Central Depository Services (India) Limited, or CDSL, a company engaged in providing demat and related services, is coming out with its initial public offering (IPO) next week. The public issue that opens on June 19 and closes on 21 is likely to give good returns on listing, feel brokerages.
Mumbai-based CDSL is issuing 3.52 crore shares in the price band of Rs 145 to 149 per equity share; 7 lakh shares will be reserved for eligible employees.The issue size is about Rs 521 crore.
"The offer shall constitute up to 33.65 percent of the fully-diluted post-offer, paid-up equity share capital of the company and the net offer to the public would constitute 32.98 percent of the post-offer equity share capital," CDSL said in a statement. Applicants can invest for a minimum of 100 shares or in multiples of 100 thereof.
The IPO is basically an offer for sale by existing investors — up to 27,217,850 equity shares by BSE Limited; up to 4,775,000 equity shares by State Bank of India; up to 2,174,358 equity shares by Bank of Baroda and up to 1,000,000 equity shares by The Calcutta Stock Exchange.
Angel Broking says that the IPO is worth applying. "At the issue price band of Rs 145-149, the stock is being offered at 17.7x-18.2x its FY2017 EPS, which we believe is reasonably priced, and hence, recommend SUBSRIBE to the issue," the brokerage said in its note.
Centrum Broking also has a positive view on CDSL's public issue. "Given the current decent financials such as high margins, healthy return ratios, free cash flow generation and strong balance sheet, the issue may attract good subscription in the current market scenario where there is lot of buying interest in primary as well as secondary offerings. Further, it is likely that the listing may also be at a premium to the offer price," the brokerage said in a note.
Here are the highlights of CDSL and its IPO (according to Angel Broking, Centrum Broking):
CDSL has wide source of revenues, 35 percent from the annual issuer charges (which is recurring in nature) and 21 percent from transactions having some correlation with volumes in the markets. Another 13 percent comes from online data charges.
As the capital markets have remained buoyant, there has been an increasing trend of new listings, and thus, CDSL has generated 11 percent of its revenues from the IPO/ Corporate action charges. Hence, broadly speaking, the revenue base of CDSL is quite diversified.
CDSL has a market share of about 43 percent in demat accounts.
The number of demat accounts at CDSL has grown at a CAGR of 8.6 percent over FY2011-17 to 12.3 millionn, compared to 5.1 percent for (rival) NSDL over the same period, to 15.6 million.
The company earned a net profit of Rs 86 crore on operating income of Rs 146 crore in 2016-17 in comparison to Rs 91 crore net profit and Rs 123 crore in the preceding fiscal.
The company is debt-free cash rich (cash and investment of Rs 551 crore as on Mar'17). The company has healthy return ratios (FY17 - RoE 17.3 percent, RoCE 22.3 percent and RoIC 27.9 percent). Its stable business and steady revenue growth has allowed them to consistently pay dividends (last 3 years average 40 percent pay out).