What happens when the backbone of India’s stock market depositories start showing different growth trends? That is the question investors are asking after the latest quarterly results of NSDL and CDSL, the two key players that power the country’s demat ecosystem.

For years, Central Depository Services (CDSL) was the only listed option in this space. But with National Securities Depository (NSDL) entering the market last year, the comparison has become sharper. 

According to the brokerage report by Motilal Oswal, both stocks are under close watch but with a cautious stance.The brokerage has maintained a ‘Neutral’ rating on both stocks, indicating limited upside visibility at current levels. 

Let’s break down what is working and what is not for each.

NSDL: Strong revenue growth, but margins under pressure

The brokerage house Motilal Oswal has given a ‘Neutral’ rating to NSDL and has set a target price of Rs 1,000 for the stock. This implies an upside potential of around 14% from the current market price.

According to the brokerage report, NSDL delivered a strong top-line performance in the March quarter. Growth was largely driven by its banking services segment, which saw a sharp rise.

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“NSDL’s operating revenue rose by 26% year-on-year and 27% quarter-on-quarter to Rs 460 crore,” the report noted.

However, higher costs seem to have offset some of the gains. Expenses rose faster than revenue, putting pressure on profitability.

“Operating expenses rose 30% year-on-year and 40% quarter-on-quarter,” the brokerage added.

This impacted margins, even though earnings before interest, tax, depreciation and amortisation (EBITDA) still grew on an annual basis.

The brokerage also expects steady growth ahead.

“We expect NSDL to post a revenue/PAT growth of 11%/15% over FY26-FY28 estimates,” annually on a compounded basis.

Going forward, factors like demat account additions, fintech partnerships, and cost control will be key triggers for NSDL.

CDSL: Weak quarter raises near-term concerns

On the other hand, the brokerage has kept a ‘Neutral’ rating to CDSL as well. According to the brokerage report, the company saw a weaker quarter, particularly on a sequential basis.

“CDSL’s operating revenue rose 17% year-on-year but declined 14% quarter-on-quarter,” the report highlighted.

The drop was mainly due to softer depository income, which impacted overall earnings.

Profitability also took a hit during the quarter.

“PAT for the quarter declined 21% year-on-year and 40% quarter-on-quarter,” Motilal Oswal noted in its report.

Margins narrowed as well. At the same time, costs remained elevated.

“Operating expenses were up 27% year-on-year,” the report added. Despite this near-term weakness, the brokerage sees some long-term growth potential.

Motilal Oswal in its report added, “We estimate a CAGR of 15%/17%/18% in revenue/EBITDA/PAT for CDSL over FY26-28 estimates.”

However, investments in technology and hiring could limit margin expansion in the near term.

NSDL, CDSL share price performance

NSDL has declined around 1.6% in the last five days and about 20% over the past six months. On a year-to-date basis, the stock is down nearly 17%.

CDSL, meanwhile, has seen sharper corrections. The stock has fallen around 5% in the last five days, 18% over six months, and about 13% so far this year.

What investors need to watch

The broader takeaway from the brokerage report is that while both NSDL and CDSL are part of a structurally strong segment linked to India’s financialisation trend, near-term challenges remain.

For now, according to the brokerage report, valuations appear to factor in much of the growth, which is why the stance remains neutral on both.

Disclaimer: Investment insights and stock ratings mentioned in this report are based on third-party brokerage analysis and do not constitute a direct offer or solicitation by this publication. Equity investments are subject to market risks; please consult a SEBI-registered investment advisor before making any financial decisions based on target prices or ratings. As NSDL and CDSL operate in a regulated market environment, investors should evaluate their personal risk appetite and long-term financial goals independently.

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