National Securities Depository Ltd. (Subscribe)

Highlights

National Securities Depository Limited (NSDL), incorporated in 2012, is a SEBI registered market infrastructure institution (MII) offering a wide range of products and services to the financial and securities markets in India. As the first and leading depository in the country, NSDL introduced the concept of dematerialization of securities, revolutionizing the securities landscape in India.

NSDL offers wide ranges of Services and products which comprises of (i) Core Depository Services which includes, maintaining allotment and transfer of ownership records, account opening and management, settlement of market and off-market transfers, dematerialisation of securities, corporate  actions, pledge, margin pledge, non-disposal  undertakings  (NDUs), consolidated account statement (CAS), providing a comprehensive suite of APIs, cash  benefit  services (ii) Suite of E-Services which includes SPEED-e, SPICE, IDeAs, STeADY, e-Voting and (iii) Ancillary products and Value added products.

As a depository, NSDL provide a robust depository framework that enables market participants to participate in the financial and securities markets in India. They also play a central role in developing products and services that will continue to address the growing needs of the financial services industry in India.

NSDL had over 39.5 mn demat accounts held with registered across 294 depository participants. They have an aggregate of 79,773 issuers registered with the standalone operational revenue per investor account was Rs. 156.80. which helped NSDL to command total income market share of ~42.6 pct.

Out of the total proceeds of Rs. 40,116 mn, ~Rs. 40,116 mn would go towards existing selling shareholders of the company. NSDL expects that the proposed listing of its Equity Shares will enhance their visibility and brand image.

Key Highlights

• Total client accounts (demat accounts) grew at 27.4 pct CAGR between FY17 to FY25 to reach 192.4 mn as of March 2025 and it is expected to reach 225-240 mn by FY27P registering a CAGR of 11-12 pct. The demat accounts increased rapidly during pandemic due to lockdown, attractive returns delivered by equity market, however, the growth rate is expected to moderate in the next few years as some loss of momentum could be there on account of higher base.
• NSDL core depository services provide them with a steady source of recurring revenue, primarily through annual custody fees that they charge issuers of securities and annual maintenance fees they charge depository participants in relation to corporate accounts serviced through NSDL depository platform which provides stability to their business.
• NSDL accounts holders were located in more than 99.34 pct of pin codes in India and 194 countries across the world. In June 2014, they achieved the milestone of having assets of over Rs. 100,000 bn under their custody after 18 years of operations. In September 2024, they had assets of over Rs. 500,000 bn under custody.
• Through their subsidiaries, NDML and NPBL, they offer a range of IT-enabled solutions through multiple verticals such as e-governance, payments solutions, collaborative industry solutions, regulatory platforms, KYC solutions, insurance repository services, digital banking services, amongst others. This subsidiary contributes 56.44 pct of NDSL’s consolidated sales but contributes almost ~8 pct in the profits.
• NSDL aim to continue to focus on attracting new investors to the securities market in India and increase the user base of their depository business by increasing the number of customers through depository participants registered with them.
• NSDL’s key growth strategies include (i) Continue to focus on growth potential and increase market penetration by leveraging strengths (ii) Continue to invest in and upgrade IT infrastructure systems for the enhancement of operational efficiency, service quality and operational resilience (iii) Diversify offerings and enhance database management business (iv) Increase the market share of payments bank business.
• The sales/EBITDA/profit of the company has grown by 17.88 pct CAGR/ 21.2 pct CAGR/20.88 pct CAGR over FY23 – FY25. In FY25 the company reported sales of Rs. 14,201 mn, which grew 11.98 pct YoY while EBITDA of the company rose 31.74 pct YoY to Rs. 3,775 mn while margins expanded 397 bps YoY in FY25.  During FY25 the company posted profit of Rs. 3,431 mn which jumped by 24.57 pct YoY.

Key Risk

• A large proportion of NSDL business is transaction-based, in particular, delivery-based, and dependent on trading activity in the securities market. If trading volumes dropped it might affect NSDL business.
• NSDL are subject to higher penalties and settlement amounts as a MII and may be required to contribute a higher percentage of profits to the Investor Protection Fund, which may adversely affect profitability and dividend payments.

Peer Comparison Based on FY25 Financials

Business Model Comparison

Financial Performance

Valuation

NSDL is one of the largest Depositories in the World, established in August 1996 has established a state-of-the-art infrastructure that handles most of the securities held and settled in dematerialized form in the Indian capital market. Using innovative and flexible technology systems, NSDL works to support the investors and brokers in the capital market of the country. At the upper end of the price band of Rs. 800, the issue is priced at a PE of 46.63x its FY25 earnings on post issue equity capital. Given the Pedigree of the company and one of the most important market infrastructure institutions in India, one can Subscribe to this issue from a longer-term perspective.

Disclaimer: The views shared in blogs are based on personal opinions and do not endorse the company’s views. Investment is a subject matter of solicitation and one should consult a Financial Advisor before making any investment using the app. Investing using the app is the sole decision of the investor and the company or any of its communication cannot be held responsible for it.