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Hello Readers

There has been back to back IPO's this month, the next one is making all the right buzz being a BSE Ltd’s subsidiary Central Depository Services (India) Limited. Let's take a quick look at the issue.



Issue Opens : 19th June 2017

Issue Closes : 21st June 2017
Listing on : NSE
Issue Price Band : 145 - 149
Minimum Bid : 100 shares
Minimum Investment Amount : Rs. 14,500 (at lower band)


The Company


CDSL is the second largest depository of our country. It's revenue from operations includes transaction, account maintenance charges and settlement charges paid by depository participants. Besides, there are annual fees, corporate action charges and e-voting charges paid by the companies concerned. They offer services to the following clients : 

Depository Participants and other capital market intermediaries: They offer dematerialization for a wide range  of  securities  including  equity  shares,  preference  shares,  mutual  fund  units,  debt  instruments, Government securities.

Corporates:  They offer facilities  to  issuers  to  credit  securities  to  a  shareholder's  or  applicant's  demat  accounts  to  give  effect  to  a  range  of  non-cash  corporate actions  such  as  bonus  issue,  subdivision  of holdings and conversion of securities in a merger, amalgamation or in an initial public offering.


Capital market intermediaries: They offer KYC services in respect of investors in Indian capital markets to capital market intermediaries including to mutual funds.

Insurance  Companies:  They  offer  facilities  to  allow  holding  of  insurance  policies  in  electronic  form  to the holders of these insurance policies of several insurance companies.


Others: They also offer other online services such as e-voting, e-Locker, National Academy Depository, easi (Electronic  Access  to Security  Information), easiest (Electronic  Access  to  Security  Information and  Execution  of  Secured  Transaction) drafting  and  preparation  of  wills  for  succession (myeasiwill) mobile  application  (myeasi,  m-voting)  and  Transactions  using  Secured Texting  (TRUST). They also regularly conduct investor meetings and other awareness programs


Objects of the Issue

  1.  Sale of Equity Shares by existing shareholders
  2. Achieve the benefits of listing.

Positives : 

  1. The Company has witnessed a CAGR of 13% in revenues in last 3 years and has been able to post decent profit Margins, being around 40% consistently for past 3 years.
  2. On the upper side i.e. Rs 149 and EPS of 8.21, the P.E. works out to be 18.21, which makes it an reasonably priced issue.
  3. Moreover, the company is into the business which has barriers to entry, means lower competition indicating stable revenues throughout.

Negatives


  1. BSE’s stake after the issue will decline to 24% after CDSL IPO. This may reduce BSE’s bargaining power and may hurt CDSL’s valuation, sharply reducing BSE’s expected return on investment.

Conclusion


The issue has been fairly priced at a P.E of 18.21. Moreover, decent revenue growth, highers margins makes it an issue worth subscribing. Not to forget, we recently had BSE Ltd IPO which has already rewarded investors handsomely.

For More Insights you can have a look at its RHP filed with SEBI. Copy & Paste the link :  http://www.sebi.gov.in/filings/public-issues/jun-2017/central-depository-services-limited_35092.html

Disclaimer
I do not have any interest in this IPO. This article is purely for educational and awareness purpose and should not be taken as an recommendation to Buy or Sell the stock. Please consult your investment advisor before making any investment.

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