Whalesbook
Contrasting Market Positions
The preference stems from their fundamentally different business models. CDSL, while leading in retail demat accounts with an 80% market share and adding 76 lakh new accounts in Q3 FY26, primarily relies on transaction volumes. NSDL, conversely, commands 86.2% of the total demat custody value, totaling $5.89 trillion, and holds a near-monopoly over Foreign Portfolio Investors (FPIs).
Revenue Resilience and Margin Dynamics
This divergence impacts earnings stability. NSDL's revenue mix is more resilient, with recurring fees constituting 48.3% of operating income in 9M FY26, insulating it better from retail trading fluctuations. CDSL's recurring income was 39% in the same period, making its earnings more vulnerable to market activity. NSDL operates as a financial infrastructure conglomerate, with only 47% of its income from core depository services, while CDSL is a pure-play depository with higher consolidated margins.
Performance in Q3 FY26: Divergent Paths
Cost discipline drove NSDL's performance in Q3 FY26, allowing EBITDA margins to expand to 29.8% despite flat operating revenue. Conversely, CDSL faced margin pressure, with expenses rising 22% and EBITDA margins declining to 52.9%, partly due to investments and headwinds in its KYC subsidiary.
Valuation and Long-Term Outlook
Valuations have moderated for both, with CDSL trading at 37 times estimated FY28 earnings and NSDL at 34 times. Despite earnings downgrade risks in weak equity markets, structural growth drivers like increasing financial savings and economic expansion provide a long-term tailwind for the duopolistic depository market. Nonetheless, NSDL's predictable, institutional-heavy income is favored in uncertain times.