Value Pick Stocks for long term investment
Central Depository Services (India) Ltd (CDSL)
Overview
Central Depository Services (India) Ltd (CDSL) is a premier depository service provider, enabling secure and efficient maintenance of securities and transactions in the Indian financial market. As India’s only listed depository, CDSL holds a significant position in the evolving digital financial ecosystem.
Market Cap
₹ 31,355 Cr.
Current Price
₹ 1,500
52-Week High/Low
₹ 1,990 / 811
Stock P/E
56.5
Book Value
₹ 73.2
Dividend Yield
0.63%
ROCE
40.2%
ROE
31.3%
Debt
₹ 1.04 Cr.
Reserves
₹ 1,320 Cr.
Sales Growth (3Y)
33.2%
Profit Growth (3Y)
27.9%
Q3 FY2024 Results Highlights
- Revenue from Operations: ₹ 2,348.67 Cr (up 29.7% YoY)
- Net Profit: ₹ 555 Cr, reflecting a growth of 27.9% YoY
- EBITDA Margin: 60.3%, showcasing operational efficiency
- Earnings Per Share (EPS): ₹ 12.72 for the quarter
Segmental Performance
- Depository services accounted for 85% of revenues
- Repository and Data Entry segments reported strong growth at 18.5% YoY
Future Growth Drivers
Increased Market Participation
The expanding base of retail investors in India, driven by growing financial literacy and government initiatives, is expected to fuel higher account openings and transaction volumes.
Digitization of Financial Services
With a robust regulatory push, the migration to digital financial ecosystems offers CDSL an advantage, given its leadership in digital depository services.
New Revenue Streams
- Repository services in commodities and insurance sectors
- Expansion into data analytics and value-added services for clients
- Expanding Geographies: Penetrating tier-2 and tier-3 cities
Strategic Expansions and Capital Expenditure (CapEx)
CapEx Plans:
- Recent investments of ₹7,525.57 lakh in property, plant, and equipment
- Investment in technology upgrades and cybersecurity
Strategic Rationale:
- Strengthening core depository services to meet surging demand
- Enhancing operational efficiencies through automation and AI-driven processes
Products and Innovations
- Diversified offerings such as eKYC, insurance repositories, and centralized data management
- Partnerships to integrate blockchain technology for secured and transparent financial transactions
Financial Projections (2025-2028)
| Metric | 2025E | 2026E | 2027E | 2028E |
|---|---|---|---|---|
| Revenue (₹ Cr) | 1,300 | 1,550 | 1,800 | 2,150 |
| EBITDA Margin (%) | 62 | 63 | 64 | 65 |
| Net Profit (₹ Cr) | 650 | 800 | 980 | 1,200 |
| EPS (₹) | 31.1 | 38.3 | 46.8 | 57.3 |
| ROE (%) | 32 | 33 | 34 | 35 |
Competitive Landscape
Peers:
CDSL primarily competes with NSDL in India, with NSDL holding a dominant position in institutional accounts. CDSL, however, leads in retail accounts.
Strengths:
- Low-cost structure and minimal debt provide financial stability
- Consistent innovation in services and technology enhances its competitive edge
Weaknesses:
- Dependence on regulatory frameworks for depository services
- Limited diversification outside India compared to global peers
Valuation Estimate
Target Price (12 Months): ₹1,800
Valuation Multiples:
- Forward P/E: 47x
- EV/EBITDA: 30x
Investment Thesis
- Robust Financial Metrics: Industry-leading ROCE and ROE figures combined with consistent sales and profit growth
- Tailwinds from Market Growth: India’s surging retail participation in equity markets offers long-term volume growth
- Strategic Diversification: Expansion into insurance repositories and value-added data services
- Strong Dividend Policy: Regular payouts provide steady returns
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