India’s oldest and largest depository, NSDL, has caught the attention of the brokerage firm Motilal Oswal. The brokerage has initiated coverage on this recently listed stock. The brokerage house has given a ‘Neutral’ rating with a target price of Rs 1,200 per share. This implies an 8% downside from the current market price of Rs 1,298 per share.
So, why does Motilal Oswal believe NSDL may not deliver big upside in the near-term? According to the brokerage report, here are the five key reasons shaping its cautious stance.
Motilal Oswal on NSDL: Valuations are stretched
Motilal Oswal in its recent report noted that NSDL is well-placed to ride India’s growing journey towards greater financial inclusion.
As per the brokerage report, “The opportunities for the entire Indian capital market ecosystem over the next decade,” with a growing significance of financial markets but “low penetration (demat penetration at 15% Vs 60%+ in the US), continue to be immense.”
However, the brokerage believes the stock’s current pricing already factors in this potential. As it noted, “Given the duopoly nature of the industry and NSDL’s superior pricing power, depositories deserve premium valuations. However, we believe the stock is fairly valued, and all the positives are priced in at current levels.”
Motilal Oswal on NSDL: Position in institutional business
Motilal Oswal poited out that a key reason NSDL stands out from rival CDSL is its dominance in institutional and custodian accounts. As per the brokerage, “NSDL dominates in institutional, custodian, and large corporate accounts, resulting in revenue per active account at around Rs 157 in FY25, nearly 3x that of CDSL.”
This institutional skew gives NSDL more stable revenue pools linked to custody value, rather than just transaction volumes. According to the report, this makes its income more resilient across market cycles, but also means it is less exposed to the faster retail-led growth seen in recent years.
Motilal Oswal on NSDL: A wide base of issuers
The report also pointed that NSDL’s position as the preferred partner for corporates.
“NSDL services the widest base of issuers in India, including ~70%+ of unlisted corporates mandated to dematerialise,” the brokerage added in its report.
As per the brokerage report, this generates steady, recurring revenue from issuer charges and builds a strong moat. Once corporates integrate demat systems, they rarely shift to another provider, ensuring stickiness. Still, while this is a strength, it is already priced into the stock at current levels.
Motilal Oswal on NSDL: Market share dynamics in demat accounts
While NSDL has regained some ground in demat account market share, but the brokerage house pointed out that “its position is still below its peak.”
According to the report, “NSDL has stepped up its focus on investor engagement by expanding partnerships with fintech brokers, enabling digital onboarding and account opening in tier 2/3 cities, which has resulted in a rise in incremental demat market share over the past few months (10% in Aug’24 to 17% in Aug’25).”
Yet, its overall share of around 20% is much lower compared to 48% back in FY20, indicating the competitive edge of CDSL in retail-led growth.
Motilal Oswal on NSDL: Subsidiaries add diversification but small in scale
NSDL also has other businesses under its umbrella, like NDML and NPBL.
The brokerage noted, “NDML (KRA, insurance repository) and NPBL (payments bank) position NSDL beyond a pure-play depository. While the contribution to net profit from these subsidiaries is currently less than 10%, these adjacencies provide accretive growth drivers and diversification opportunities from the core depository business.”
But for now, their financial contribution is modest. The payments bank arm NPBL has turned profitable but maintains margins of less than 1%.