As India’s largest depository heads for a SEBI-mandated IPO by July 31, investor focus
sharpens on how NSDL compares to its listed peer CDSL, whose stock has surged 44%
over the past year.
National Securities Depository Ltd (NSDL), the country’s oldest and largest depository by
value of assets under custody, is nearing its much-anticipated stock market debut, with
Securities and Exchange Board of India (Sebi) mandating a listing by the end of July.
But while investors await clarity on the final date, comparisons with its nimbler rival
Central Depository Services Ltd (CDSL) have come into sharp focus, especially after
NSDL’s unlisted shares corrected nearly 20% from their 52-week highs, even as CDSL’s
listed stock rallied 45% over the past 12 months.
According to Bloomberg, NSDL is expected to start taking investor orders as early as next
week, with the issue size scaled back to 5.01 crore shares from an earlier proposed 5.73
crore. The IPO, which may raise up to $500 million, will be an entirely offer-for-sale (OFS)
issue from shareholders including IDBI Bank, the National Stock Exchange of India, and
State Bank of India. NSDL will not receive any proceeds from the IPO.
“The NSDL–CDSL divergence is a textbook case of differing business models and market
positioning,” said Bhavik Joshi, Business Head at INVasset PMS. “NSDL’s core strength
lies in its institutional dominance — with over 89% of India’s demat asset value under custody, and deep integration with mutual funds, insurance firms, and government
securities.”
Joshi said, “It also holds a strong presence in the unlisted and pre-IPO ecosystem, which
is poised for regulatory tailwinds as private market infrastructure evolves.”
CDSL, by contrast, has emerged as a retail powerhouse, especially during the recent bull
run. “CDSL has emerged as the poster child for India’s retail financialization. Its nimble
tech stack, competitive pricing, and rapid onboarding have led to a dominant share of
retail demat accounts,” said Joshi. “Investors must distinguish between depth and
breadth… CDSL, though more retail-centric and cyclical, may offer stronger operating
leverage in upcycles.”
NSDL leads across several institutional metrics. As of December 31, 2024, it had 64,535
issuers, more than double CDSL’s 31,557. It also had 63,542 DP Service Centres
(DPSCs), compared to 17,883 for CDSL. NSDL continues to dominate in the unlisted
space as well, with 53,169 unlisted companies on its platform, versus 21,295 for CDSL.
In contrast, CDSL’s strength lies in the number of demat accounts held, 14.65 crore as of
December 2024, far outpacing NSDL’s 3.88 crore. While CDSL holds more accounts,
NSDL’s custody value per account is significantly higher, averaging Rs 1.25 crore per
account versus Rs 5 lakh for CDSL.
In the unlisted market, NSDL shares have fallen from Rs 1,275 to around Rs 1,025 in
recent weeks. “The correction in NSDL’s unlisted share price ahead of its IPO reflects
recalibration rather than structural weakness,” said Joshi. “It is not uncommon for pre-IPO
valuations to adjust in response to listed peer benchmarks, changing market risk appetite,
and revised growth expectations.”
“In NSDL’s case, the re-pricing seems driven by three forces: softening investor
expectations post-listing euphoria in CDSL, macro-level de-rating in tech-led financial
infrastructure names, and the absence of a fresh primary capital infusion to signal nearterm growth acceleration,” Joshi explained.
Still, he believes the long-term outlook remains solid. “If the IPO is priced conservatively
relative to CDSL’s current valuations, the drawdown may serve to reset expectations —
not undermine fundamentals.”
The IPO being entirely an OFS has also prompted questions about promoter intent. “An
IPO structured entirely as an Offer for Sale (OFS) naturally raises questions about
promoter conviction and reinvestment intent,” Joshi said. “While this doesn’t inherently
signal a lack of faith, it does alter the narrative.”
“NSDL is a cash-generating business with a long runway of regulatory and ecosystemdriven tailwinds. Its growth does not necessarily hinge on capital infusion,” he noted.
However, in the absence of new capital, “the spotlight shifts to governance quality,
operating leverage, and dividend policy.”
Sebi regulations stipulate that no single entity can hold more than 15% ownership in a
market infrastructure institution like NSDL, said Ranjit Jha, Founder & CEO, Rurash
Financials.
“This mandate is aimed at diversifying ownership and reducing the concentration of
power within these crucial financial entities. Both NSE & IDBI Bank currently have around
25% holding each in NSDL. Hence, among other things, main reason for this IPO is to
comply with the regulations,” said Jha.
NSDL has already informed shareholders that all pre-IPO equity shares will be locked in
starting July 18, in line with Sebi norms. MUFG Intime India has been appointed as
registrar, and ICICI Securities, Axis Capital, HSBC Holdings, and IDBI Capital are lead
managers to the issue.
CDSL’s meteoric rise has raised concerns about whether valuations have overshot
fundamentals. “CDSL’s rally over the past year mirrors the broader surge in retail market
activity, a secular rise in demat account openings, and expanding use-cases for
depositories across asset classes,” said Joshi.
But he cautioned, “A large part of CDSL’s revenues remains market-linked — from
corporate actions, transactions, and float income — all of which are susceptible to market
cycles.”
“If the current rally is pricing in uninterrupted volume growth, record IPO flows, and a
persistently bullish retail environment, then there is risk of overextension,” he said. Still,
long-term structural drivers remain intact, including SEBI’s push for dematerialisation and
broader digital adoption.
Looking beyond the listing, the medium-term growth opportunity for both depositories lies
in expanding into new asset classes.
“The next phase of growth for depositories lies beyond equity markets,” said Joshi.
“Medium-term opportunities include dematerialisation of insurance policies, educational
certificates, sovereign gold bonds, and even tokenised assets.”
CDSL is likely to benefit more from the ongoing expansion of the retail investor base,
thanks to its quicker onboarding processes, wider integration with partners, and flexible
tech architecture. NSDL, on the other hand, is better positioned to lead on the institutional
front, particularly in managing complex asset classes and large-scale recordkeeping,
owing to its long-standing relationships and institutional expertise, according to Joshi.
“While CDSL has the retail velocity and brand recall, NSDL brings depth, trust, and
compliance strength,” Joshi said. “The growth runway is large enough for both to scale —
but the market will reward whoever leads the transition from compliance infrastructure to
financial infrastructure utility.”
“As the economy continues to grow, more companies would prefer to access the capital
markets. This would result into a healthy competition and a level playing field to both the
depositories. Considering the increasing awareness of investors on investments and
entry of millennials into the stock markets, both the depositories have scope to fare well,”
Ranjit Jha said.