NSDL plans to launch IPO: What should be your strategy for CDSL shares now? Here’s what Anil Singhvi suggests

NSDL IPO: National Securities Depository Limited (NSDL), India's oldest depository, has filed draft papers with markets regulator Sebi for its initial public offering (IPO). The IPO is a complete offer-for-sale (OFS) of more than 5.72 crore equity shares by existing shareholders, according to the draft red herring prospectus (DRHP).

Under the OFS, IDBI Bank plans to offload 2.22 crore shares, National Stock Exchange (NSE) 1.80 crore shares, Union Bank of India 56.25 lakh shares, State Bank of India and HDFC Bank will offload 40 lakh shares each. This aside, the Administrator of the Specified Undertaking of the Unit Trust of India (SUUTI) will sell 34.15 lakh shares of the Mumbai-based depository.

NSDL, CDSL: Share depositories in India

There are two government-registered share depositories in India. One is Central Depositories Services India Ltd (CDSL), and the other is NSDL. Share or security depositories hold shares in electronic form. Earlier, when share trading was available only offline, shares were held in the form of physical paper certificates.

In simple words, CDSL and NSDL are to share what Banks are to Cash and fixed deposits. 

CDSL was founded in 1999, whereas NSDL was established in August 1996 as the first electronic securities depository in India with national coverage. Both the stock exchanges can use either of the two depositories for trading and settlement activities.

The shares of CDSL were listed on the NSE on June 30, 2017. 

As per Zee Business, NSDL has mentioned CDSL 122 times in its DRHP. 

NSDL vs. CDSL (number-wise)

Over the past two years, NSDL's revenue rose 118 per cent while that of CDSL surged 61 per cent. However, during the period, the operating profit of CDSL jumped 51 per cent while NSDL's rose 24 per cent. Further, CDSL's profit in the last two years has grown by 37 per cent and NSDL's by 24 per cent, ZEE Business data show.

Revenue

Operating profit

Margin

Profitability

Market share: Active demat accounts

Companies' Demat accounts: NSDL has a 67% share

Source: Zee Business Research

NSDL IPO: What Anil Singhvi recommends

The managing editor of Zee Business and the market expert said the holders of CDSL shares should not be worried at all. In some cases, NSDL is better, such as market share, while in others, CDSL is better, like operational performance, profit, and active demat accounts, Singhvi noted. The market expert added that his faith in CDSL remains intact and that he will track NSDL when the company launches its IPO. "A lot will depend on the pricing (valuation) at which they bring the IPO. If the pricing is attractive, then it can be considered, but for now, investors holding CDSL shares should not have any doubts or second thoughts," Singhvi added.

The market expert has suggested CDSL investors hold the shares. Strong parentage, robust business, and healthy cash flows are some of the reasons cited by the expert to hold the stock.