CDSL's IPO Seeing High Demand As Retail Investors Rush To Subscribe
Retail investors are piling up the bids for CDSL's IPO. The retail investor portion in the ongoing IPO has been oversubscribed over 10 times already, and going by the way the demand is rising, retail investors could see the highest oversubscription figures as compared to other categories. By contrast, the institutional and HNI portions have been oversubscribed at 6.5 and 3.36 times till the early morning numbers.
Recent IPOs that opened for subscription in June have not seen a similar retail response. Tejas Networks and Eris Lifesciences have seen an oversubscription in the retail category of just about 3.5 times.
CDSL is among the leading securities depository in India with 589 registered Depository Participants across 29 states and 7 Union Territories , which also includes two overseas centres. CDSL has a market share of around 45 percent in the depositories business. In the KYC segment, CDSL has 15 million records with approximate market share of 67%.
Its business has been steadily growing, thanks to the penetration of the equity culture among Indians, and the steady rise in trading volumes on the bourses. In the last three years, CDSL has been receiving a higher incremental market share of owner accounts, at close to 60 percent. CDSL has a market share of 58 percent in DP transactions.
The depositories business is oligopolistic in which CDSL has a wide network of around 17,000 sites in the country. With a robust technology platform, CDSL has been able to gain market share with a lower cost offering for its services.
In the last three years, revenues have increased 13 per cent CAGR while net profit increased at a pace of 21.9 per cent CAGR. At its offer price at the higher end of the price band (Rs 145-149), the stock is valued at a PE of around 18 times earnings. In the coming years, its cash flows are expected to rise steadily as trading volumes increase. Further, services such as e-KYC and other record keeping could further increase revenue streams.
As there's substantial earnings visibility in the future, most brokerages have a subscribe call on the issue. If the recent oversubscription figures are any indication, a decent listing gains may be on the cards for investors. But with such high bidding and oversubscription figures, many retail investors may return empty handed without an allotment.
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