Nasa's d raises by 16% post-IPO: Experts discuss the factors leading to this rise in shares following the initial public offering. Insights provided.
In the bustling Indian securities market, a new player is making waves – the National Securities Depository Limited (NSDL). After its successful Initial Public Offering (IPO), NSDL has emerged as a more attractive investment choice compared to its rival, Central Depository Services Limited (CDSL), despite CDSL's dominance in demat accounts and profitability.
Anand Rathi, a domestic brokerage house, predicts that NSDL is likely to focus on growth opportunities and market reach, bolstering its position in the market. This view is supported by several key factors.
Firstly, NSDL is priced more cheaply than CDSL. With a price-to-earnings (P/E) multiple of around 47x, NSDL is significantly cheaper than CDSL's 68x. Moreover, NSDL's price-to-book ratio is much lower at 7.98x compared to CDSL’s 20.4x, suggesting that NSDL is undervalued relative to its peer.
Secondly, NSDL's post-IPO market performance has been robust. The stock surged over 33% shortly after listing, indicating strong market confidence and momentum, while CDSL saw only a mild uptick in share price during the same period.
Financially, NSDL has reported impressive growth. In FY25, the company recorded a 12% year-on-year (YoY) revenue growth and a net profit growth of 24.6% YoY. NSDL also boasts a higher total value of assets under custody and a broader base of institutional/high-value clients. In contrast, CDSL posted higher profitability margins but experienced revenue and profit declines in its latest quarter, along with margin contraction.
CDSL, however, leads in profitability, retail investor accounts, and stable recurring revenue, making it a steady performer. NSDL, on the other hand, offers a more compelling valuation, stronger growth post-IPO, and a dominant position in high-value clients and assets, which may translate into better investment upside post-listing.
Investors seeking growth and value might favor NSDL, while those prioritizing profitability and retail market dominance might lean toward CDSL.
The NSDL IPO consisted of 5.01 crore shares worth Rs 4,010.95 crore. ICICI Securities served as the book-running lead manager for the IPO, and MUFG Intime India (Link Intime) was the registrar. The allotment for the IPO was finalized on August 4, and the shares of NSDL hit the bourses on August 6, 2023, for the first time, listing at a premium of 10% to its issue price of Rs 800.
NSDL provides electronic infrastructure for the dematerialisation of securities and facilitates the electronic settlement of trades in the Indian securities market. The company, a SEBI-registered market infrastructure institution (MII) and a pioneer in the dematerialisation of securities in Indian capital markets, has been in the business of depository operations for over 26 years. Anand Rathi also predicts that NSDL will strengthen and modernize its IT infrastructure to improve operational efficiency.
Deven Choksey, Managing Director of KRChoksey Shares and Securities, is positive on the depository duopoly segment. The National Securities Depository (NSDL) commands a higher share of the revenue in the depository sector. The NSDL share price has risen 16.2% to Rs 1087.90 on the BSE, reflecting the market's optimism about the company's future prospects.
In essence, NSDL offers a compelling investment opportunity due to its attractive valuation, robust post-IPO growth, and strong financial performance. However, investors should consider their investment objectives and risk tolerance before making decisions.
- In the Indian securities market, NSDL's growth opportunities and market reach might bolster its position farther, as predicted by Anand Rathi.
- For investors seeking growth and value, NSDL's price, which is significantly cheaper than CDSL's, and its impressive post-IPO market performance make it an appealing investment choice compared to CDSL.
- In addition to its stronger growth post-IPO and dominant position in high-value clients and assets, NSDL promises to strengthen and modernize its IT infrastructure for improved operational efficiency, according to Anand Rathi.
- NSDL's stock, initially priced at Rs 800 per share, surged by over 33% shortly after listing on the stock-market, signifying robust market confidence and momentum.
- Moreover, NSDL's dominant position in the dematerialization of securities in Indian capital markets and its role as a SEBI-registered market infrastructure institution (MII) add more reasons for potential investors to consider this Defi sector of the finance business.
