NSDL likely to give a 15% listing pop to investors

Mumbai: Investors who put money in National Securities Depository Ltd's ₹4,012 crore initial public offering (IPO) can expect a listing pop of around 15% on Wednesday. Analysts said investors could hold the stock beyond the debut day as a discount in valuation to its larger peer, CDSL, could result in further upside.

"NSDL offers investors a relatively safer bet amid this uncertain environment as most listed entities and sectors are expected to be impacted by tariffs," said Dharmesh Kant, head of research, Cholamandalam Securities.

The grey market premium - the price in the unofficial market that investors pay for the shares before listing - was at ₹128 for NSDL on Tuesday, a 15% premium to the upper price band of ₹800. NSDL shares in the unofficial market have fallen nearly 40% from the peak after the company's IPO price band fell below expectations.


"NSDL was trading in the unlisted market around ₹1,025, then after the price band was announced there was a dip in the GMP," said Abhishek Pandya, research analyst, StoxBox. "After the IPO was announced, the investor sentiment turned positive and listing gains of around 13-15% are expected."

Though CDSL is a bigger depository with 15.86 crore accounts compared to NSDL's 4 crore accounts, analysts are optimistic about the smaller depository's client profile.

“In the current market cycle, NSDL is at an advantage since it has institutional and HNI clients and lower retail participation as retail investors can turn cautious in the current uncertain market environment,” said Pandya. “Fresh investors can wait until the first quarter results to buy.” The NSDL IPO was priced in the band of Rs 760-800 per share and was subscribed 41.01 times on Friday, its final day of bidding. Narendra Solanki, head of fundamental research — Investment Services, Anand Rathi Shares and Stockbrokers, said valuation in the IPO was ‘decently lower’ .

NSDL is valued at 46 times the Price to Earnings (PE) ratio while CDSL is at 64 times. “Investors who got allotment should hold the shares for the next one year. NSDL is expected to close the valuation gap, implying further upside potential of 12-15% over the listing gains,” said Pandya. Kant said if the stock falls 5- 10% below the upper price band of Rs 800 in the near term, which is likely, it will be a better opportunity for investors from a long term perspective.