NSDL offers long-term play in a growing capital market

ET Intelligence Group: National Securities Depository (NSDL), the country's largest securities depository, aims to raise ₹4,011 crore through an offer for sale (OFS). While the peer Central Depository Services' (CDSL) demat custody value at ₹70.5 lakh crore is just 15% of NSDL's ₹464.2 lakh crore, the latter has lower operating margin and net profit.

This reflects in its lower IPO valuation. India's demat account penetration at 13.4% in FY25 has grown at 21.9% annually over the past 10 years, according to Crisil.

The long-term growth prospects for the sector look bright driven by the increasing financialisation of savings and deepening capital markets. Given these factors, the issue is suitable for investors having a long-term horizon and moderate risk tolerance.

Business
Depositories primarily generate revenue through transaction fees, custody charges (fixed amounts for holding securities) and annual fees. Established in 1996, NSDL held 85.1% of total securities by number and 86.8% by value in FY25, according to Crisil. NSDL had 39.5 million active demat accounts and a network of 65,391 service centers as of March 2025.

It has focussed on institutional clients and larger-value transactions, while competitor CDSL has carved out a niche in the expanding retail investor segment.

Financials
Total income and net profit grew by 18.1% and 20.9% annually between FY23 and FY25 to ₹1,535.1 crore and ₹343.1 crore respectively. Consolidated EBITDA (earnings before interest, taxes, depreciation, and amortisation) grew by 22.5% to ₹492.9 crore during the period while return on equity (RoE) improved to 17.1% from 16.4%. Despite these positives, NSDL trails CDSL in several profitability metrics and operates at thinner margins. Its operating profit margin for FY25 was 24% compared with CDSL's 53.2%.

Valuation
NSDL demands a P/E multiple of up to 46.6 compared with CDSL's P/E of 68. The latter's premium valuation owes to its more profitable business model.

Anchors invest Rs 1,201.4 crore
The depository raised ₹1,201.4 crore from 61 anchor investors. It allotted 15 million hares at upper price band of ₹800 apiece. LIC, Smallcap World Fund, ICICI Prudential MF, SBI MF, Nippon Life India, HDFC MF, Fidelity Funds, Government Pension Fund Global, SBI Life Insurance, HDFC Life Insurance, and Abu Dhabi Investment Authority were some of the anchor investors.