CDSL Q4 Review - Strong Industry Position, Lower Regulatory Risk Merit Higher Valuations: ICICI Securities

ICICI Securities Report

Depositories remain a structural play on India’s capital markets buoyed by higher retail participation. Central Depository Services Ltd. benefits from:

1. leadership (in a duopoly), in terms of number of demat accounts (market share at 76%, as of March 2024 [calculated as per data on website]);

2. steady non-market-linked revenues (from annuity issuer charges);

3. possible operating leverage ahead despite investments made in FY24; and

4. optionality such as insurance repository and pledge income (pledge income increased from Rs 30 million in Q1 FY24 to Rs 60 million in Q4 FY24).

Quarterly Ebitda of CDSL has increased from average Rs 808 million in FY23 to Rs 1,479 million in Q4 FY24.

Downside risks include decline in market volumes and threat from alternate identification stacks other than KYC CRA.

Upside risks can stem from revision in annual issuer charges and a sharp increase in market volume as seen in FY21/FY22.

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