NSDL IPO review (Apply)

•    The company is engaged as a pioneer in depository services in India and is an ice breaker for the demat process.
•    The company is expanding its horizon with more value-added services and options.
•    The company posted steady growth in its top and bottom lines.
•    It paid dividends for FY23 and FY24 at 50%.
•    Based on its recent financial data, the issue appears fully priced.
•    Investors may grab this opportunity to invest in this evergreen company for medium to long term.

ABOUT COMPANY:
National Securities Depository Ltd. (NSDL) is a SEBI registered market infrastructure institution (“MII”) offering a wide range of products and services to the financial and securities markets in India. Following the introduction of the Depositories Act in 1996, through the Company, it pioneered the dematerialization of securities in India in November 1996. As of March 31, 2025, it is the largest depository in India in terms of number of issuers, number of active instruments, market share in demat value of settlement volume and value of assets held under custody (Source: CRISIL Report). 

Further, as of March 31, 2025, the company had a network of 65,391 depository participants’ service centres as compared to 18,918 such centres with CDSL. As a depository, it provides a robust depository framework that enables market participants to participate in the financial and securities markets in India. It also plays a central role in developing products and services that will continue to address the growing needs of the financial services industry in India. Using innovative and flexible technology systems, NSDL works to support investors, brokers, issuers and other market participants in the Indian capital markets and aims at ensuring the safety and soundness of Indian securities market by developing settlement solutions that increase efficiency, minimize risk and reduce costs.

Its depository facilitates securities to be held in digital form by investors through accounts known as “Demat Accounts” held with it through depository participants. This includes securities held in dematerialized form with various asset classes namely equities (listed equity and unlisted equity), preference shares, warrants, funds (mutual funds, REITs, InvITs and AIFs), debt instruments (corporate debt, commercial paper, certificate of deposit, pass through certificate, security receipts, government securities, sovereign gold bonds, municipal debt, treasury bill) and electronic gold receipts.

As part of its depository business, NSDL operates a centralized digital book-keeping system that facilitates the holders of securities to hold and transfer their securities in electronic form and enables settlement solutions in an efficient and cost-effective manner. It also facilitates and maintains complete records of the ownership of securities held in dematerialized form with it on behalf of the issuer entity. The company provides depository services to investors, issuers, depository participants, financial institutions, stockbrokers, custodians, clearing corporations and other market intermediaries and have established an ecosystem for these entities to integrate with its systems.

NSDL’s core depository services provide it with a steady source of recurring revenue, primarily through annual custody fees that it charges issuers of securities and annual maintenance fees it charges depository participants in relation to corporate accounts serviced through its depository platform. It charges a standardized fixed fee per annum for each corporate account, pro-rated according to the month in which such account is opened in its depository platform. It also charges transaction fees to depository participants and issuers of securities for transactions effected through its depository systems. As part of NSDL’s commitment to the capital markets community in India, it has leveraged technological infrastructure to cater to the diverse needs of the securities market in India and introduced several additional products, e-services and ancillary value-added services and initiatives directly and through its subsidiaries, NSDL Database Management Limited (“NDML”) and NSDL Payments Bank Limited (“NPBL”), thereby emerging as a key enabler for the financial market in India (Source: CRISIL Report). As of March 31, 2025, it had 450 employees on its payroll and additional 355 contract employees.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route OFS issue of 50145001 equity shares issue worth Rs. 4011.60 cr. (at the upper cap). The company has announced a price band of Rs. 760 – Rs. 800 per equity shares of Rs. 2 each. The issue opens for subscription on July 30, 2025, and will close on August 01, 2025. The minimum application to be made is for 18 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE only. The issue constitutes 25.07% of the post-IPO paid-up equity capital. Since this is a pure secondary issue, no funds are going to the company. This OFS is purely for listing gain and providing exit to some of its stakeholders.

The company has reserved 85000 equity shares (worth Rs. 6.80 cr. at the upper cap) for its eligible employees and offering them a discount of Rs. 76 per share, from the rest, it has allocated not more than 50% for QIBs, not less than 15% for HNIs, and not less than 35% for Retail investors.

The joint Book Running Lead Managers (BRLMs) to this issue are ICICI Securities Ltd., Axis Capital Ltd., HSBC Securities and Capital Markets (India) Pvt. Ltd., IDBI Capital Markets & Securities Ltd., Motilal Oswal Investment Advisors Ltd., and SBI Capital Markets Ltd., while MUFG Intime India Pvt. Ltd. is the registrar to the issue. HDFC Bank Ltd. is the M-BRLM for this issue responsible for only marketing. Motilal Oswal Financial Services Ltd., SBICAP Securities Ltd., HDFC Securities Ltd., and Investec Capital Services (India) Pvt. Ltd. are the syndicate members. 

The company has issued/converted entire initial equity issue at par value. The average cost of promoters/selling stakeholders is Rs. 2.00, Rs. 5.20, Rs. 12.28, and Rs. 108.29 per share.

Post-IPO, its current paid-up equity capital of Rs. 40.00 cr. will remain the same as this is a pure OFS. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 16000.00 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit, of Rs. 1099.81 cr. / Rs. 234.81 cr. (FY23), Rs. 1365.71 cr. / Rs. 275.45 cr. (FY24), Rs. 1535.19 cr. / Rs. 343.12 cr. (FY25). 

For the last three fiscals, the company has posted an average EPS of Rs. 15.13 and an average RoNW of 16.75%. The issue is priced at a P/BV of 7.98 based on its NAV of Rs. 100.27 as of March 31, 2025, as well as on post-IPO basis.

If we attribute FY25 annualized earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 46.62. Based on FY24 earnings, the P/E stands at 58.10. Thus, prima facie, the issue appears fully priced.

The company has posted PAT margins of 21.35 % (FY23), 20.17% (FY24), 22.35% (FY25), its RoE margins of 16.43%, 16.36%, 17.11%, respectively for the referred periods.

DIVIDEND POLICY:
The company has paid dividends of 50% for FY23 and FY24FY23). It has adopted a dividend policy in January 2023 and amended it in January 2025, based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown CDSL as its listed peer. It is trading at a P/E of around 64.1 (as of July 25, 2025). However, they are not truly comparable on an apple-to-apple basis.

MERCHANT BANKER’S TRACK RECORD:
The six BRLMs associated with the offer has handled 101 pubic issues in the past three fiscals, out of which 23 issues closed below the offer price on listing date.