CDSL

Banking Frontiers - - Highlights - Me­hul@bank­ingfron­tiers.com

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.

DP, IS­SUERS

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

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