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Revenue Growth Faces Margin Squeeze
NSDL's strong revenue performance, particularly a 49% year-over-year increase in its Banking Services division, shows its capacity to seize growth chances. However, this top-line jump is shadowed by a disproportionate 30% surge in operating expenses. This widening cost base has compressed EBITDA margins to 22.7%, down from over 29% in the previous quarter. The key question for investors and analysts is whether NSDL can control rising costs to justify its high valuation.
Q4 FY26 Financials: Revenue Up, Costs Climb
NSDL's operating revenue for the fourth quarter of fiscal year 2026 reached INR 4.6 billion, up 26% year-over-year and 27% quarter-over-quarter. The Banking Services segment was the main driver, growing 49% YoY and 56% QoQ. For the full fiscal year 2026, total revenue was INR 15.3 billion, an 8% increase from FY25. However, operating expenses rose 30% YoY and 40% QoQ to INR 3.5 billion. Employee costs climbed 29% YoY, and other expenses jumped 52% QoQ. This led to EBITDA growing a more modest 14% YoY to INR 1 billion. EBITDA margins tightened to 22.7% from 25.1% in 4QFY25 and 29.9% in the third quarter of FY26. Profit After Tax (PAT) for the quarter was approximately INR 903 million, with margins at 19.7% compared to 22.9% in 4QFY25. NSDL's stock traded around INR 880-885 in early May 2026, with a market cap of about INR 17,600 crore and a trailing twelve-month P/E ratio of roughly 47x.
NSDL vs. CDSL: A Competitive Look
NSDL operates in a duopoly in India's depository services with Central Depository Services (India) Limited (CDSL). NSDL's P/E is around 47x, while CDSL trades higher, from 55x to 58x. CDSL also has a larger market capitalization, estimated above INR 26,500 crore. Although NSDL boasts more expansive infrastructure with over 65,000 DP service centers versus CDSL's 18,918, CDSL secured a greater share of new demat account openings (88% market share in FY23-24), with NSDL's incremental share being lower. NSDL does lead in serving institutional and large corporate accounts, generating revenue per active account nearly triple that of CDSL. The wider Indian financial services sector is also dealing with geopolitical uncertainties and oil price volatility, impacting investor sentiment and leading to foreign portfolio outflows.
Valuation Concerns Amid Cost Pressures
A major concern for NSDL is the steady increase in operating expenses, with 'other expenses' alone surging 52% QoQ in Q4 FY26. This has significantly compressed EBITDA margins to 22.7%, a notable drop from over 29% in recent periods. Historical trends show NSDL has faced margin compression before, with operating margins falling from over 49% to around 30% between FY21 and FY25. The company's projected growth of 11-15% for FY26-28E relies on future cost moderation, which has not yet consistently materialized. NSDL's P/E of approximately 47x looks high, especially given difficulties in margin expansion and its slower rate of attracting retail investors compared to CDSL. Adding to operational concerns, NSDL recently faced a three-day technical issue in late April 2026 that disrupted share settlements.
Analyst Views and Future Outlook
Motilal Oswal keeps a 'Neutral' rating on NSDL with a one-year price target of INR 1,000, suggesting limited upside from current levels. Axis Capital, another analyst firm, holds an 'Add' rating with a similar INR 1,000 target, acknowledging NSDL's strong franchise but pointing out margin challenges. The average consensus target price is around INR 1,135-1,149, implying potential upside over 28% according to some estimates. However, general analyst sentiment suggests that much of NSDL's growth potential may already be reflected in its stock price, urging investor caution. Future projections forecast revenue, EBITDA, and PAT compound annual growth rates of 11%, 13%, and 15% respectively from FY26-28E, provided cost management is successful and the banking segment continues its growth.