NSDL IPO: Betting on the Backbone of India's Capital Markets

About the Issue:  

National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) are India’s two central depositories, playing a crucial role in the country's capital market infrastructure. They securely hold securities such as shares, bonds, and mutual fund units in dematerialised form and facilitate seamless, paperless trading and settlement. As custodians of India’s growing pool of investors and issuers, both entities are central to the efficiency and transparency of market operations.

With NSDL’s much-anticipated IPO set to open for subscription on July 30, 2025, investor attention has sharply turned to how NSDL compares with its listed peer, CDSL. The Rs 4,011.60 crore issue is entirely an Offer for Sale (OFS) of 5.01 crore equity shares, with no fresh capital infusion component. The IPO will close on August 1, 2025, with the allotment expected by August 4, and tentative listing scheduled on the BSE for August 6, 2025.

The price band is set at Rs 760–Rs 800 per share. Retail investors can apply for a minimum lot of 18 shares, requiring an investment of Rs 13,680 at the upper price band. For small non-institutional investors (sNII), the minimum application is 14 lots (252 shares) amounting to Rs 2,01,600, while large NIIs (bNII) must apply for 70 lots (1,260 shares), totaling Rs 10,08,000.

ICICI Securities is the Book Running Lead Manager (BRLM) to the issue, and MUFG Intime India Pvt Ltd (formerly Link Intime) is the registrar.

As NSDL hits the primary markets, comparisons with CDSL—its only peer in India’s duopolistic depository landscape—will be closely watched by institutional and retail investors alike.

See the issue details below.

Objects of the Issue
The NSDL IPO is entirely a pure Offer for Sale (OFS), comprising 5.01 crore equity shares. As there is no fresh issue component, NSDL will not receive any proceeds from the offering. Instead, the funds raised will go to the existing shareholders who are offloading their stakes. The primary objective of the IPO is to facilitate the listing of NSDL’s shares on the BSE, which is expected to enhance the company’s brand visibility, create a public market for its equity shares, and improve corporate transparency and governance standards.

NSDL is classified as a professionally managed company with no identifiable promoter, reflecting its institutional ownership structure and alignment with governance norms expected of listed entities. The selling shareholders in this IPO include IDBI Bank Ltd, the National Stock Exchange of India Ltd, State Bank of India, Unit Trust of India, HDFC Bank Ltd, and Union Bank of India.

Industry Outlook
India’s capital markets are experiencing robust growth, with capital raised through public and rights issues rising from Rs 91,950 crore in FY2019 to Rs 2.18 lakh crore in FY2025. Demat accounts have grown at a 21.94 per cent CAGR, reaching 19.24 crore by March 2025, driven by rising retail participation and digital onboarding, enabled by greater financial literacy, digitization, and retail investor participation. The rise of discount brokers, projected to capture 70–72 per cent market share by FY2026, and expanding mutual fund AUM reflect deepening retail involvement. Regulatory reforms by SEBI and GIFT IFSC initiatives are further strengthening investor confidence.

Within this evolving landscape, NSDL holds a dominant position. It commands a 97 per cent share in demat value of debt securities and leads with 73.04 per cent of registered unlisted companies. Depository revenues are expected to grow at 11–12 per cent CAGR through FY2027, supported by increased digitization, regulatory mandates for dematerialization, and growing investor activity.

NSDL’s subsidiaries add to its growth engine. NDML (National Database Management Ltd) is expanding in KYC services and stands to benefit from demat mandates in the insurance sector. NPBL (NSDL Payments Bank Ltd), its payments bank, is targeting the underpenetrated Rs 1.4 trillion rural market, growing deposits at 55 per cent YoY in FY2025 and aiming to cross-sell financial products. Together, these initiatives position NSDL to capitalize on India’s capital market momentum and financial inclusion push.

Company Profile and Business Operations
National Securities Depository Ltd. (NSDL), India’s first and largest depository, is a SEBI-registered Market Infrastructure Institution (MII) and a key enabler of India’s capital markets. It facilitates secure, digital holding and settlement of securities across asset classes like equities, debt, mutual funds, and government securities. As of March 2025, NSDL held an 86.8 per cent share in total demat value and serviced 99.99 per cent of FPI assets in demat form, highlighting its dominance in the institutional segment.

NSDL operates a wide-reaching network of 294 depository participants (DPs) across 65,391 service centres in 99.34 per cent of India’s pin codes and 194 countries. While it accounts for 33.9 per cent of total DPs, it commands 77.6 per cent of DP centres, reflecting superior distribution and quality. Its revenue model is anchored in recurring income from issuer custody fees and DP charges, supplemented by licensing and value-added services.

Through subsidiaries—NDML and NPBL—the company has diversified into digital KYC services and B2B and B2C financial products. With a focus on technology-driven innovation, NSDL remains a foundational pillar in India’s growing, digitized financial ecosystem.

Financials

(Source – Company’s RHP)

(Source – Company’s RHP)

Operational Metrics

1. Revenue Mix (Rs crore & per cent of Total Revenue)

2. Number of Issuers

3. Demat Custody Value (in Rs lakh crore)

4. Number of Demat Accounts (in crore)

Strengths and Weaknesses of NSDL:
NSDL holds a strong leadership position as India’s first and largest depository, with clear dominance in demat value, number of issuers, and custody of institutional assets. It caters primarily to high-value institutional and HNI clients, with an average demat account size of Rs 1.77 crore. The company operates a vast network of over 65,000 service centres—more than three times that of CDSL—enabling deep penetration across India’s geography. On the technology front, NSDL offers advanced platforms such as IDeAS and Speed-e and has developed a robust DLT-based infrastructure to enhance operational efficiency and data integrity.

Its subsidiaries, NDML and NPBL, contribute to business diversification across digital KYC, insurance repositories, and payments banking. Financially, NSDL remains strong, reporting Rs 1,420 crore in revenue and Rs 343 crore in profit for FY25. It benefits from regulatory approvals from SEBI, RBI, IRDAI, and UIDAI, reinforcing its position as a credible market infrastructure institution.

However, NSDL faces intensifying competition from CDSL and agile fintech players, especially in the fast-growing retail demat segment. Regulatory headwinds remain a concern, including prior compliance lapses and the mandated demerger of NDML’s insurance repository business. Its revenue model is largely market-linked and heavily reliant on DP-driven activity, making it vulnerable to cyclical slowdowns. Moreover, the IPO being a complete Offer for Sale (OFS) brings no capital infusion into the company.

Other concerns include governance uncertainties tied to upcoming stake sales by key institutional shareholders such as IDBI and NSE, as well as a single-exchange listing (BSE-only), Rs 125 crore in contingent liabilities, a lack of clear dividend policy, and unsuccessful product rollouts in the past. The enforceability of foreign judgments also poses potential legal complexities. Key risks for NSDL span shifting investor demand, rapid product evolution, technology upkeep, market volatility, and a dynamic regulatory environment.

Peer Comparison

NSDL remains the market leader by demat value, holding approximately 86.81 per cent of total securities and 85.06 per cent by volume. In contrast, CDSL dominates the retail space with 15.3 crore demat accounts as of March 2025—significantly higher than NSDL’s 3.9 crore. When it comes to issuers, NSDL is well ahead, servicing 79,773 compared to CDSL’s 35,922. It also leads in terms of active instruments, with a 65.27 per cent market share. Additionally, NSDL surpasses CDSL in physical infrastructure, operating 65,391 DP service centres versus CDSL’s 18,918, which strengthens its presence in Tier-2 and Tier-3 cities and enhances its capability to serve institutional clients.

Valuation & Profitability Metrics (FY2025)

At the upper price band of Rs 800, National Securities Depository Limited (NSDL) is valued at a P/E of 46.6x based on its FY25 earnings, translating to a post-issue market capitalisation of Rs 16,000 crore and a return on net worth (RoNW) of 17.1 per cent. Since the IPO is entirely an Offer for Sale (OFS), no fresh capital will be infused into the company. However, the valuation appears reasonable considering NSDL’s entrenched position in the capital markets ecosystem, its annuity-like revenue streams, and consistent financial performance. Between FY23 and FY25, its revenue, EBITDA, and PAT have grown at a healthy CAGR of ~18–21 per cent, reflecting strong operating leverage and robust financial health.

In comparison, CDSL is currently trading at a significantly higher P/E of 67x. Given NSDL’s dominant 86.8 per cent share in demat value and its near-complete control of FPI demat assets, the offering looks fairly priced. While CDSL has benefited from the explosive growth in retail investor participation and its pure-play depository model, NSDL has adopted a more diversified and institutionally anchored growth strategy. The company is actively investing in modernising its IT infrastructure, expanding digital services, and scaling its payments bank—initiatives that may yield long-term gains, albeit with some near-term impact on margins.

The broader structural tailwinds in India’s capital markets—rising financialisation, increased formalisation, and growing household savings—are likely to benefit both NSDL and CDSL. While NSDL’s institutional orientation provides revenue stability, it must execute effectively on new growth levers such as NDML and its banking subsidiary to maintain pace with its leaner, more retail-focused competitor.

Recommendation

NSDL stands as a reliable and foundational institution within India’s capital market architecture, underpinned by strong institutional ownership and stable, annuity-like revenues. Although it faces mounting competition from a more agile peer in the retail segment, its scale, credibility, and business diversification position it well for sustained long-term growth. Continued investments in technology, digital KYC, and its payments bank offer meaningful future upside. As a legacy player evolving towards innovation-led growth, NSDL presents a compelling case. We recommend a ‘Subscribe’ for medium to long-term investors who believe in the ongoing expansion of India’s capital markets and the strength of the depository duopoly.