The IPO for the Central Depository Securities (India) Limited (CDSL) closes on June 21, and has launched in the price band of Rs. 145-149. CDSL is one of two securities depositories in India, functioning in a duopoly market with a 43% market share in revenues in FY16.  

CDSL has raised Rs 154.07 crore from its 15 anchor investors. The price band for the IPO share sale is fixed at Rs 145-149. In terms of valuation, at the upper price band CDSL has been valued at 18.2x on FY17 earnings. The ROE on average for the past few years has been 17%. 

For analysts, the valuations and outlook appear strong. The depository system in India is large and growing rapidly, a Rs. 2.4 bn industry that has expanded at 12% CAGR over the past three years.

The Indian equity markets’ capitalization was approximately 80% of India's estimated GDP as on FY17, which is 20% lower compared to the global average of 98%. This suggests that there is a lot of growth in the coming years, especially post demonetization and the moves by government to compel households and individuals to shift investments out of gold and cash, and into financial assets. Since FY09, savings in financial assets have seen a growth at 10% CAGR which indicates a rising interest of people in capital markets. The percentage of net investment in shares, mutual funds & debentures has seen even more startling growth, at 54% CAGR from FY12 to FY16.

CDSL versus NSDLCDSL has been able to take advantage of this growth in investments, capturing a 59% share in incremental demat accounts opened. Its larger geo coverage compared to NSDL has helped - it has over 4,600 DP locations, compared to NSDL's 1,900+ DP locations. 

CDSL’s operating revenues are more stable, thanks to annual fees which form 39% of its revenues compared to 7% at NSDL. Transaction fees, which are more volatile revenues, accounted for 50%+ of NSDL's revenues, compared to 21% for CDSL. The company registered a 13.7% YoY growth in number of demat accounts in FY17, which stood at 12.4 mn investor accounts as on April 30, 2017. 

SMC Online and LKP Securities among others, recommended subscribing to the IPO.