NSDL Unlisted Shares

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NSDL Pre-IPO Note (28.04.2025)

Business Overview:

NSDL primarily provides depository services, maintaining demat securities through Depository Participants (DPs) such as banks and brokers, which reduces the risks associated with physical certificates. It facilitates transaction processing, enabling smooth trade settlements, including market/off-market transfers, inter-depository transfers, and corporate actions. Additionally, NSDL offers value-added services such as e-voting, consolidated statements, SMS/email alerts, PAN issuance, and KYC verification. NSDL also has subsidiaries including NDML, which focuses on e-KYC, insurance repository, and academic record verification, and NSDL Payments Bank, providing banking services.

Investment Rationale:

NSDL boasts an established legacy and trust, being the first depository in India, founded in 1996, and holding over ₹500 lakh crore worth of demat assets as of December 2024. Its revenue base is diversified, deriving income from custody and transaction fees, PAN & KYC services, and banking income through its Payments Bank. The company has government contracts, handling Aadhaar-based e-KYC and PAN card processing, which provide recurring fee income and strategic positioning. Its tech-driven infrastructure ensures a high-reliability tech framework crucial for institutional flows and corporate actions. An upcoming IPO, likely in FY25-26, presents an opportunity for NSDL to replicate CDSL's success after its listing in 2017.

NSDL vs CDSL:

CDSL has a significantly higher Net Profit Margin (NPM) of ~50% compared to NSDL's ~22%. CDSL's business focus is purely on depository services, while NSDL is diversified into banking and KYC services. CDSL benefits from lean operations, while NSDL has a higher cost base due to its subsidiaries. CDSL's customer base is retail-oriented, with high-volume, low-cost transactions, while NSDL caters to institutional clients, involving regulated/low-margin services. The revenue mix for CDSL is primarily high-margin transactional income, whereas NSDL derives revenue from custody fees and PAN/KYC services. CDSL's operating leverage is better, scaling on fixed infrastructure, while NSDL's is diluted by varied business operations. CDSL's promoter is BSE, while NSDL's promoter is NSE. As of March 2025, CDSL had ~15 Crore demat accounts compared to NSDL's ~4 Crore. Value of holdings for CDSL stands at ₹70+ Lakh Crore compared to NSDL's ₹500 Lakh Crore. CDSL is focused on retail segments, while NSDL concentrates on institutional clients and HNIs. CDSL is listed since 2017, NSDL is unlisted.

Financials:

| Particulars | 2021 | 2022 | 2023 | 2024 | 9MFY25 | |-------------|------|------|-------|-------|--------| | Revenue | 466 | 761 | 1,022 | 1,268 | 1141 | | EBITDA | 206 | 240 | 255 | 285 | 370 | | PAT | 188 | 212 | 235 | 275 | 260 | | EPS | 47 | 53 | 11.75 | 13.75 | 13 |

Shareholding:

The shareholding structure is as follows: Others (34.12%), IDBI Bank Ltd. (26.10%), NSE (24%), HDFC Bank Limited (8.95%), and Unit Trust Of India (6.83%).

Conclusion:

CDSL has a market capitalization of ₹27,000 Cr, an estimated FY25E PAT of ~₹550 Cr, and a P/E ratio of ~50x.

As per 9MFY25 numbers, NSDL has reported consolidated revenue of ₹1,056 crore and PAT of ₹257 crore. Annualizing this, the estimated PAT for FY25 could reach ~₹340 crore. With ~20 crore outstanding shares, the potential market capitalization and implied P/E ratios at different price points are:

| Stock Price | Mcap (Cr) | Implied P/E | |-------------|-----------|-------------| | 800 | 16,000 | 46x | | 900 | 18,000 | 52x | | 1000 | 20,000 | 58x |

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