India’s first depository brews IPO plans

MUMBAIA : National Securities Depository Ltd (NSDL), India’s first and largest depository services company, has entered talks with investment banks for an IPO worth 4,500 crore, said two people who were aware of the development.

NSDL was established in 1996 after the enactment of the Depositories Act. As of May 31, it had more than 27.6 million investor accounts, with a demat custodial value of 297.55 trillion. The custodian has a market share of more than 89% in terms of value of the demat assets.

Key Stakeholders

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Key Stakeholders

India’s only other custodian – Central Depository Services (India) Ltd (CDSL) – went public in 2017 and brought 524 crore in an IPO that was subscribed 170 times. CDSL was founded in 1999.

“NSDL has entered into discussions about the planned IPO. Most of the leading domestic and foreign investment banks are competing for the IPO mandate and the mandates could be finalized in the coming weeks. The IPO will usually be a secondary share sale by existing investors, while a small amount can be raised as part of the IPO. Most of the company’s shareholders, including several shareholders of public sector banks and other investors in the company, are likely to sell some of their shareholdings through the IPO,” said one of the two above-mentioned individuals on condition of anonymity.

NSDL’s largest shareholders are IDBI Bank and the National Stock Exchange (NSE), with 26% and 24% respectively. Other government borrowers State Bank of India, Union Bank of India and Canara Bank own 5%, 2.81% and 2.30% respectively, while the central government, through the Specified Undertaking of the Unit Trust of India (SUTI) holds 6.83 % possess . Other shareholders of NSDL include HDFC Bank, Citibank, HSBC, Standard Chartered Bank, Deutsche Bank, Kotak Mahindra Life Insurance Co. Ltd and IIFL Special Opportunities Fund.

The IPO is probably at least worth it 4,500 crore at a valuation of 16,000-17,000 crore, the second person said, also speaking on condition of anonymity.

An email sent to NSDL went unanswered until press time.

For the fiscal year ended March 31, 2022, NSDL reported consolidated sales of 821.29 crore, an increase of 56% over the previous fiscal’s 524.30 crore. The company reported a profit of 212.32 crore in FY22, compared to a gain of 188.55 crore in the previous fiscal.

NSDL Custodian Services contributed 369.26 crore revenue in FY22, followed by banking services contributing 299.24 crore and database management services coming in 92.60 crores.

NSDL’s plans to go public come at a time when demat account opening has exploded due to the post-covid stock market rally. After a sharp jump in new demat bills to 14.2 million in FY21, openings rose further to 34.7 million in FY22. The total number of demat accounts in the country was 94.77 million at the end of May 31, 2022. Certainly, demat account openings are expected to slow this year due to the stock price correction and volatility brought on by global macroeconomic challenges.

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