The Central Depository Services (India) Ltd. said the company will maintain its operating margins and dividend payout after going public.
The margins for CDSL rose from 44 percent in the year ended March 2015 to 54.5 percent in the last financial year. “We will maintain those margins” PS Reddy, managing director and chief executive officer, told BloombergQuint. The depository earns nearly two-thirds of its revenue from annual and transaction fees.
The company paid 60 percent of its net profit in dividends in 2016-17. “Our endeavour is to continue with the same dividend policy,” said Bharat Sheth, chief financial officer in an interview to BloombergQuint. Income from investments will continue to accrue given the company’s surplus cash balance of Rs 525 crore, Sheth said.
The depository launched its initial public offering on Monday to raise up to Rs 1,540 crore. BSE has to cut its stake from 50 percent to 24 percent by June 30 to meet a regulatory requirement as a stock exchange cannot hold more than that in a depository. It missed the previous deadline of March 31.
CDSL has seen the highest incremental growth in the number of depository participants over the last three financial years and also had the highest registered depository participants at the end of March 2016. Most of its participants are stockbroker DPs (Depository Participants). “When the stock markets are booming, the stockbroker DPs add more accounts than others like banks or custodians, which has contributed to the substantial growth in incremental demat accounts,” said Reddy.
However, in terms of market share, National Securities Depository Ltd. remains the largest depository in India.
While a large proportion of the company’s business is transaction-related and depends on trading volume. Reddy said there was no possibility of lower prices as the Securities and Exchange Board of India fixes prices for depositories.
- The company has also ventured into areas of KYC, where CDSL commands 65 percent market share.
- CDSL considers GSP Suvidha provider “yet another growth area”.
- CDSL has also been shortlisted as a commodity warehouse repository, which could also aid growth prospects.
- CDSL said the number of demat accounts will increase if the government implements its plan to have a single demat account for all financial assets. It was announced by the finance minister in the 2014-15 budget but has not been implemented yet.