Why CDSL Share Price is Rising

In the past three days, Indian share markets have experienced a significant boost with a remarkable increase of Rs 7.9 trillion in the total marketcap.

This surge was primarily driven by the positive momentum observed in global financial markets.

During this three-day market rally, the Sensex rallied over 1,300points, equating to an increase of 2.2%, while the Nifty rallied above 19,400.

Among the many stocks that benefited from this market rally, one particular standout was CDSL (Central Depository Services Limited).

Over the past five days, CDSL share price rallied over 6% while in the past one month, the stock has gained over 20%.

Let's find out why...

#1 Robust Q2 Results

Following the release of its impressive second-quarter results on 30 October 2023, CDSL (Central Depository Services) saw a substantial 7.7% increase in its stock price.

Since then, the stock has continued to exhibit an upward trajectory. The company specializes in depository services.

In Q2, CDSL achieved a consolidated revenue from operations of Rs 2.1 bn, marking a remarkable year-on-year growth of 39.2%. The company's consolidated net profit surged to Rs 1.1 bn for the quarter ending in September.

This represents a substantial increase of 35.4% compared to the same quarter in the previous year when the profit stood at Rs 800 million (m).

This financial performance was underpinned by a robust top-line and strong EBITDA.

One of the key highlights of CDSL's Q2 report was the substantial growth in the number of demat accounts. As of 30 September 2023, the company managed a total of 96.2 m demat accounts, with an impressive addition of approximately 8 m demat accounts during the quarter.

This significant increase in the number of accounts is noteworthy, especially when compared to the 5.2 m demat accounts opened in Q1FY24 and 4.8 m in Q2FY23.

#2 Key Beneficiary of Rising Digitalisation

The other reason why CDSL share price is rising could be because of the flourishing digitization and expansion of the Indian equity market.

Notably, the surge in market activity, both in the secondary and primary segments, fuelled by a growing number of investors and traders, has led to a rising demand for depository services. CDSL, as the sole listed depository in India, is uniquely positioned to benefit from this trend.

Furthermore, CDSL has achieved a remarkable milestone with the rapid growth of demat accounts. This substantial increase in demat accounts highlights the growing interest in Indian equities among investors and traders, directly benefiting CDSL as the custodian for these accounts.

The expansion of CDSL's market share for cumulative active demat accounts, from 40% in FY14 to an impressive 73% in FY23, underscores its dominance in the depository services sector.

Despite this significant growth, the cumulative demat accounts shared between CDSL and NSDL as of March 2023 stand at just 110 m, indicating a substantial growth opportunity.

Diversified revenue streams, strong financials, high earnings visibility, and the scalability offered by new business ventures contribute to the positive outlook for CDSL.

CDSL holds a unique position in the Indian financial landscape as the country's only listed depository. This could change once NSDL is listed.

CDSL plays a crucial role in enabling investors to hold and transact in securities electronically while also facilitating the smooth settlement of trades on stock exchanges.

CDSL's reach extends to maintaining and servicing more than 96.2 m demat accounts for a diverse set of Investors or Beneficial Owners (BOs) across India.

What Next?

Going forward, the company is well-positioned for growth in the coming decade due to the several factors mentioned above.

First and foremost, there is a noticeable surge in the adoption of dematerialization, the conversion of physical securities into electronic form, which aligns with the broader digital transformation trend in the financial sector.

Additionally, there is a growing demand for e-voting, providing shareholders with a secure and convenient means to participate in corporate decision-making processes.

Furthermore, the expansion of the National Academy Depository, a platform designed for the storage and management of educational certificates, offers CDSL an additional avenue for growth.

Moreover, CDSL is strategically investing in cutting-edge technologies to enhance its service offerings.

How Shares of CDSL have Performed Recently

CDSL share price is up 6% in past five days, while over the month, the shares are trading higher by 22%.

Over the year, the shares of the company have gained 29%.

The company touched its 52-week high of Rs 1,620 on 11 November 2023 and its 52-week low of Rs 880.9 on 28 March 2023.

CDSL iCDSL is currently trading at a PE (Price to Earnings) multiple of 51.6x.

The promoter holding was unchanged in the July-September quarter at 15%.

DIIs held 29% of which, mutual fund holding increased by 1% in the last quarter to 12.5% with the number of schemes increasing from 18 to 22.

FIIs held 8.1%, while the public was the largest shareholder at 47.9%.

For more details, you can have a look at the latest shareholding pattern of CDSL.

About CDSL

Central Depository Services (India) Limited (CDSL) is one of India's leading securities depositories.

It is the only listed depository in India and a key beneficiary of structural growth in capital markets.

There are only two depositories in India, the other being NSDL which is not listed yet.

As a securities depository, CDSL facilitates the holding of securities in digital form and enables securities transactions (including off-market transfers and pledges) to be processed by book entry.

It generates income from annual issuer charges (annuity nature of the income), transaction charges (market dependent), IPO/corporate activity charges, online data charges (through its subsidiary CDSL Ventures) and others.

The company has high stability of operating income from the fixed annual charges collected from the registered companies and transaction-based fees collected from Depository Participants.

For more details, you can have a look at the CDSL company fact sheet and quarterly results on our website.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...