+91-9969147300

Central Depository Services (India) Ltd.

Issue Summary
Type Offer for Sale
Size Rs 5.1 bn to Rs 5.2 bn
Offer Price Rs 145 to Rs 149 per share
Minimum subscription Minimum - 100 shares and in multiples of
100 thereafter
Listing NSE
Bid/Issue opens 19-June-2017
Bid/Issue closes 21-June-2017
Shares on offer 35.16 million shares
Face Value Rs 10 per share
Pre/Post-issue promoter holding 50.05 / 24
Promoters BSE LTD
Lead Managers Axis Capital, Edelweiss Financial Services,
Nomura Financial Advisory and Securities
(India) Pvt. Ltd, SBI Capital Markets,
Haitong Securities India Pvt. Ltd, IDBI
Capital Markets & Securities, Yes Securities
(India).

CDSL - IPO 1 19th Jun, 2017

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OBJECTS OF THE ISSUE

The objects of the offer are to achieve the benefits of listing the equity shares on
NSE and for the sale of equity shares by the selling shareholders.

The company expects that listing of the equity shares will enhance its visibility
and brand image and provide liquidity to its existing shareholders.

The company will not receive any proceeds of the offer and all the proceeds of the
offer will go to the selling shareholders in the proportion of the equity shares
offered by them.

COMPANY BACKGROUND

1. Business

DSL is the second largest securities depository in India, after NSDL, with a 44%
market share in terms of demats accounts. But it is a leading depository in terms
of incremental growth of Beneficial Owner (BO) accounts with a 60% market
share.

CDSL commenced its depository business in 1999 with the objective of providing
convenient, dependable and secure depository services at affordable cost to all
market participants. The company was initially promoted by the BSE which
subsequently divested a part of its stake to leading Indian banks. It has
connectivity with clearing corporations of all the leading Indian stock exchanges
including the Bombay Stock Exchange (BSE), National Stock Exchange (NSE) and
Metropolitan Stock Exchange of India. It has also entered into MoUs with
depositories globally including with DTCC, JASDEC and Euroclear.

CDSL offers services to the following clients:

Depository Participants and other capital market intermediaries: CDSL offer

dematerialization for a wide range of securities including equity shares,
preference shares, mutual fund units, debt instruments, government securities.
As a securities depository, they facilitate holding of securities in electronic form
and enable securities transactions (including off-market transfer and pledge) to
be processed by book entry. The DPs act as their agent and offer depository
services to the BO of the securities. The Registrar and Transfer Agents (RTAs) and
Clearing Members (CMs) are the other intermediaries involved in the process of

CDSL - IPO 2 19th Jun, 2017

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issue and transfer of securities on their electronic platform.

Corporates: CDSL offer facilities to issuers to credit securities to a shareholder's

or applicant's demat accounts to give effect to a range of noncash corporate
actions such as bonus issue, subdivision of holdings and conversion of securities
in a merger, amalgamation or in an initial public offering. Capital market
intermediaries: CSDL offer KYC services in respect of investors in Indian capital
markets to capital market intermediaries including to mutual funds.

Insurance Companies: CDSL offer facilities to allow holding of insurance policies

in electronic form to the holders of these insurance policies of several insurance
companies.

Others: CSDL also offer other online services such as e-voting, e-Locker, National
Academy Depository (NAD), easi (Electronic Access to Security Information),
easiest (Electronic Access to Security Information and Execution of Secured
Transaction) drafting and preparation of wills for succession (myeasiwill) mobile
application (myeasi, m-voting) and Transactions using Secured Texting (TRUST).
They also regularly conduct investor meetings and other awareness programs

2. Key management personnel

Taruvai Subbayya Krishna Murthy, is the non-executive Chairman and a Public

Interest Director of CDSL Ltd. He has been on our Board since March 30, 2016
and holds a bachelor's degree in economics and law from University of Mysore
and University of Madras, respectively, and a master's degree in fiscal studies
from University of Bath, United Kingdom. He was also the former chief election
commissioner of India and secretary of Ministry of Corporate Affairs. Prior to
joining the company's Board, he served the GOI at various levels. As secretary of
the Ministry of Corporate Affairs, he contributed in setting up the Investor
Education and Protection Fund from unclaimed dividends of companies. He was
also the Chief Commissioner of Income Tax in Bombay. He has served as an
advisor to the International Monetary Fund in Ethiopia and Georgia. In 2005, he
was also appointed by the Supreme Court of India to conduct elections to the
Board of Control for Cricket in India. He has several years of experience in the
securities market.

Padala Subbi Reddy is the Managing Director and Chief Executive Officer of
CDSL Ltd. He has been on the company's Board since March 6, 2009. He

CDSL - IPO 3 19th Jun, 2017

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completed his bachelors in arts (economics) from Andhra University,
Vishakhapatnam and a master's degree in arts (economics) from University of
Hyderabad. He has also worked as a research assistant in Gokhale Institute of
Politics and Economics, Pune. Prior to joining our Company, he was associated
with BSE as chief general manager of surveillance and inspection. He is also a
member of various committees of SEBI including, inter alia, the Secondary
Market Advisory Committee and Corporate Bond and Securitization Advisory
Committee. He is also a member of the National Council for Capital Markets of
Confederation of Indian Industry and the Associated Chambers of Commerce
and Industry of India.

Nehal Naleen Vora is a Shareholder Director of CDSL Ltd. He has been on the
company's Board since July 25, 2015. He holds a bachelor's degree in commerce
from the University of Mumbai and completed his masters in management
studies from the Narsee Monjee Institute of Management Studies, University of
Mumbai. He is also the chief regulatory officer of BSE. Prior to joining BSE, he
worked with various departments in SEBI. He also served as a director, law and
compliance at DSP Merrill Lynch Limited heading broking and investment
banking compliance. He has more than 15 years of experience in areas of legal
compliance. He currently heads all the regulatory functions of BSE which
includes membership compliance, surveillance, inspection, investigation,
regulatory communication, investor services, listing compliance and regulatory
legal.

CDSL - IPO 4 19th Jun, 2017

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Reasons to apply

1. Stable Revenue Stream with Diversified Offerings

The main source of revenues for a depository are the fixed annual charges
collected from the registered companies and transaction based fees collected
from its depository participants (DPs).

Apart from that, online data charges and IPO/online data charges are some other
sources that provide a stable and recurring revenue stream for depositories.

CDSL, along with its subsidiaries, offer services to several sub-sectors of the
Indian securities and financial services market including capital markets, mutual
funds and insurance companies. Its diversified offerings to several client bases
including DPs, corporates, stock exchanges, clearing corporations, registrars and
the investors provide the company with multiple streams of stable, recurring
operating revenue.

The company also leverages on its existing relationships with corporates by

offering consistent revenue-generating services like e-notices and e-voting
services. Revenues from depository operations account for 78% of the overall
revenues.

The company provides KYC services to capital market intermediaries through its
subsidiary CDSL Ventures. This is the second largest source of revenue
accounting for 16.6% of overall revenues.

In addition to the above, CDSL also provides online services such as e-locker,
National Acadamic Depository, insurance policies in the electronic form,
preparation of wills, and, mobile applications.

These multiple offerings in the Indian securities market offer a stable and
recurring revenue stream for CDSL.

2. High Economies of Scale with Incremental Growth of BO Accounts

Along with the stable revenues, CDSL enjoys economies of scale which further
aids its profitability.

CDSL - IPO 5 19th Jun, 2017

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The company's main costs comprise of employee wages and employee benefits
and software development and maintenance costs. These costs, which are largely
fixed operating costs, help CDSL enjoy high economies of scale. The economies of
scale further lead to a steady growth in company's profitability.

Further, the high economies of scale have been further enhanced by a growth in
beneficial owner (BO) accounts.

The company is the leading securities depository in India by incremental growth

of BO accounts and by the total number of registered DPs according to the
CRISIL Report. (in terms of market share, it is the second largest depository in
India)

In FY17, it held a 60% market share of incremental BO accounts with a net

growth in BO accounts of 13.68% from Fiscal 2016 to Fiscal 2017. For DPs, as on
FY17, the company had 589 registered DPs with over 17,000 service centres
across India.

The direct DPs connection through centralized database systems ensures

relatively low initial set up costs and minimal incremental costs.

Low cost of operations and capital expenditure ensure high profitability. CDSL
earned average operating and net margins of 45% and 54%, respectively in the
past five years.

3. New Offerings to expand business

Both CDSL and NSDL, as a result of competition for market share, are
continually striving to offer the best possible facilities to investors. This has
resulted in each depository offering some unique services.

To catch up with the competition from NSDL, CDSL is aiming to introduce a

comprehensive range of additional services at competitive prices.

The company has also received the letter of intent (LOI) to register as a
commodity warehouse repository. The operations for the same are proposed to
commence from 2017. It is also planning to expand its National Academy
Depository (NAD) project to include more educational institutions in the future.

CDSL - IPO 6 19th Jun, 2017

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Finally, the company has also registered itself as a KYC Service Agency (KSA) &
Authorized Service Agency (ASA) and as a KYC User Agency (KUA) &
Authorized User Agency (AUA) with the e Unique Identification Authority of
India (UIDAI).

These initiatives are likely to further diversify the company's operations and
provide it with economies of scale.

4. Good Financial Position with Steady Growth and Consistent Dividend Payout

CDSL has been able to grow its revenues at a CAGR of 13.33% and net profits at a
CAGR of 21.96% during the past three years (FY15-FY17).

Most of the above growth comes on the back of company's stable and recurring
revenues and fixed operating costs.

The company also enjoys high margins. During FY17, operating margins stood at
54%, while net profit margins stood at 59%.

Further, the company and its subsidiaries do not have any outstanding
indebtedness as of March 31, 2017. This makes the company debt free and hence
financially sound.

The company's stable business and steady revenue growth has allowed it to
consistently pay dividends since FY12. The dividend pay-out ratio was more
than 35% in the past three years.

CDSL - IPO 7 19th Jun, 2017

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Reasons not to apply

1. Appointment of a central KYC registration agency may adversely impact KYC

revenues

CDSL's subsidiary, CDSL Ventures, was the first KRA registered with the SEBI
under the KRA Regulations. As of April 30, 2017, CDSL held over 15 million
capital market investor records under the KRA Regulations representing
approximately 67% market share. Revenue from operations of CDSL Ventures
was 16.63% of total operational revenue for the Fiscal 2017.

The KRA Regulations currently provide the option to an intermediary to rely on

client KYC data available on the KRA system or taking KYC details again while
on-boarding the client. Since the GoI has authorised CERSAI (Central Registry of
Securitisation Asset Reconstruction and Security Interest of India) to act as, and
to perform the functions of, the central KYC records registry under the
Prevention of Money Laundering Rules 2005, including receiving, storing,
safeguarding and retrieving the KYC records in digital form, our subsidiary,
CDSL Ventures may lose a substantial portion of its business and thus, adversely
affecting its business prospects, results of operations and financial condition.

2. Risks from Regulations, Shift in Consumer Preferences, and Inability to Scale

New Offerings

The depository system is a highly regulated market in India. All product and
segment offerings are ultimately determined by SEBI and depository companies
are limited in their flexibility to innovate or differentiate vis-a-vis other
depositories.

Any delays or failure to obtain such approvals may affect the company's
operations and business.

CDSL also faces the risk from the probable shift in consumer preferences. Factors
such as changes and volatility in the prices of securities, concerns over inflation,
retail confidence in markets, changes in government monetary policies and
exchange rates can impact the consumer preferences towards financial services.

If any of these factors lead to a shift in consumer preferences and if levels of

activity on the stock exchanges are materially affected, it can affect the business
of the company.

CDSL - IPO 8 19th Jun, 2017

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Lastly, while the company is planning to come up with new services under its
basket of offerings, any inability to scale these businesses could mean losses and
would pose a risk to the business.

3. Contingent Liability

As at March 31, 2017, the company had contingent liabilities totaling Rs 399
million.

Of the above, Rs 398 million relate to its service tax dispute with Commissioner
of Service Tax and CESTAT. These relate to the characterization and classification
of certain items.

If the company is compelled to realize all or a material proportion of these

contingent liabilities, it may affect the business, financial condition and results of
operations.

CDSL - IPO 9 19th Jun, 2017

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Financial Analysis

Income Statement Consolidated (Rs, million) FY13 FY14 FY15 FY16 FY17
Revenue from operations 907 889 1,053 1,229 1,460
Other income 333.01 338.91 402.17 384.34 405
TOTAL REVENUE 1,240 1,228 1,455 1,613 1,865

EXPENSES:
Employee benefits expenses 172 175 192 215 249
Other expenses 378.63 387.67 409 375 417
Total 550 562 601 590 666
EBITDA 357 327 452 639 1,794
EBITDA Margin 39.40% 36.80% 42.90% 52.00% 54.40%
Depreciation & Amortization 26 50 62 42 37
Exceptional Items 5 -6 17 331 0
PBT 659 622 808 1,312 1,162
Tax 154 127 233 402 300
Profit After Tax 505 495 575 910 863
Less Minority Interests 6 2 -2 1 8
Net Profit After Tax 499 494 577 909 854
Net Profit Margin (Ex. Extraordinary income) 55.60% 54.90% 53.20% 57.60% 58.50%
EPS 4.8 4.7 5.5 8.7 8.2

CDSL - IPO 10 19th Jun, 2017

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Balance Sheet Consolidated (Rs, million) FY13 FY14 FY15 FY16 FY17
Liabilities
Networth 3,285 3,534 4,160 4,793 5333.21
Minority Interest 124 136 146 147 154.87
Non-Current Liabilities 216 218 14 34 14
Current Liabilities
Short term liabilities 51 55 300 302 322
Short term provisions 275 276 18 50 76
Other current liabilities 215 339 477 203 173
Total liabilities 4,166 4,557 5,115 5,530 6,072
Assets
Non Current Assets
Net Fixed Assets 76 68 51 30 47
Intangible Assets 22 30 16 7 8
Financial Assets 258 447 2,465 2,267 2825
Other Non-current Assets 161 176 120.8 135 154.8
Current Assets
Current Investments 3,162 3,307 1,909 2,470 2300
Trade Receiveables 85 62 69 130 133
Cash and cash equivalents 353 410 431 404 483
Other Current Assets 49 58 52 88 122
Total Assets 4,166 4,557 5,115 5,530 6,072

Key Financial Ratios FY13 FY14 FY15 FY16 FY17

Debt Equity Ratio 0 0 0 0 0
EBITDA Margin (%) 39.40% 36.80% 42.90% 52.00% 54.40%
Net profit margin (%) (Ex. Extraordinary
40.30% 40.20% 39.70% 56.40% 45.80%
income)
ROE (%) (Ex. Extraordinary income) 15.40% 13.80% 13.50% 12.10% 16.00%

CDSL - IPO 11 19th Jun, 2017

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Concluding remarks

CDSL, the second largest depository in the country has bagged a sizeable share
in the depository market. CDSL commenced operations in 1999, three years after
NSDL. But by keeping low entry barriers for brokers to act as a depository
participant and introducing volume based transaction charges, CDSL's market
share has risen to 44% in terms of depository accounts and 43% in terms of
revenues. Further CDSL is leading in the new beneficiary accounts cornering 60%
market share.

Apart from securities depository services, CDSL has diversified into other digital
services such as KYC services to capital market intermediaries, e-locker,e-voting,
National Acadamic Depository services, electronic holding of insurance policies
etc. As a result of diversification, revenues from other services constitute a
sizeable share of 38% ensuring healthy growth in revenues - 13% annual growth
in the past four years - and imparting it further economies of scale. This coupled
with low fixed costs have translated in to high profit margins and robust
profitable growth. CDSL's profits have grown at an average rate of 14% in the
last four years.

Revenue Break-up share (%) (FY16) CDSL NSDL

Transaction Fees 21 51
Custody Fees 39 37
Other Charges 38 5
Annual Maintenance Chgs 2 7

Stable income from depository operations coupled with additional revenue

streams from other digital services and high profit margins impart a healthy
economic moat to CDSL. Even as compared to market leader NSDL, CDSL's
financials compare favorably. Being a significant depository player, CDSL is well
placed to benefit from increased retail participation in equity markets as well as
growth in digitisation services in the country.

Financial Snapshot (FY16) CDSL NSDL

Total Income (Rs m) 1,613 1,375
Operating Margin (%) 52.00% 44.00%
Net Margin (%) (Ex. Extraordinary income) 47.10% 38.00%
Return on Networth(%) (Ex. Extraordinary income) 12.00% 12.00%

At the upper end of the price band of Rs 149, CDSL is valued at 18 times its FY17
earnings. Given its sound financials, robust business prospects and most
importantly reasonable valuations subscribers could consider APPLYING IPO.

CDSL - IPO 12 19th Jun, 2017