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.
Institutional depth vs retail velocity
“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 in value, CDSL in volume
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.
Unlisted market cools ahead of listing
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 near-term 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.”
Entirely an OFS: no fresh capital
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 ecosystem-driven 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.”
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 rally: overdone or justified?
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.
Who’s better positioned for what comes next?
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.
Also read | NSDL IPO set to open soon: Unlisted share price down 20% from peak. Here are 7 things to watch out for
“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.”
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
