Whalesbook
Market Positions: Accounts vs. Custody Value
The preference for NSDL stems from its different business model. CDSL leads in retail demat accounts, holding an 80% market share and adding 76 lakh new accounts in Q3 FY26. However, CDSL primarily relies on transaction volumes. NSDL, in contrast, dominates the total demat custody value at $5.89 trillion (86.2% share) and holds a near-monopoly over Foreign Portfolio Investors (FPIs).
Resilient Revenue Streams: NSDL's Advantage
This difference directly affects earnings stability. NSDL's revenue mix is more resilient, with recurring fees making up 48.3% of its operating income in 9M FY26. This helps shield NSDL from the ups and downs of retail trading. CDSL's recurring income was 39% in the same period, leaving its earnings more exposed to market activity. NSDL functions more like a financial infrastructure group, with only 47% of its income from core depository services. CDSL, on the other hand, is a pure-play depository with higher overall margins.
Q3 Performance: Margins Tell the Story
In Q3 FY26, NSDL's cost management led to expanded EBITDA margins of 29.8%, even with flat operating revenue. CDSL, however, experienced margin pressure. Its expenses grew by 22%, causing EBITDA margins to fall to 52.9%, partly due to investments and challenges within its KYC subsidiary.
Valuation Outlook: Stability Wins
Both companies' valuations have cooled. CDSL trades at 37 times estimated FY28 earnings, while NSDL trades at 34 times. While weak equity markets bring risks of earnings downgrades, long-term growth factors such as rising financial savings and economic expansion support the depository market overall. However, in uncertain times, NSDL's steady, institutional-focused income stream is seen as more attractive.