CDSL stock can give 30% price appreciation in nine months

CDSL is the No 1 Depository in the country with over 6.50 crore demat accounts, having more than 56757 crore securities valued at Rs 37.17 lakh crore under custody. It is also the first listed Depository in the country and the second listed Depository in the world. CDSL was formed in 1999 to fulfil the sole objective of providing a convenient, dependable and secured depository services. A Depository is where one can dematerialise physical securities like shares, bonds and mutual fund units for safekeeping. The company is a Market Infrastructure Institution providing services to all market participants-Exchanges, Clearing Corporation, Depository Participants, Issuers and Investors. It is a facilitator for holding of securities in the demat form and an enabler for securities transactions. The company’s vision and mission is to empower the idea of an independent investor, enhancing convenience and security with extreme ease of doing business. As of 31 March 2022, the top 5 shareholders of CDSL are BSE (20%) , LIC of India (4.40%), Standard Chartered Bank (7.18%), PPFAS Mutual Fund (4.59%) and Canara Bank (2.39%). As of 31 March, 2022 institutions hold 56% of the total shareholding while the balance 44% is held with retail shareholders. For the FY 2021-22, the company earned a total operating income of Rs 415 crores, increasing by 53% on the back of increase in transaction income (67%) and annual issuer charges of (34%). The total net profit increased by 65% to Rs 264 crores mainly due to increase in total income by 54%. The EBIDA margin increased to 72% while the net profit margin increased to 55%. While BSE is the promoter of CDSL, the other Depository in the country is NSDL, which is promoted by IDBI Bank and NSE having 30% and 24% stake respectively. NSDL is currently not listed on the stock exchange but there have been media reports now and then that NSDL is planning to raise money via an IPO, allowing some of its existing share holders to fully or partly exit their investment. As per data provided by CDSL and NSDL, the No of demat accounts in the country have jumped by more than 60% during the last one year ending March 2022. The prime reasons are the increase in smart phone usage, easier onboarding of new customers and the fantastic returns delivered by the equity markets in the last few years. Analysts have commented that during Covid, the investing and spending habits of individuals went a drastic change pushing investing and trading into a digital realm. With more and more young investors moving away from fixed deposits and preferring to invest their money directly in stocks, demat accounts with depositories are on the rise. Recent IPO from LIC and many others which are expected in the near future will also increase the pace of addition. The CDSL stock made a high of Rs 1734 and is currently quoting at Rs 1090 on the bourses. Fund managers and analysts are bullish on the CDSL scrip and expect the stock to deliver a 30% price appreciation in the next nine months time frame.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.