National Securities Depository Limited (NSDL) plays a critical role in India’s capital markets, transforming the way securities are held, traded, and settled since its inception in 1996. Though not a listed company, NSDL’s unlisted shares are actively tracked by investors seeking exposure to the company’s backbone in the securities ecosystem. This article takes a deep dive into NSDL's financial performance, analyzing its growth drivers and operational strengths.
NSDL: The Backbone of India’s Securities Market
From Paper to Digital
NSDL revolutionized India’s securities market by digitizing the storage and transfer of securities. Before NSDL, paper-based share certificates were subject to delays, loss, forgeries, and ownership disputes. The creation of NSDL allowed for secure and efficient electronic transactions, enabling India to hold over 3.5 crore demat accounts, managing trillions of rupees in assets.
Financial Performance: Growth and Profitability
Revenue & Profit Growth
➤ Revenue from Operations grew 15.6% YoY, from ₹409.17 crore (FY23) to ₹473.06 crore (FY24), driven by an increase in transaction volumes and more investor participation. Higher market activity, particularly in the equity markets, contributed to this growth, proving that NSDL’s core business thrives in a dynamic market environment.
➤ Total Income increased by 24.2% YoY, from ₹1,099.82 crore to ₹1,365.70 crore, boosted by both core operations and banking subsidiary income. The robust growth in the banking sector, led by NSDL Payments Bank, is a key contributor to the overall rise in total income, providing diversification to NSDL’s revenue streams.
➤ Profit After Tax (PAT) rose by 17.3% YoY, from ₹234.81 crore to ₹275.44 crore, highlighting operational efficiency and strong cost management. This is driven by higher operating leverage and growing transaction volumes, as well as strategic cost management that ensured profitability kept pace with increasing revenues.
➤ Earnings Per Share (EPS) climbed from ₹11.74 to ₹13.77, underlining the company’s strong financial health and investor confidence. The increase in EPS reflects NSDL’s ability to generate value for its shareholders through consistent growth and profitability.
➤ Interest Income on Non-Current Investments saw a rise of 25.8%, from ₹58.62 crore to ₹73.75 crore. This growth is largely due to the company’s strategic investments and prudent portfolio management, ensuring a steady stream of income even during periods of market volatility.
Operational Review: Technology, Efficiency, and Market Reach
Digital Infrastructure and Scalability
➤ Demat Accounts: NSDL has now surpassed 3.5 crore demat accounts, supporting equities, bonds, mutual funds, and new products like electronic gold receipts. The increasing number of demat accounts indicates both rising financial literacy and a greater shift toward digital investments, with investors increasingly adopting dematerialized securities.
➤ T+1 Settlement Cycle: As India transitions from T+2 to T+1 settlement cycles, NSDL plays a crucial role in enabling the quicker settlement of transactions, improving liquidity and reducing counterparty risk. This shift ensures that NSDL is aligned with global standards, enhancing investor confidence and market efficiency.
➤ UPI Block Mechanism: NSDL has implemented the UPI block mechanism, ensuring that funds are blocked (but not debited) until trade settlements occur. This innovative feature protects investors from defaults, reducing counterparty risk and contributing to market stability.
Technology and Innovation
➤ Blockchain/DLT: NSDL leverages blockchain technology for corporate bond monitoring, providing increased transparency and compliance. This technological investment improves trust in the market, positioning NSDL as a forward-thinking, digital-first institution.
➤ Mobile App (SPEED-e): NSDL’s mobile app enables investors to manage accounts, update KYC, and initiate pledges. The user-friendly interface helps to drive digital adoption, ensuring that investors have easy access to their demat accounts and related services, especially as India’s digital ecosystem grows.
➤ Automation: NSDL has significantly invested in automation to reduce manual errors, increase processing speeds, and handle surges in transaction volumes efficiently. This strategic move enhances scalability and ensures operational efficiency, reinforcing NSDL’s position as a key player in India’s capital markets.
Market Position and Strategic Advantage
Duopoly Market Structure
➤ Market Leadership: NSDL and CDSL together dominate India’s depository space. While CDSL has a larger share of retail accounts, NSDL is the preferred choice for institutional investors, offering deep liquidity and a wider range of services. This market structure gives NSDL a distinct competitive edge, ensuring its position as a market leader in the institutional segment.
➤ Strategic Partnerships: NSDL’s partnerships with major banks (HDFC, SBI, IDBI) and exchanges (NSE, BSE) enhance its credibility and expand its reach. These strategic alliances contribute significantly to NSDL’s market share, providing it with access to a broader investor base and ensuring its continued relevance in the Indian financial ecosystem.
What NSDL Unlisted Shares Reveal?
Valuation and Shareholder Confidence
➤ Premium Valuation: NSDL’s unlisted shares often trade at a premium due to the company’s monopolistic position in India’s securities market and its stable cash flow generation. Investors recognize the value of NSDL’s infrastructure and its near-monopoly status, which offers a strong foundation for long-term growth.
➤ Asset-Light Business Model: The company operates a highly profitable asset-light business model, with minimal capital expenditure required. Most of NSDL’s revenue comes from digital services, including custody, transaction, and banking fees. This efficient model allows NSDL to generate high returns with relatively low operational costs.
➤ Pricing Power: As one of the two dominant players in the market, NSDL enjoys significant pricing power. The regulatory protection and the duopoly structure enable NSDL to maintain attractive pricing, leading to high profit margins and a favorable market position.
Risks and Challenges
➤ Regulatory Risks: As a heavily regulated entity, NSDL’s revenue streams are vulnerable to changes in regulatory policies, particularly those set by SEBI. Any modifications in fee structures or market regulations could directly impact NSDL’s business.
➤ Market Sensitivity: Since NSDL’s income is largely transaction-driven, the company’s financial performance is sensitive to market cycles. Bullish markets tend to drive higher transaction volumes, boosting revenue, while bear markets could reduce activity and hurt profitability.
➤ Competition: While NSDL dominates the institutional investor segment, CDSL’s rapid growth in retail accounts presents a competitive challenge. However, NSDL’s stronghold in the institutional market and its focus on enhancing digital services ensure its continued leadership.
The Strategic Backbone: Why NSDL Is Indispensable
Growth Drivers
➤ Expanding Demat Base: The rise in financial literacy and increased digital adoption are fueling growth in demat accounts, expanding NSDL’s customer base. This trend is expected to continue as India’s middle class grows and more people invest in financial markets.
➤ Scalability: NSDL’s cloud-based infrastructure and automated systems make it highly scalable, enabling the company to handle surges in transaction volumes without significant additional costs. This scalability positions NSDL to capitalize on future growth in India’s financial markets.
➤ Global Reach: As foreign portfolio investments grow, NSDL’s services continue to attract international investors, increasing India’s integration with global markets. This global exposure supports NSDL’s long-term growth prospects, helping to diversify its revenue base.
’s robust financial performance and operational excellence make it an indispensable part of India’s securities market infrastructure. Driven by strategic partnerships, technological innovation, and a near-monopoly position in the depository space, NSDL’s financial strength continues to grow. While its unlisted shares offer a more volatile investment avenue, they reflect strong investor confidence in the company’s long-term prospects. As India’s capital markets evolve, NSDL’s critical role will only strengthen, making it an attractive entity for investors.
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