Zafar Iqbal
Central Depository Services Limited (CDSL), India’s largest securities depository, has reported a mixed financial performance for Q3 FY25. Despite showcasing year-over-year (YoY) growth in revenue, the company experienced significant quarter-on-quarter (QoQ) declines in both revenue and profit margins. Following this announcement, the company’s stock price witnessed a sharp drop, signaling investor concerns over its financial health.
Share Price Movement
The share price of CDSL fell by 9.45% on January 27, 2025, closing at Rs. 1,358.35 per share compared to its previous close of Rs. 1,500.25. This decline has reduced the company’s market capitalization to approximately Rs. 28,744 crore. The sharp drop reflects market reactions to the company’s weaker-than-expected quarterly performance.
Business Milestones
CDSL achieved a significant milestone by becoming the first depository in India to register over 14.65 crore demat accounts as of December 31, 2024. During Q3 FY25 alone, approximately 92 lakh new demat accounts were opened, highlighting the company’s continued efforts to expand financial inclusion and digital access to securities.
Q3 FY25 Financial Highlights
Revenue Performance
- Quarter-on-Quarter: Revenue fell by 13.66% to Rs. 278 crore in Q3 FY25, compared to Rs. 322 crore in Q2 FY25.
- Year-over-Year: Revenue increased by 29.91% from Rs. 214 crore in Q3 FY24.
Profit Analysis
- Quarter-on-Quarter: Consolidated profit declined by 19.75% to Rs. 130 crore in Q3 FY25 from Rs. 162 crore in Q2 FY25.
- Year-over-Year: Profit grew by 21.50% from Rs. 107 crore in Q3 FY24.
Operating Profit Margin (OPM)
The company’s operating profit margin decreased from 61% in Q3 FY24 to 58% in Q3 FY25, indicating increased operational pressures.
Growth Metrics
- TTM Sales Growth: 58%
- TTM Profit Growth: 57%
- 5-Year CAGR: The stock delivered a compounded annual growth rate of 70% over the past five years.
Industry Context and Competitors
Market Growth
The depository industry in India is experiencing substantial growth, driven by increased financial inclusion and digital innovation. Demat accounts grew by 32% from FY23 to FY24, reaching 15.14 crore accounts, reflecting a broad trend towards digitization in securities management.
Competitor Analysis
CDSL’s primary competitor, National Securities Depository Limited (NSDL), also plays a significant role in the depository ecosystem. However, CDSL maintains a dominant market share of 76%, underscoring its leadership in the industry. CDSL’s price-to-earnings (P/E) ratio currently stands at 56.85, reflecting its premium valuation.
Market Outlook
CDSL’s strong infrastructure and security protocols have established its reputation as a reliable depository in India. With assets under custody worth Rs. 64 lakh crore as of March 2024, the company is well-positioned to capitalize on India’s growing investment ecosystem. However, recent financial results suggest the need for strategic adjustments to sustain growth and profitability.
The ongoing expansion of demat accounts, bolstered by simpler processes and digital accessibility, signals continued opportunities for growth in the depository industry.
Investor Considerations
The mixed financial performance and subsequent stock price decline highlight the importance of cautious investment in CDSL. While YoY growth remains promising, the QoQ decline in key metrics raises concerns about the company’s short-term performance.
Specification Table
| Aspect | Details |
| Q3 FY25 Revenue | Rs. 278 crore |
| QoQ Revenue Decline | 13.66% |
| YoY Revenue Growth | 29.91% |
| Q3 FY25 Profit | Rs. 130 crore |
| QoQ Profit Decline | 19.75% |
| YoY Profit Growth | 21.50% |
| Market Cap | Rs. 28,744 crore |
| Demat Accounts | 14.65 crore (as of Dec 31, 2024) |
| New Accounts (Q3 FY25) | 92 lakh |
| Market Share | 76% |
| Assets Under Custody | Rs. 64 lakh crore (as of Mar 2024) |
| P/E Ratio | 56.85 |
Conclusion
CDSL’s Q3 FY25 performance reflects a blend of strengths and challenges. While the company continues to lead in demat account registrations and maintain YoY growth, declining QoQ metrics underscore the need for operational improvements. As the depository industry expands, CDSL remains well-poised to benefit from India’s growing financial inclusion, provided it addresses current financial pressures effectively.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should consult their financial advisors before making any investment decisions.
