IDBI Bank and NSE-backed NSDL may pick 7 i-banks for 2023 IPO

NSDL (National Securities Depository Limited), the country’s first depository services firm, which is backed by key investors like IDBI Bank & NSE is likely to shortlist 7 investment banks as advisors as its prepares to launch an initial public offer in 2023, multiple industry sources with knowledge of the matter told Moneycontrol.

If the listing plans fructify, NSDL would become the second depository services company to be listed on the domestic bourses, post the bumper market debut of peer CDSL ( Central Depository Services Limited) in 2017.

“Several banks had pitched for this deal and NSDL is likely to go ahead with ICICI Securities, Axis Capital, HSBC Securities, Motilal Oswal Investment Advisors, SBI Capital, HDFC Bank and IDBI Capital,” said one of the persons cited above.

A second person told Moneycontrol that NSDL, which has played a key role in revamping the Indian securities market by facilitating holding and transfer of securities in dematerialised form, is cash rich and that the proposed IPO was likely to be majorly an OFS ( offer for sale) with stake dilution by multiple investors.

“ ICICI Securities is the left lead for this deal and IDBI Bank, NSE and a few others are likely to participate in the OFS and trim their stake,” this person said.

As of June 30, 2022, IDBI Bank held 26.1 per cent and NSE held 24 per cent in NSDL. Other shareholders include the likes of HDFC Bank with 9.95 per cent  , SBI with 5 percent, Deutsche Bank AG with 5 percent and Citi Bank, HSBC and Standard Chartered Bank with 3.13 percent each. The Central Government , through the Specified Undertaking Of The Unit Trust Of India (SUUTI) also holds 6.83 percent.

“ No final call has been taken on the quantum of the IPO, but as of now the indicative size is around Rs 2,500 crores and could be upwards of this number as well ,” added a third person.

All the three persons above spoke to Moneycontrol on the condition of anonymity.

In response to an email query from Moneycontrol, NSDL said, “ as per our policy , we would not like to comment on any such speculative matter.” ICICI Securities and HSBC Securities declined to comment while the other investment banks didn’t respond to our queries.

A closer look at NSDL and it’s stats

Established in 1996, NSDL, which is led by MD & CEO Padmaja Chunduru, provides a bouquet of services to investors, stock brokers, custodians and issuer companies  through its nationwide network of Depository Partners.

According to the firm’s website, as of 31st July, 2022, NSDL has 2,84,31,848 active investor accounts, 57,262 DP service centres and Rs 306.72 lakh crores of demat custody value.

The market share of NSDL in value of demat assets is more than 89% and its demat accountholders are present in more than 99% of pin codes in the country and 189 countries across the globe, reflecting its wide reach. In FY22, NSDL’s consolidated revenue stood at Rs 821 crores, up 56 percent on a YoY basis. Its profits stood at 212.32 crores versus a profit of Rs 188.55 crores in the previous fiscal.

The other depository CDSL was set up in 1999 and raised Rs 524 crores in its 2017 IPO which was subscribed a whopping 170 times. Recently, CDSL crossed the 7 crore mark in active demat accounts.

“ The Indian depository services segment is a duopoly and we have just scratched the surface as a country when it comes to addition of new demat accounts,” said Ajay Garg, Founder and MD, Equirus Capital.

To be sure, in the depository system, securities are held in depository accounts, which is akin to holding funds in bank accounts. Transfer of ownership of securities is done through simple account transfers. This method does away with all the risks and hassles normally associated with paperwork. Consequently, the cost of transacting in a depository environment is considerably lower as compared to the earlier method of transacting in certificates.

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