL, the DPs offer demat services
to BOs of securities. Registrar & Transfer Agents (RTAs) and
Clearing Members (CMs) are other intermediaries involved in the process
of issue and transfer of securities of BOs to CDSL’s platform. CDSL also
offers facilities to corporates to credit securities to the BO’s demat
accounts to give effect to corporate actions i.e. issue of bonus shares,
stock-split, and conversion of securities. It also offers KYC services
to MFs, electronic holding of policies of several insurance companies
and other services
like e-voting, e-Locker, National Academic Depository and drafting of
succession wills.
CDSL
is coming up with an Initial Public Offering (IPO) of 35.2mn equity
shares through 100% book building route. The IPO will open for
subscription on Monday, June 19, 2017 and will close on Wednesday, June
21, 2017. The entire issue is an Offer for Sale (OFS) and CDSL will not
receive any proceeds from the offer, as 100% of the proceeds will go to
parent BSE and its sponsors, all of whom are selling part of their stake
to comply with depositories regulations. While ~77% of the IPO proceeds
will go to BSE, the balance 23% will go to other sponsors. The offer
will constitute 33.7% of the post offer paid-up equity capital of CDSL.
The price band for the issue has
been fixed at Rs145 to Rs149. At the upper end of the price band, CDSL’s
market capitalisation works out at Rs15.6bn, while at the lower end, it
is pegged at Rs15.2bn. The shares will be listed on the NSE.
Outlook & Valuation
We
believe CDSL is a predictable and profitable business with improving
market
share and better cost competitiveness, while newer business initiatives
are likely to drive growth going forward. The company has a unique
business model with no comparable listed peer, which can consistently
generate cash and lead to regular dividend payouts. Such a business, we
believe could command a PE multiple of ~24-25x. At the IPO price
band, the issue comes at a PE multiple of 18.1x FY17 (trailing)
earnings, which we believe leaves a lot on the table for investors.
Thus, we recommend SUBSCRIBE to the Issue.
No comments:
Post a Comment