India's leading depositories, National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL), have reported contrasting financial results for the first quarter, highlighting the dynamic nature of the country's securities market.

NSDL's Performance

NSDL reported a consolidated revenue of Rs 312.00 crore, marking a 14% sequential decline. However, the company managed to boost its net profit by 8% to Rs 89.60 crore. A significant achievement for NSDL was the substantial increase in its demat account market share, which rose to 15.5% from 9.4% in the previous year. The company has now crossed the milestone of four crore accounts.

In terms of custody value, NSDL continues to dominate the market with an impressive 86.6% market share.

CDSL's Strong Revenue Growth

In contrast to NSDL, CDSL posted a robust revenue growth of 15.6%, with its top line reaching Rs 259.00 crore. This growth was primarily driven by higher issuer revenue and a recovery in transaction income. However, CDSL's net profit growth was modest, increasing slightly from Rs 100.00 crore to Rs 102.00 crore. It's worth noting that on an annual basis, CDSL's bottom line saw a 24% decline.

CDSL added 5.7 million new demat accounts during the quarter, slightly lower than the 6.4 million accounts added in the previous quarter. Despite this, CDSL maintained its strong position in new account additions, retaining an 84% market share.

Market Performance and Valuation

The market valuations of both depositories reflect investor confidence in the sector's growth potential:

NSDL currently trades at a price-to-earnings (P/E) ratio of 74.00, while CDSL's P/E stands at 66.00. The higher market capitalization of CDSL at Rs 32,806.00 crore compared to NSDL's Rs 24,166.00 crore suggests that investors are placing a premium on CDSL's stronger revenue growth and larger market share in demat accounts.

Conclusion

The contrasting performances of NSDL and CDSL in the first quarter highlight the competitive landscape of India's depository services sector. While NSDL has made significant strides in expanding its demat account market share and maintains a dominant position in custody value, CDSL continues to lead in new account additions and has demonstrated stronger revenue growth. As the Indian securities market evolves, both depositories are positioning themselves to capitalize on the growing investor base and increased market activity.

CDSL (Central Depository Services (India) Ltd.), a key player in India's financial infrastructure, reported a significant decline in its first-quarter profits despite an increase in demat custody. The company's performance reflects challenges in maintaining profitability amid changing market conditions.

Financial Highlights

Demat Custody Growth

CDSL reported demat custody of ₹79 lakh crore in the first quarter, up from ₹71 lakh crore in the previous quarter and ₹74 lakh crore in the same quarter last year. This growth in custody value indicates a positive trend in the company's core business.

Account Opening Slowdown

The company opened 57 lakh net accounts during the June quarter, compared to 64 lakh in the previous quarter and 99 lakh in the first quarter of last fiscal. This suggests a slowdown in new account additions, which could impact future growth prospects.

Profit Decline Despite Revenue Stability

CDSL reported a net profit of ₹102.40 crore for the quarter, marking a 23.6% decrease from ₹134.00 crore in the same period last year. This substantial drop in profitability came despite a marginal increase in revenue, which grew by 0.6% to ₹259.00 crore from ₹257.40 crore year-over-year.

EBITDA and Margin Contraction

The company's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) also saw a significant decline, falling 15.1% to ₹130.60 crore from ₹154.40 crore in the previous year's corresponding quarter. This decline in EBITDA was accompanied by a notable contraction in the EBITDA margin, which decreased from 60.0% to 50.4%, representing a substantial 960 basis points reduction.

Market Response

The market reacted negatively to CDSL's financial results. The company's shares closed 3.77% lower at ₹1,616.00 on the day of the announcement. Despite this decline, CDSL's stock has gained 10.65% year-to-date, indicating overall positive investor sentiment.

Challenges and Outlook

While CDSL managed to increase its demat custody and maintain revenue levels, the significant drop in profitability and margins suggests the company is facing challenges in cost management or experiencing pressure on its core business operations. The slowdown in new account openings, coupled with declining profits, may indicate a need for the company to explore new growth avenues or implement cost optimization strategies to improve its financial performance in the coming quarters.

As a crucial entity in India's financial markets infrastructure, CDSL's performance is closely watched by investors and market participants. The company's ability to leverage its growing demat custody while addressing profitability challenges will be key factors to monitor in the upcoming quarters.