CDSL sees best listing day gain since D-mart

Depository firm's stellar debut follows huge response for its Rs 525-crore IPO

Shares of Central Depository Services (CDSL) gained 75 per cent during their stock market debut on Friday, the best listing day performance since March, when Dmart operator Avenue Supermart's shares had more than doubled.

Shares of CDSL closed at Rs 260.7; the issue price was Rs 149. The stellar debut followed a huge response for its Rs 525-crore Initial Public Offer (IPO), which saw 170 times more demand than the shares on offer.

The shares only traded on the National Stock Exchange, hit a high of Rs 270 and a low of Rs 250, with a total of Rs 1,315 crore changing hands. At the closing price, CDSL's market capitalisation was Rs 2,734 crore.

"The debut was in line with the expectations. The company's IPO was one of the most subscribed in the history of Indian capital markets. CDSL has provided a unique investment opportunity, as it is the first depository to list," said Dharmesh Mehta, managing director, Axis Capital.

P S Reddy, managing director of CDSL, says the potential for the depository business in India is huge. "The percentage of population that participates in the stock markets is still miniscule. With the economy progressing, more and more investors will flock the equity markets and institutions like CDSL will benefit from it," he said.

Illustration: Ajay Mohanty

Set up in 1999, CDSL is one of only two depositories in the country, with National Securities Depository (NSDL). Both facilitate the holding of securities in an electronic (dematerialised) format. As of end-March, CDSL managed 12.3 million demat accounts; NSDL handled 15.6 mn.

CDSL charges annual issuer fees for holding securities in this form. It also generates revenue from services such as electronic voting, documents storage, processing of Know Your Customer (KYC) applications, and processing fees for corporate actions like dividend payout and buybacks.

After the BSE stock exchange, CDSL is the second market infrastructure institution to go public. Most analysts had advised their clients to subscribe to the latter's IPO, citing stable earnings growth, attractive valuations and return on equity.

For 2016-17, CDSL had net profit of Rs 85.8 crore, on revenue of Rs 186.9 crore. At the IPO price of Rs 149, the company was valued at around 17.5 times its FY17 earnings. With the listing day surge, the stock now trades at nearly 32 times its FY17 earnings.