This company, along with NSDL, are the only two depository that are authorised by SEBI. This stock corrected by over 38 percent from its all-time high. In this article we will look at its fundamentals and a brief if its trading at an attractive valuation.
About the Company
CDSL is India’s largest depository, enabling digital stock transactions and securely storing securities. It operates alongside NSDL and serves exchanges, clearing corporations, depository participants, issuers, and investors.
CDSL manages equity, debt instruments, and mutual funds, with 8.81 lakh crore active demat accounts and securities worth Rs 4.52 lakh crore in custody. It has 588 depository participants, 212 branches, and 17,000+ operational sites, providing seamless depository services through a central database system.
Price Movement
With a market capitalization of Rs 24,823 crore, CDSL made a 52-week high of Rs 1,989.80 per share, trading at a 40 percent discount from its current market price of Rs 1,188 per share. It has impressive ROE and ROCE of 31.3 percent and 40.2 percent, respectively.
Business Model
As of 31 March 2024, CDSL generates the majority of its revenue through Annual Issuer Charges. It contributes around 31 percent of revenue for the company. The second most important stream is through transaction charges that account for 27 percent of the revenue. Other sources of revenue include account maintenance fees, e-voting fees, E-CAS and BO statement charges, etc.
Market Position and Share
As of FY2024, CDSL holds a dominating position in new demat account openings. It grew from 81 percent in FY22-FY23 to 88 percent in FY23-FY24. The total demat accounts opened in FY23-FY24 is 3.69 crore of which 3.26 crore have been opened by CDSL outlining a strong market position.
As of FY24, of a total of 15.14 crore demat accounts, 11.56 crore demat accounts have been opened by CDSL alone outlining a market position of 76 percent. As of Q3 FY25, the company reported a demat custody of Rs 75 lakh crore, up by 29 percent, from Q3 FY24 demat custody of Rs 58 lakh crore.
Financial Highlights
It reported revenue from operations of Rs 278.10 crore in Q3FY25, up by 29.6 percent, from its Q3FY24 revenue of Rs 214.47 crore. EBITDA stands at Rs 146 crore as of Q3 FY25, up by 19 percent, from its Q3FY24 EBITDA of Rs 122 crore. Net profit stands at Rs 130.93 crore as of Q3 FY25, up by 21 percent, from its Q3FY24 net profit of Rs 107.33 crore.
Challenges
The management said that the company is facing muted transaction volumes due to geopolitical issues. Transition charges have also seen a decline influenced by both volume decreases and price cuts.
NSDL, which focuses on institutional clients and manages higher-value securities, is its main competitor, which may impact CDSL’s ability to increase it market share efficiently in the near future.
Future Prospects
CDSL is not focused on gaining market share from its competitors but rather investing in its technology and enhancing its value proposition to its stakeholders. With rising retail participation, new demat accounts, more listings through IPO, and digital transformation, the company seems to sail through the challenges and drive economic growth.
The management is very optimistic about the future of the Indian equity market. With different education initiatives and social media campaigns, CDSL empowers retail investors to actively participate in the equity market which will in turn help it increase its revenue.
Analyst Recommendation
As per the data shared by Trendlyne, Central Depository Services Ltd. has an average target of Rs 1500 per share. The estimate represents an upside of 22.24 percent from the last price of 1227 per share.
Conclusion
As retail participation is on the rise, the company, which has a large share of its revenue from retail investors, is well-positioned to capitalize on the growing retail participation in the Indian market. Its duopoly market position ensures stable revenues while technological advancements provide scalability.
Written by Satyajeet Mukherjee
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
