With more IPOs launching after a drought of nearly 6 months, Indian markets have seen good growth of retail trading business in FY24. And with NSDL focusing on listing on bourses, both CDSL and NSDL, the only 2 Indian depositaries are expected to see growth of 10-12% CAGR in user base between FY24-29.
But the road ahead won’t be a walk in the park. In FY23, CDSL’s growth was impacted by a 17% decline in market-linked revenue (transaction, IPO and KYC (fetch). This was overcome by a 30% YoY growth in the annuity stream (annual issuer charges, e-voting and e-CAS).
CDSL also increased its user base 4x from 2.12cr in FY20 to 8.3cr in FY23. It also held a strong market share of 73% in FY23, increased from 52% in FY20. This compares to NSDL which has client base of 3.15cr of and market share of around 27%.
CDSL continues to be a market leader in the number of BO accounts as well, with a 73% market share and 85% incremental share. But it is also facing tough competition from NSDL in the FPI business. Till Mar ‘23, NSDL serviced 99.99% of the value of equity, debt and other securities held by FPIs in demat form in India.
– LATEST Q4FY23 UPDATES:
– Revenue in FY23 was at ₹620.94cr, Net profit at ₹275.96cr
– Operating profit of ₹319 cr with margin of 57.5%
– Adding ~20 lakh accounts monthly, which is up 46% YoY but down 36% from the peak.
– Market-linked revenue down ~17% in FY23 due to a ~20/17% drop in transaction/IPO and corporate action revenue
-Increasing number of public offerings augur well for depositary business
| Particular | FY21 | FY22 | FY23 |
| Net Revenue (in Cr) | 343.7 | 551.3 | 555.1 |
| Total Costs (in Cr) | 131.5 | 184.5 | 231.7 |
| Profit (in Cr) | 200.3 | 311.2 | 275.9 |
| Profit | 58.2% | 56.4% | 49.7% |
| P/E | 63.4 | 40.8 | 46.1 |
| RoE (%) | 25 | 31.6 | 23.9 |
– AREAS CDSL WILL BE FOCUSING ON IN FY24
1.Transaction costs set to rise in share of total revenue= Delivery volume has registered 12% YoY growth in Q1FY24 after five quarters of sequential decline. Share delivery volume has also risen to 24.3% in Q1FY24, a 5-year high. Transaction revenue has declined YoY decline four times in the last 10 years.
2.E-voting and eCAS revenue to grow in future= CDSL has ~85% market share in incremental Demat account addition, which is reflected in strong e-CAS revenue growth. E-voting and eCAS contribute ~8% of total revenue and ~60% of ‘Others’ revenue.
3. Insurance policy dematerialization a great opportunity= IRDAI has proposed compulsory dematerialisation of all insurance policies This will open up opportunities for the four IRDA-registered insurance repositories- NDML, CAMS, KARVY and CIRL.
LOOKING AHEAD
CDSL is looking to diversify its business and is leveraging all technological aspects of the financial industry. Being one of the early listed depositary companies, the company has always been cash-rich which makes it open to any acquisition opportunities in the future, if available. With a heads-up with NSDL, CDSL is poised to grow well in FY24. Thus seeing a good rise in bottom line and EPS, we iterate a “BUY” rating on the stock.
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