Pros and Cons of Investing in NSDL

One of the most anticipated IPOs of 2025 - National Securities Depository Limited (NSDL) - was a big success. NSDL's IPO was oversubscribed 41 times.

Investors who did not receive any shares during allotment are now buying the shares from the open market. This has led to a huge demand for shares of the company, resulting in a sharp surge since listing on 6 August 2025.

The stock is down today after its results but that has more to do with short term market sentiment than anything else.

What about the long term?

Should investors consider the stock of NSDL?

In this editorial, we will dive into the pros and cons of investing in NSDL.

Read on...

Pros

#1 Duopoly with a Strong Market Pressence

The Indian stock market has evolved from the days of physical share certificates to today's digital trading environment.

At the core of this transformation are depositories, which are specialised institutions that safely store your securities in electronic form.

The two major players present in this space: Central Depository Services Ltd (CDSL) and National Securities Depository Limited (NSDL).

The Indian securities depository market is a regulated duopoly where NSDL leads in institutional, high-value assets and a broader range of services, while CDSL leads in retail investor volume.

These companies serve as the backbone of India's capital markets, enabling millions of investors to buy, sell, and hold securities securely through their demat accounts.

NSDL's revenue benefits from its stable, recurring fees from custody, issuer fees, and transaction charges. It also has subsidiaries like NSDL Payments Bank and NSDL Database Management Ltd that diversify its income.

The company primarily serves large institutional clients such as foreign portfolio investors, mutual funds, and corporates. This ensures revenues that are assured and stable, which is a big positive. According to media reports, 85% of NSDL's revenues are recurring in nature.

The company manages an overwhelming 99.99% of Foreign Portfolio Investor (FPI) assets and controls approximately 86.81% of total securities by value in India.

As India's capital markets grow larger, NSDL's position will reinforce its leadership and enhance its ability to capture more business, maintain pricing power, and attract strategic partnerships.

Going forward, more active trading and settlements in the securities market will lead to increased transaction volumes. This should translate into higher earnings from transaction fees, custody charges, and other related services.

#2 Good Financials

A look at the basic financials of the company indicates good growth over the years.

Financial Snapshot (2022-2024)

(Rs m)	FY22	FY23	FY24	FY25
Revenue	8,212.90	10,219.88	12,682.44	14,201.46
Net Profit	2,125.90	2,348.10	2,754.45	3,431.24

Source: DRHP

NSDL saw good increase in revenues and net profits for FY25. Revenues grew 12% YoY from Rs 12,682.44 million (m) to Rs 14,201.46 m.

FY25 net profit at Rs 3,431.24 m, was a 24.6% increase over FY24.

Before FY25, on an annual basis, NSDL's financials have shown steady improvement over the years.

In FY22, the company recorded a total income of Rs 8,212.9 m, which grew to Rs 10, 219.88 m in FY23, and further surged to Rs 12,682.44 m in FY24.

The net profit has also witnessed an upward trend, increasing from Rs 2,125.9 m in FY22 to Rs 2,348.1 m in FY23, and Rs 2,754.45 m in FY24.

This consistent growth highlights NSDL's strong market position and the rising demand for depository services, making it a key player in India's financial infrastructure.

Cons

#1 Regulated Business

Being a key financial market infrastructure institution, NSDL operates under stringent regulatory oversight.

Thus, any adverse regulatory changes, compliance issues, or litigation risks could affect business operations and/or its reputation.

Non-compliance with privacy and data protection laws could lead to legal claims and impact financial performance.

#2 Market Risks

NSDL's revenues and profitability depend heavily on market activity and transaction volumes in the securities market. Cyclical downturns or reduced trading volumes could impact financial performance.

General market risks such as macroeconomic conditions, geopolitical uncertainties, and equity market volatility can impact the company's performance and subsequent stock price movement.

About NSDL

Established in 1996, NSDL is India's first and largest central securities depository. It's promoted by NSE.

It provides electronic depository services that enable investors, brokers, custodians, and issuer companies to hold and trade securities in dematerialised (electronic) form, replacing the traditional paper-based share certificates.

The company improves efficiency, safety, and speed of securities transactions by allowing ownership transfers through simple electronic account transfers rather than physical paperwork.

Investors should be mindful of the risks, conduct thorough research, and also evaluate corporate governance before making investment decisions.

To know more, check out NSDL's fact sheet.

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

Investors should evaluate the company's fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.

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...