JM Financial Initiates Coverage on NSDL with 'Add' Rating, Sets ₹1,290 Target

JM Financial has launched its coverage on National Securities Depository Ltd. (NSDL) with an 'Add' rating and a price objective of ₹1,290. This target implies an almost 12% potential increase from its recent closing price.

NSDL continues to be the dominant platform for securities settlement in India, managing the largest portion of demat-based transaction value. In the fiscal year 2025, NSDL processed settlements worth ₹103.2 lakh crore, capturing a significant 66% market share against CDSL's 34%.

The brokerage highlighted that NSDL's primary depository business is supported by several structural growth factors. These include an increase in new accounts, more issuers coming on board, growth in custody value, and sustained transaction volumes.

Beyond its core operations, NSDL has expanded into a diversified financial infrastructure provider through its subsidiaries, NDML (NSDL Database Management) and NPBL (NSDL Payments Bank). These entities collectively accounted for 56% of NSDL's consolidated revenue in FY25. NDML manages 18.8 million KYC records, while NPBL operates 3 million active accounts and over 3 lakh micro ATMs, contributing 51% to operating revenue.

JM Financial noted the duopoly structure of India's depository sector, suggesting that NSDL's strong cash flows and lower volatility, compared to stock exchanges, warrant premium valuations.

The brokerage projects NSDL to achieve a Compound Annual Growth Rate (CAGR) of 11% in revenue, 18% in EBITDA, and 15% in profit between FY25 and FY28.

Separately, NSDL's three-month shareholder lock-in period is set to expire soon, which will release approximately 75 lakh shares, representing about 4% of the company's total outstanding equity.

Impact This news is likely to boost investor confidence in NSDL, given the positive initiation of coverage by a reputable brokerage. The price target suggests further upside potential. However, the impending release of a significant number of shares post lock-in expiry could introduce some short-term volatility. The diversification strategy also points towards long-term resilience and growth.

Rating: 7/10

Difficult Terms Explained: Depository: An organization that holds securities (like shares and bonds) and facilitates their transfer and settlement. NSDL is a depository. Demat: Short for 'dematerialized', referring to the process of converting physical share certificates into an electronic format, held in a demat account. Securities Settlement: The process of transferring ownership of securities and funds after a trade is executed. KYC: 'Know Your Customer' is a mandatory process for financial institutions to verify the identity of their clients. EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization. It's a measure of a company's operating performance. CAGR: Compound Annual Growth Rate. The average annual growth rate of an investment over a specified period. Duopoly: A market structure where only two sellers or producers dominate. IPO: Initial Public Offering. The first time a company offers its shares to the public. Shareholder lock-in period: A period after an IPO during which existing shareholders (like founders or early investors) are restricted from selling their shares.