a) Stable growth from multiple offerings
b) Strong Financials driven by high economies of scale
c) Leading securities depository with the highest share of incremental growth of BO accounts
Details of the Issue:
The public issue of CDSL consists of offer for sale of 3.52 Cr equity shares by existing shareholders aggregating to Rs. 524 Cr (at upper price band).
Objects of the Issue:
Listing of share and stake sale from some of the existing shareholders.
Valuation and Recommendation:
CDSL has delivered a strong performance over FY15-17 wherein the revenue from operations grew at a CAGR of 17.8% from Rs. 105.3 Cr in FY15 to Rs. 146 Cr in FY17. Adj. Net profit increased from Rs. 56.5 Cr in FY15 to 85.8 Cr in FY17. Since the industry has high entry barriers the existing two depositories will to continue to maintain their market positioning. Given the stable growth in the financial performance, strong cash generation, healthy return on equity and a high cash on books (~35% of market capitalization at upper price band), we feel the issue is attractively priced compared to similar profile of high cash generating service companies. At Upper band of Rs. 149, CDSL is offered at 12.6x EV/EBITDA of FY17 earnings and 18.2x PE, which looks attractive. Thus, we recommend subscribing to the issue.
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About Nirmal Bang
Founded in 1986 by Nirmal Bang, the Nirmal Bang is recognized as one of the largest retail broking houses in India, providing an array of financial products and services. Their retail and institutional clients have access to products such as equities, derivatives, commodities, currency derivatives, mutual funds, IPOs, insurance, depository services and PMS. The Group is headed by Mr. Dilip Bang and Mr. Kishore Bang.
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