CDSL IPO valuations attractive on stable earnings, parentage, say analysts

CDSL, whose revenue grew 17.8% to Rs146 crore over FY15-17 and whose net profit over the same period grew 24.8% to Rs87 crore, is a debt-free company, with cash and investments of Rs551 crore as on March.

As Central Depository Services Ltd (CDSL) prepares to offer shares to the public in a three-day sale starting Monday, analysts are broadly positive on the financials and future of India’s first share depository to go public.

The IPO of CDSL was subscribed 30% on Monday, the first day of the bidding till 11am. (Hindustan Times)

At the top end of the price band of Rs145-149 per share, the CDSL initial public offer (IPO) will raise Rs 524 crore. Parent BSE Ltd, State Bank of India Ltd (SBI), Bank of Baroda Ltd and The Calcutta Stock Exchange will sell around 3.51 crore shares. CDSL will not receive any proceeds from the offer.

The company on Friday raised Rs154 crore from anchor investors. After the IPO, BSE’s stake in CDSL will fall from 50.05% to 24%.

CDSL is one of India’s two depositories—the other is National Securities Depository Ltd—which holds securities in electronic form. The business is highly regulated with entry barriers, and hence, the market is likely to remain a duopoly, analysts said.

According to Motilal Oswal Securities Ltd, at Rs 149 a share, the offer is valued at 18.2 times FY17 earnings per share (EPS), which is attractive due to its strong parentage, stable earnings growth, strong margins and decent return on equity of 17% in FY17.