CDSL, on a growth path after its IPO, is also planning new services too
The `525-crore IPO of Central Depository Services (CDSL) has been oversubscribed 170 times recently. The offer attracted bids for 4,206,029,600 shares against the total issue size of 2.48 crore shares. CDSL subsequently made a memorable debut on NSE, as the scrip got listed at `250, a premium of 67.79% over its issue price of `149.
In fiscal 2017, CDSL held a 59% market share of incremental Beneficial Owner (BO) accounts with a net growth in BO accounts of 13.68% from fiscal 2016 to fiscal 2017; over 253 billion securities of 9934 issuers under custody representing a total value of `18.3 trillion; 589 registered DPs who had over 17,000 service centers across India; and over 15 million KYC records with a market share of approximately 67%. According to Bharat Sheth, CFO at CDSL, as many as 37 banks and 6 NBFCs are CDSL’s DPs. For the company, all the DPs are big and 179 companies were admitted during 2016-17. As of April 30, 2017, the comp-any has over 12.4 million investor accounts and its overall performance has improved compared to previous years.
OPERATIONS REVENUE RISES
CDSL’s revenue from operations includes transaction charges, account maintenance charges and settlement charges paid by DPs and annual fees, corporate action charges and e-voting charges paid by companies whose securities are admitted to its systems. CDSL registered revenue CAGR of 17.8% while operating margin improved significantly from 44% in FY15 to 54.5% in FY17. Says Sheth: “The total amount of annual issuer fees for FY 16-17 is `51.71 crore, recording a yoy growth by 7.44% over FY 15-16.”
ROBUST IT SYSTEM
CDSL has state-of-the-art IT systems. It has deployed its core depository system based on a centralized architecture providing real-time updated information to users. It has an experienced team of internal IT professionals, supported by third party IT service providers. “Our domain strength and modern IT capabilities have enabled us to implement several online applications to enhance the investor experience including online statement generation, allowing users to generate transaction-cum-holding statements for a financial year; web-based Centralised Depository Accounting System (CDAS) allowing the users greater flexibility and ease of use in conjunction with our registration based account management tools; an easy system allowing users to view executed transactions on a real-time basis; e-Locker, a facility allowing users to store different documents, which can be viewed, downloaded or shared from any location subsequently; and mobile app (myeasi and m-Voting),” says Sheth.
Moreover, CDSL also provides BOs access to their respective accounts on the internet. It has developed expertise in handling large data volumes due to several years of experience of working with a large network of DPs across the country.
INFRASTRUCTURE & SECURITY
CDSL’s system can be accessed over the internet as well as the intranet through a secure channel using multi-factor user authentication. CDSL has deployed stateof-the-art server hardware, enterprise flash storages and highly resilient network infrastructure. It has contingency terminals to ensure DPs’ access to information remains unaffected in case of technical disruptions at a particular DP location. Sheth explains: “Our Information Security Management System (ISMS) protects information throughout the life span, from its initial creation to its final disposal. Our ISMS complies with ISO 27001 standard. Our system has multiple back-up levels including a redundant failover cluster and a seamless switchover to the Disaster Recovery System (DRS), located at a different seismic zone to ensure business continuity. We are one of the few depositories globally to have been awarded ISO 22301:2012 certification for our Business Continuity Management System (BCMS). We also provide internet access to DPs as a contingency measure.”
MARKET SHARE RISES
In terms of market share, CDSL is the second largest depository in India. Incremental market share of new BO accounts for FY 16-17 is 59%. Overall market share for total BO accounts as on 31March 2017 is 44%. The incremental market share of new BO accounts for the last 3 years is 58%.
TARGETS, FUTURE PLANS
Generally, CDSL aims to strategically expand network of DPs and service centers to ensure reach to potential investors and it expects significant portion of new DP relationships will include DPs present in tier 2&3 cities due to relatively lower scale of DP services currently available in these cities.
Says Sheth: “Besides strengthening its position in depository, we are also planning to build on nascent businesses such as EKYC, eInsurance, National Academic Depository and new businesses such as GST as GST Suvidha provider (GSP) and Commodity Repository.”
Bharat Sheth estimates that new businesses are expected to contribute in the next
2 -3 years