NSDL IPO Receives SEBI Approval

Securities and Exchange Board of India or SEBI has approved the initial public offering (IPO) of National Securities Depository Limited (NSDL). This is an important development as NSDL is responsible for handling the majority of securities held and settled in dematerialized form in the Indian capital market.

SEBI's Approval Process for NSDL IPO

NSDL submitted its Draft Red Herring Prospectus (DRHP) to SEBI on 7 July 2023. However, in August 2023 SEBI put the IPO on hold. Fortunately this suspension has been lifted and NSDL has now received final observations from SEBI allowing it to proceed with its IPO.

It is important to note that SEBI has the authority to halt any IPO if there are ongoing investigations or if there are delays in obtaining necessary information from the company or regulatory bodies.

Details of the NSDL IPO

NSDL IPO will feature an offer for sale (OFS) of 57,260,001 shares. This means that existing shareholders will be selling their shares to the public rather than issuing new shares. The main stakeholders selling their stakes in the IPO include:

• IDBI Bank: Up to 22.2 million shares
• NSE: 18 million shares
• Union Bank of India: 5.62 million shares
• State Bank of India: 4 million shares
• SUUTI: 3.4 million shares
• HDFC Bank: 4 million shares

Market Impact and Future Outlook

Once the IPO is completed and NSDL is listed on the stock exchanges it will become the second depository services company to be publicly traded in India following CDSL's successful debut in 2017. The participation of major banks and financial institutions as stakeholders in this IPO highlights the confidence in NSDL’s business model and its significance in the financial ecosystem.

As of 31 March 2023 NSDL managed over 31.46 million active demat accounts through 283 authorized depository participants. These accounts are held by investors across more than 99% of postal codes in India and 186 countries worldwide. Furthermore, NSDL is responsible for overseeing 40,987 issuers indicating its substantial role in the market.

Key Players in the NSDL IPO

The book running lead managers for NSDL IPO include:

• ICICI Securities
• Axis Capital
• HSBC Securities and Capital Markets (India)
• IDBI Capital Markets and Securities Ltd
• Motilal Oswal Investment Advisors Ltd
• SBI Capital Markets Ltd

These financial institutions are tasked with managing the IPO process and ensuring that it runs smoothly, attracting investors while providing necessary information.

Background of NSDL

NSDL was established in August 1996 and has become a vital part of India's financial infrastructure. Before the advent of NSDL the Indian capital market relied heavily on paper based settlements which led to numerous challenges including bad deliveries and delayed title transfers. The introduction of NSDL helped modernize this process, making transactions smoother and more efficient.

Despite the existence of a vibrant capital market in India for over a century, NSDL's establishment marked a turning point by providing a depository framework. This framework not only safeguards securities but also simplifies the trading process for investors.

Rivalry with CDSL

NSDL’s primary competitor is Central Depository Services or CDSL which was founded in 1999. CDSL is already listed on the stock exchanges and recently achieved a remarkable milestone by opening 60 million active demat accounts, making it the largest depository in India in terms of account numbers.

Conclusion

The approval of NSDL’s IPO marks a significant step forward for the Indian capital market as it prepares to offer its shares to the public. This move is expected to enhance transparency and accountability in the financial services sector while providing investors with a unique opportunity to participate in one of India’s largest depositories.

As NSDL gears up for its IPO, investors and market participants are keenly observing its progress and potential market impact. With the continued growth of digital financial services in India, NSDL's listing could further bolster confidence in the Indian capital markets, paving the way for more robust trading practices.

The upcoming IPO represents not only an opportunity for stakeholders to divest their shares but also a chance for investors to be part of a transformative phase in India's financial landscape.

As a final note, keep an eye on CDSL’s stock performance as it serves as a benchmark for NSDL's market debut. As of recent trading data, CDSL's stock price has shown some fluctuations with a slight dip of over 1.11% trading around ₹1,352.85 per share but later closed at ₹1375 per share.

Investors should keep an eye on how NSDL IPO develops and think about its potential as they explore the changing Indian capital market.