Company overview
National Securities Depository Ltd. (NSDL) is a SEBI registered market infrastructure institution offering a wide range of products and services to the financial and securities markets in India. The company functions as the largest depository in India in terms of number of issuers, number of active instruments, market share in demat value of settlement volume and value of assets held under custody. Using innovative and flexible technology systems, NSDL works to support investors, brokers, issuers and other market participants in the Indian capital markets and aims at ensuring the safety and soundness of securities market by developing settlement solutions that increase efficiency, minimize risk and reduce costs. As of 31 March 2025, the company has a network of 65,391 depository participants’ service centres.
Objects of the offer
- To carry out the Offer for Sale of up to 50,145,001 equity shares of face value of Rs.2 each by the selling shareholder.
- To achieve the benefits of listing the equity shares on BSE.
Investment Rationale
- Revenue model – NSDL’s revenue model is driven by a strong base of recurring income, primarily from annual custody fees charged to issuers and annual maintenance fees collected from depository participants for corporate demat accounts. These core services contributed over 86% of recurring revenue in FY25, providing high revenue visibility and stability. The company also generates recurring revenue from a broad range of ancillary services, including DPM software licensing, foreign investment limit monitoring, mutual fund data services, SEZ system usage, and value-added offerings like Cloud DPM and STP Navigator. Transaction-based income from settlements, corporate actions, e-Voting, and CAS adds to the revenue mix, along with registration fees and income from banking services via subsidiary NPBL.
- Diversified Asset Classes – NSDL maintains a strong leadership position with a highly diversified range of asset classes held in demat accounts, including equities, debt instruments, mutual funds, REITs, InvITs, AIFs, sovereign gold bonds, and electronic gold receipts. As of March 31, 2025, it accounted for 85.06% of securities by number and 86.81% by value in the depository market. This broad asset coverage supports a wide investor base and enables value-added services like pledging, margin pledging, and loans against securities. NSDL also operates well-diversified business verticals through its subsidiaries NSDL Database Management Ltd (NDML) and NSDL Payments Bank Limited (NPBL). NDML provides e-governance and market infrastructure services, while NPBL offers digital banking and financial services, contributing over 50% to operational revenue in FY25. This diversification strengthens NSDL’s position as a comprehensive financial infrastructure provider.
- Improved KPIs – The company has demonstrated a robust improvement across critical operating metrics in FY25, reinforcing its market leadership and operational efficiency in the Indian depository space.
- Financial Performance – The company reported revenue of Rs.1,420 crore in FY25 as against Rs.1,268 crore in FY24, an increase of 12% YoY. The revenue grew at a CAGR of 18% between FY23-25. The EBITDA of the company in FY25 is at Rs.493 crore and EBITDA margin is at 35%. The PAT of the company in FY25 is Rs.343 crore and PAT margin is at 24%. The CAGR between FY23-25 of EBITDA and PAT is 22% and 21% respectively.
Key risks
- OFS risk – The IPO consists of only an Offer for Sale of Equity Shares worth up to 50,145,001 equity shares by the Selling Shareholders. The entire proceeds from the Offer for Sale will be paid to the Selling Shareholders, and the Company will not receive any such proceeds. The offer comprises the sale of up to 22,220,000 Equity Shares by IDBI Bank Ltd, 18,000,001 shares by National Stock Exchange of India Ltd, 4,000,000 shares by State Bank of India, 3,415,000 shares by Administrator of the Specified Undertaking of the Unit Trust of India, 2,010,000 shares by HDFC Bank Ltd and 500,000 shares by Union Bank of India.
- Shifting investor preferences – The company remains significantly dependent on depository services for revenue, and any shift in investor preference away from capital markets could materially impact its business, financial condition, and operating results.
- Risk of Innovation Lag – Limited success in innovating or scaling new tech-driven products and services may hinder NSDL’s growth and competitiveness in a rapidly evolving market.
Outlook
NSDL is a pioneer in depository services in India and is steadily broadening its scope by offering a growing range of value-added services and solutions. According to RHP, Central Depository Services (India) Limited (CDSL) is the only listed competitors for NSDL. CDSL is trading at an average P/E of 68.04x. At the higher price band, the listing market cap of NSDL will be around ~Rs.16,000 crore and the company is demanding a P/E multiple of 46.65x based on post issue diluted FY25 EPS of Rs.17.15. When compared with its peers, the issue seems to be reasonably priced in (fairly valued). Based on the above views, we provide a ‘Subscribe’ rating for this IPO for a medium to long-term Holding.
Disclaimer: Investments in the securities market are subject to market risks, read all related documents carefully before investing. Securities quoted here are exemplary, not recommendatory. Please consult your financial advisor before investing. Please note that we do not guarantee any assured returns for the securities quoted here.
Research disclaimer: Investment in the securities market is subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, and certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.
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