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CDSL gains 75% on debut day after blockbuster IPO

30 June, 2017

Central Depository Services Ltd (CDSL) made a strong debut on the stock markets on Friday with its shares soaring 75% from the initial public offering price on the listing day.

Shares of CDSL started trading on the National Stock Exchange at Rs 250 apiece, up 68% from the issue price of Rs 149. The shares rose as high as Rs 269.95, before closing at Rs 260.70 piece, giving it a market valuation of about Rs 2,700 crore ($422 million).

The 50-stock benchmark NSE Nifty closed 0.2% higher.

CDSL, part-owned by stock-exchange operator BSE Ltd, is listed only on the NSE.

The depository company’s debut is the second-best this year after that of Avenue Supermarts Ltd. Shares of the hypermarket chain D-Mart’s operator doubled on the first day of trading.

CDSL is the 11th company to list on the stock exchanges this year. Six of the previous 10 companies gained on debut. The gainers included BSE, whose shares rose 33% on listing on the NSE.

Analysts say CDSL benefitted from attractive valuations, a strong parentage, high earnings growth and entry barriers in a segment where it has only one main competitor—National Securities Depository Ltd.

“The IPO is available at 18.2 times earnings per share for 2016-17, which we believe is attractive,” said Yogesh Hotwani, analyst at Motilal Oswal Financial Services Ltd.

Hotwani said CDSL’s revenue has been growing at a fast pace while its operating expenses have been under control. This has led to an expansion in its profit margin to 54% in 2016-17 from 42.5% in 2014-15.

CDSL’s consolidated net profit rose to Rs 85.78 crore for 2016-17 from Rs 73.91 crore the year before. Revenue from operations rose to Rs 146 crore from Rs 122.85 crore.

The company’s robust start on the bourses comes after it received bids for 170 times the number of shares on sale in its public offering, making it the most attractive IPO in nearly 12 years. This translated into bids worth Rs 62,653 crore ($9.7 billion).

The IPO of Mumbai-based CDSL was the most successful offering in India since Gurgaon-based FCS Software’s share sale in 2005. It also beat Bengaluru-based business services provider Quess Corp Ltd’s share sale last year and Avenue Supermarts’s public issue in March this year.

CDSL’s IPO, the first by a securities depository firm in India, comprised only an offer for sale by its shareholders, including BSE, State Bank of India, Bank of Baroda and Calcutta Stock Exchange. The shareholders sold a total of 33.65% stake in CDSL. BSE alone sold 26%. The selling shareholders raised a total of Rs 524 crore at the upper end of the Rs 145-149 price band.

Ahead of the IPO, the company sold shares worth Rs 154.06 crore to anchor investors including Abu Dhabi Investment Authority, Goldman Sachs and Indian asset managers such as DSP BlackRock and SBI Mutual Fund.

CDSL, which facilitates deposits of securities such as shares, debentures and bonds of investors in electronic form, had filed its draft red herring prospectus with SEBI on 28 December last year. It 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 were the merchant bankers for the IPO.

Law firm AZB & Partners was the legal counsel to selling shareholders for the CDSL IPO. Nishith Desai Associates represented the merchant bankers as Indian legal counsel while Herbert Smith Freehills LLP was the international counsel to the merchant bankers.

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CDSL gains 75% on debut day after blockbuster IPO

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