CENTRAL DEPOSITORY SECURITIES IPO [RESEARCH REPORT]

Having well-established Stock Exchanges in the country which trade all over the country, have you wondered how online trading does take place? We all have heard about shares being in dematerialised form and in order to trade online one needs to have a demat account.

Dematerialisation is the process of converting physical financial instruments such as share certificates, mutual fund investments, and bonds into electronic form.

With dematerialization is eliminated the risk of false or fake securities, bad delivery etc.

So how do these shares on account of trade get transferred from one account to another? Who facilitates this?

This is where the depositories come in.

In India, there are two depositories namely National Securities Depository Limited (NSDL) or Central Depository Services (India) Limited (CDSL) that are registered with SEBI.

Today we’ll be studying about the Central Depository Services (India) Limited (CDSL).

Both NSDL and CDSL, facilitate dematerialization of shares i.e. held the shares in electronic form. So, in a way depository is held accountable for safe-keeping of your portfolio of securities.

On instruction of the account holder, depositories also facilitate transfer of securities from one account to the other. So, transfer of ownership of securities is effected by depositories.

A little about the company:

Central Depository Services (India) Limited (CDSL), is a depository managed by professionals, has been promoted by The Bombay Stock Exchange (BSE) Limited along with a cross section of several leading Indian and foreign banks.

All leading stock exchanges like the BSE Ltd, National Stock Exchange and Metropolitan Stock Exchange of India have established connectivity with CDSL.

Central Depository Services Limited (CDSL), is the second Indian central securities depository based in Mumbai.

IT’S ROLE:

A Depository facilitates holding of securities in the electronic form and enables securities transactions to be processed by book entry.

The Depository Participant (DP), who as an agent of the depository, offers depository services to investors.

According to SEBI guidelines, financial institutions, banks, custodians, stockbrokers, etc. are eligible to act as DPs.

The investor who is known as beneficial owner (BO) has to open a Demat account through any DP for dematerialisation of his holdings and transferring securities.

The balances in the investors account recorded and maintained with CDSL can be obtained through the DP. The DP is required to provide the investor, at regular intervals, a statement of account which gives the details of the securities holdings and transactions.

The depository system has effectively eliminated paper-based certificates which were prone to be fake, forged, counterfeit resulting in bad deliveries. CDSL offers an efficient and instantaneous transfer of securities.

CLIENT BASE

  • Depository Participants and other capital market intermediaries
  • Corporates
  • Capital market intermediaries
  • Insurance Companies

SUBSIDIARIES

  • CDSL Ventures Limited
  • CDSL Insurance Repository Limited

PROMOTERS:

CDSL was initially promoted by BSE Ltd. which has thereafter divested its stake to leading banks as “Sponsors” of CDSL.

The initial capital of the company is 104.50 crores(INR). The list of shareholders with effect from 14th October, 2016 is as under:


INITIAL PUBLIC OFFER (IPO)

BSE-promoted Central Depository Services (India) (CDSL) had filed a draft red herring prospectus with the Securities and Exchange Board of India for an initial public offering of up to 3.52 crore shares.

BSE, State Bank of India, Bank of Baroda and Calcutta Stock Exchange would be selling a portion of their stakes in CDSL through the IPO.

The shares are proposed to be listed on the NSE. The IPO would include sale of 3.45 crore shares by existing shareholders while the remaining seven lakh shares would be reserved for subscription by eligible employees.

  • Equity Shares of Face Value INR 10 each.
  • Initial Public Offering of up to 3,51,67,208 Equity Shares.
  • Book Running Lead Managers: Axis Capital Limited, Edelweiss Financial Services, Nomura Financial Advisory and Securities Private Limited, SBI Capital Markets Limited, Haitong Securities India Private Limited, IDBI Capital Markets and Securities Limited, Yes Securities Limited
  • Registrar: Link Intime India Private Limited

BUSINESS STRATEGY

OBJECTIVE: To provide convenient, dependable and secure depository services at an affordable cost to investors.

As a depository, it is an important Market Infrastructure Institution and has put in place necessary infrastructure for recording allotment and transfer of securities in dematerialized form and to protect the interest of the investors.

CDSL extends its services to investors through depository participants who provide an interface between the depository and the beneficial owners.

The clearing corporations of stock exchanges are electronically connected for processing settlement of transactions.

The activities like dematerialization and rematerialisation of securities, corporate actions such as issue of rights and bonus shares, and redemption of securities are carried out by the issuers of securities or their Registrars and Transfer Agents who have established electronic connectivity with the company.

To leverage the infrastructure and information for the benefit and protection of investors with a view to make the capital market a safer place, the company has launched many investor friendly systems such as Mobile App, CAS, etc.

The company aims to continue to introduce new offerings and scale up recently started businesses, and improving operational efficiency by

  1. Development of back office system to ensure standardization, automation and minimize the risk of errors;
  2. Offering single Demat account to our investors which will hold all financial assets including fixed deposits;
  • Development of a centralised billing system to increase automation and move towards seamless interaction;
  1. Enabling electronic submission and receipt of documents by DPs;
  2. Development of easier ways to opt for Electronic Consolidated Account Statements

It also aims to continue investor education initiatives to foster a rise in the number of potential new investors and deepening of the Indian securities market.

 

KEY MANAGERIAL PERSONNEL

TARUVAI S.K. MURTHY (Non-executive Chairman and a Public Interest Director)

He has been on their Board since March 30, 2016. He holds a bachelor’s degree in economics and law from University of Mysore and University of Madras, respectively, and a master’s degree in fiscal studies from University of Bath, United Kingdom.

He was also the former chief election commissioner of India and secretary of Ministry of Corporate Affairs. He was also the Chief Commissioner of Income Tax in Bombay. He has served as an advisor to the International Monetary Fund in Ethiopia and Georgia.

PADALA SUBBI REDDY (Managing Director and Chief Executive Officer)

He has been on their Board since March 6, 2009. He completed his bachelors in arts (economics) from Andhra University, Vishakhapatnam and a master’s degree in arts (economics) from University of Hyderabad. He has also worked as a research assistant in Gokhale Institute of Politics and Economics, Pune.

JAYSHREE ASHWINKUMAR VYAS (Public Interest Director)

She has been on their Board since January 18, 2014. She has a bachelor’s degree in commerce from Maharaja Sayajirao University, Baroda and is a qualified chartered accountant from the Institute of Chartered Accountants of India. She is the managing director of Shree Mahila Sewa Sahakari Co-operative Bank Limited, Ahmedabad and the managing trustee of the Indian School of Microfinance for Women.

RAJENDER MOHAN MALLA (Public Interest Director)

He has been on their Board since July 30, 2016. He holds a bachelor’s degree in commerce with honours and a master’s degree of commerce and business administration from University of Delhi.

He also has a post graduate diploma in management from Management Development Institute, Gurgaon. He is a certified associate of the Indian Institute of Bankers. Prior to joining their Board, he was the chairman and managing director of IDBI Bank.

ARAVAMUDAN KRISHNA KUMAR, (Public Interest Director)

He has been on their Board since July 30, 2016. He holds a bachelor’s degree in arts (economics) from Delhi University and is also a qualified Certified Associate of Indian Institute of Bankers. Prior to joining their Board, he was managing director of State Bank of India.

BONTHA PRASADA RAO, (Public Interest Director)

He has been on their Board since October 21, 2016. He holds a bachelor’s degree in technology (mechanical engineering) from Jawaharlal Nehru Technological University, Andhra Pradesh and a post graduate diploma in Industrial engineering from National Institute for Training in Industrial Engineering, Bombay. Prior to joining their Board, he was the chairman and managing director of Bharat Heavy Electricals Limited.

ANANTH NARAYAN GOPALAKRISHNAN (Shareholder Director)

He has been on their Board since July 22, 2014. He holds a bachelor’s degree in technology (electrical engineering) from Indian Institute of Technology, Bombay and a post graduate diploma in management from Indian Institute of Management, Lucknow.

He has over 20 years of experience in the 150 banking industry and has been a part of various committees of Reserve Bank of India.

NEHAL NALEEN VORA (Shareholder Director)

He has been on their Board since July 25, 2015. He holds a bachelor’s degree in commerce from the University of Mumbai and completed his masters in management studies from the Narsee Monjee Institute of Management Studies, University of Mumbai. He is also the chief regulatory officer of BSE.

VENKAT NAGESWAR CHALASANI (Shareholder Director)

He holds a bachelor’s degree in science and a post graduate diploma in journalism. He has been on their Board since June 28, 2016. He is also the deputy managing director (global markets) of State Bank of India. He has over 30 years of experience in banking.

BALASUBRAMANIAM VENKATARAMANI (Shareholder Director)

He has been on their Board since August 26, 2015. He holds a bachelors degree in commerce and a masters in commerce from the University of Bombay. He is a rank-holder from the Institute of Cost Accountants of India and has a diploma in business finance from the Institute of Chartered Financial Analysts of India. He has qualified as a certified information systems auditor.

He was part of the core-team involved in setting up of the National Stock Exchange in 1993 and was involved in the roll out of the capital markets segment, creation of National Securities Clearing Corporation Limited, Nifty, NCFM and futures and options segment.

NAYAN CHANDRAKANT MEHTA (Shareholder Director)

He is also the chief financial officer of BSE. He is a qualified Chartered Accountant as well as a Cost and Works Accountant. He has been on their Board since November 28, 2016. He has extensive experience of over 24 years in financial and securities markets, especially in the exchanges and its ecosystem business.

SHAREHOLDING PATTERN


INDUSTRY ANALYSIS

The depository system in India is a INR 2,400 Crore industry, as of Fiscal 2016, which has grown at a CAGR of 12% over the last three Fiscals and comprises of two depositories, namely NSDL and CDSL. NSDL, established in 1996, 105 was the first depository in India and was followed by the establishment of CDSL three years later in 1999 shortly following the implementation of compulsory trading in dematerialised securities for all investors in January, 1999.


COMPANY ANALYSIS

  • FINANCIAL OVERVIEW

                                                                                                                                 (All values are in INR Crore)

Note:
1: Total Assets include Fixed Assets as well as Current Assets

                                2: There are no borrowings made from a third party by this company

Financial Overview

This graph shows the trend in revenue and the rate of change between 2012 and 2016:

The following graph shows the amount of various expenditures of the company and the rate of change between 2012 and 2016:

The below graph shows the company’s assets and whether they have increased or decreased in terms of percentage between 2012 and 2016:

This graph shows the company’s net profits over a period of time from 2012 to 2016:

STATISTICAL OVERVIEW

The following table shows the return on equity and the earning per share between 2012 and 2016:


PRODUCT ANALYSIS

                                                                                                                                   In INR Crore


MAJOR INDUSTRY PLAYERS & COMPARISON

There is no other company in this industry that is listed on any Indian Stock Exchange

CONCLUSION

This report pretty much provides you with everything about the company.  The company has shown a growth of CAGR of 12% over the last three Fiscal Years.

CDSL conducted around 440 Investor Awareness Programs (IAPs) in the year 2015-16. This initiative allowed investors across geographies, professions and age groups to come together and learn the basics of Capital Markets, advantages of holding securities in demat form, importance of Financial Planning, Investment avenues available, etc.

Don’t forget to catch its IPO!



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