National Securities Depository Limited (NSDL), India’s first and largest securities depository, is preparing to launch its Initial Public Offering (IPO). The NSDL IPO has garnered considerable attention from retail and institutional investors alike due to its robust business model, strong financials, and key role in the Indian financial infrastructure. Although the IPO date is yet to be finalized, NSDL has received approval from SEBI and the stock exchanges as of 30th September 2024. This IPO is expected to be entirely an Offer for Sale (OFS), with no new equity being issued.
The article provides an in-depth analysis of the NSDL IPO, including its structure, financial health, promoter holdings, strengths, risks, and a step-by-step guide on how to apply.
NSDL IPO Overview
The NSDL IPO is a bookbuilding issue that will be listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). While the face value of each share is ₹2, the price band and exact issue size are yet to be declared. The IPO will offer approximately 50.15 million equity shares through an OFS route, implying that no fresh capital will flow into the company; instead, existing shareholders will offload part of their stakes.
Key Details at a Glance
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IPO Type: Bookbuilding
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Issue Size: ~50.15 million shares (exact amount to be confirmed)
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Face Value: ₹2 per share
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Issue Price Band: To be determined
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Lot Size: To be determined
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Listing: BSE and NSE
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Issue Structure: 100% Offer for Sale
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Registrar: MUFG Intime India Pvt. Ltd.
NSDL Share Reservation
As per regulatory norms, the reservation structure is expected to follow the standard allocation:
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Qualified Institutional Buyers (QIBs): Up to 50%
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Retail Investors: At least 35%
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Non-Institutional Investors (NII/HNI): At least 15%
DRHP and SEBI Approval
NSDL filed its Draft Red Herring Prospectus (DRHP) on 7th July 2023. It received regulatory approval from SEBI and the stock exchanges on 30th September 2024. While the company has not yet announced the opening date of the IPO, it must launch the issue before 31st July 2025 to comply with regulatory timelines.
Financial Performance
NSDL has exhibited strong and consistent financial growth over the past few years. Here is a breakdown of the financials over the last three fiscal years:
| Financial Year | Revenue (₹ Cr) | Profit After Tax (₹ Cr) | Assets (₹ Cr) | Net Worth (₹ Cr) |
|---|---|---|---|---|
| FY 2021 | 526.12 | 188.57 | 1,504.01 | 1,019.30 |
| FY 2022 | 821.29 | 212.59 | 1,692.75 | 1,211.62 |
| FY 2023 | 1,099.81 | 234.81 | 2,093.48 | 1,428.86 |
The company has zero debt, which reflects a strong balance sheet. Its PAT margin stands at approximately 21.35%, and its Return on Net Worth (RoNW) is 16.43%, both indicating efficient use of equity and sound profitability.
Technical Indicators
Some technical metrics that help assess NSDL’s financial health and market valuation potential include:
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Return on Equity (ROE): 16.43%
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Return on Capital Employed (ROCE): Data pending
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Earnings Per Share (EPS): Not officially announced
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Price-to-Earnings (PE) Ratio: Yet to be disclosed
These metrics, once updated post-IPO, will help investors gauge valuation levels and make informed decisions.
GMP and Market Sentiment
The Grey Market Premium (GMP) is currently recorded at ₹0, indicating that no active trading is taking place in the unofficial market. However, GMP trends typically pick up closer to the IPO opening date. It’s advisable to monitor GMP movement during the application window, as it reflects market expectations of listing gains.
Business Overview
NSDL was incorporated in 2012 and operates as a SEBI-registered Market Infrastructure Institution (MII). It serves as India’s largest depository and maintains electronic records of securities, facilitating faster and more secure settlement systems. NSDL’s services include dematerialisation, settlement of trades, corporate actions, and e-voting.
Subsidiaries
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NSDL Database Management Limited
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NSDL Payments Bank Limited
These subsidiaries help NSDL diversify its offerings and strengthen its technological backbone.
Promoter Holdings
NSDL’s existing shareholders include well-established financial institutions. Pre-issue, the promoter and public holding structure is as follows:
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IDBI Bank
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National Stock Exchange (NSE)
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SUUTI (formerly UTI)
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State Bank of India
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HDFC Bank
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Union Bank of India
Post-issue promoter holdings will reduce depending on the quantum of shares offloaded in the OFS. However, no fresh equity dilution will take place since the issue is entirely an OFS.
Strengths of NSDL IPO
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Market Leadership: NSDL is India’s largest securities depository, managing a massive share of the demat market.
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Technological Edge: The company has a robust IT infrastructure, advanced cybersecurity measures, and innovative digital products.
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Consistent Financial Performance: Steady growth in revenue and profit, along with zero debt, enhances investor confidence.
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Diversified Business: Revenue streams come from multiple service verticals, ensuring sustainability.
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Strong Promoter Background: Backed by reputed financial institutions.
Risks and Concerns
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Entirely an OFS: The company will not receive any proceeds for future expansion. Only existing shareholders will benefit.
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Market Dependency: NSDL’s revenues are influenced by market activity; any prolonged downturn could impact its top line.
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Regulatory Challenges: Being a financial market infrastructure institution, NSDL is subject to strict regulatory oversight.
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Competition: Although NSDL leads the segment, it faces competition from other depositories like CDSL.
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Promoter Holding Limits: SEBI regulations mandate promoters to reduce holdings, which could impact governance structure.
Objective of the IPO
Since the NSDL IPO is an OFS, the objective is not to raise capital for business growth but to provide an exit route for existing investors. While this limits immediate business expansion, it enhances liquidity and public visibility for the company.
Peer Comparison
NSDL’s closest competitor is CDSL (Central Depository Services Limited), which has already been listed and has a larger number of demat accounts. However, NSDL handles more valuable assets under custody and has a higher asset base per account. NSDL’s technology stack and institutional client base are also considered more premium.
Should You Invest?
Reasons to Apply
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Strong and steady financials
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Technological leadership in the Indian depository space
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Reputed promoters
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Growing investor base in India
Reasons to Avoid
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No fresh capital inflow
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Dependence on capital markets for growth
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Regulatory uncertainties
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Current GMP at zero; listing gains not guaranteed
If you are a long-term investor looking for exposure to India’s market infrastructure, the NSDL IPO could be a strategic addition. For short-term investors, it would be wise to wait until the price band and GMP become clearer.
Step-by-Step Guide to Apply
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Research the IPO: Understand the issue size, price band, GMP, and subscription status.
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Open a Demat Account: If you don’t already have one, open an account with any SEBI-registered broker.
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Select ASBA Option: Use the Application Supported by Blocked Amount method for applying through your bank or broker.
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Bid Wisely: Enter your preferred number of lots and price. Retail investors often opt for the cutoff price.
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Approve Mandate: Use UPI or net banking to block funds.
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Wait for Allotment: Allotment status is generally declared a few days after the IPO closes.
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Refunds and Listing: If not allotted, your funds will be unblocked. If allotted, shares will be credited to your Demat account before listing.
How to Check IPO Allotment
You can check the NSDL IPO allotment status through:
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NSE Website: Go to the IPO allotment section and enter PAN or application number.
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Registrar’s Portal: Visit MUFG Intime India Pvt. Ltd. and enter relevant details.
Conclusion
The NSDL IPO is a landmark offer in India’s primary markets. While it brings an opportunity to invest in one of the pillars of Indian financial infrastructure, it also comes with typical risks associated with a fully offer-for-sale structure. With strong financials, zero debt, and a leadership position, NSDL holds long-term potential.
Retail investors should weigh the pros and cons carefully, monitor GMP trends and subscription data, and apply accordingly. This IPO could be a key addition for investors looking to diversify into financial services and infrastructure sectors.
