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ADIA, FIL Mauritius lead anchor investors as CDSL raises $24 mn

17 June, 2017

Sovereign wealth fund Abu Dhabi Investment Authority (ADIA), FIL Investments (Mauritius) Ltd and top investment bank Goldman Sachs are among the anchor investors that have bet on Central Depository Services Ltd’s (CDSL) initial public offering that begins on Monday.

US-based money manager Invesco’s India arm and HSBC India also took part in the anchor allotment.

CDSL raised Rs 154.06 crore ($24 million) from the anchor investors by selling 10.34 million shares at Rs 149 apiece, the upper end of the Rs 145-149 price band, it said in a stock-exchange filing. ADIA bought about 1.61 million shares while FIL Investments and Goldman Sachs purchased 1.34 million shares each.

Indian asset managers DSP BlackRock, SBI Mutual Fund, ICICI Prudential Mutual Fund, IDFC Mutual Fund, Tata Mutual Fund and HDFC Mutual Fund, and private-sector insurer HDFC Standard Life Insurance Co also participated in the anchor book.

Anchor investors are institutional investors who accept a one-month lock-in period for a sizeable allocation of shares. Their participation highlights investors’ confidence in an IPO and sets a benchmark for the investor community at large.

The Mumbai-based securities depository firm, which counts stock-exchange operator BSE Ltd as its key promoter entity, is seeking a valuation of as much as Rs 1,557.05 crore ($241.40 million) through the IPO.

The IPO comprises only an offer-for-sale by its shareholders, including BSE, State Bank of India, Bank of Baroda and Calcutta Stock Exchange. The shareholders plan to sell a total of 33.65% stake in CDSL, as per the draft prospectus, fetching Rs 523.99 crore at the upper end of the price band. BSE alone will sell 26%.

The IPO, the first by a securities depository in India, will open on 19 June and close two days later.

CDSL had planned to float the IPO by the end of March but couldn’t do so because its parent, stock-exchange operator BSE Ltd, didn’t meet certain regulatory norms.

VCCircle reported last month that the company had resolved regulatory problems related to its IPO, putting the share sale back on track. BSE assured it will comply with all requisite norms on the shareholding limit and maximum board seats in CDSL.

The Securities and Exchange Board of India (SEBI) had, in April 2012, announced several regulatory requirements for promoters and majority shareholders in market infrastructure institutions. The aim was to develop capital markets, drive financial inclusion and enhance transparency. These requirements included ceding of special rights such as board representation, special quorum requirements and affirmative voting rights.

As per these norms, BSE was required to reduce its stake in CDSL to 24% by 2015. This deadline was extended to March this year and then till June. BSE holds a 50% stake in CDSL.

BSE, which went public in February through a Rs 1,243-crore IPO, had requested SEBI to increase the investment ceiling for stock exchanges in depositories and allow it to hold four seats on the depository’s board, two more than the norms stipulated. SEBI had rejected these requests.

CDSL filed its draft red herring prospectus (DRHP) with SEBI on 28 December last year. The firm received SEBI’s approval on 8 February.

Axis Capital Ltd, Edelweiss Financial Services Ltd, Nomura Financial Advisory and Securities India Pvt Ltd, SBI Capital Markets Ltd, Haitong Securities India Pvt Ltd, IDBI Capital Markets & Securities Ltd, and Yes Securities (India) Ltd are merchant bankers to the IPO.

Law firm AZB & Partners is legal counsel to selling shareholders for the CDSL IPO.

Nishith Desai Associates represents the merchant bankers as Indian legal counsel while Herbert Smith Freehills LLP is international counsel to the merchant bankers.

CDSL facilitates deposits of securities by opening an account. Securities such as shares, debentures and bonds of investors are held in electronic form (dematerialised form) at the depository. It has about 1.6 crore investor accounts.

The company reported a consolidated net profit of Rs 85.78 crore for the financial year 2017 on revenues (operations) of Rs 146 crore, according to the red herring prospectus (RHP). For 2015-16, its revenue from operations stood at Rs 122.85 crore compared with Rs 105.28 crore in the previous year. Consolidated net profit for 2015-16 was Rs 73.91 crore compared with 43.42 crore the year before.

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ADIA, FIL Mauritius lead anchor investors as CDSL raises $24 mn

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