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Summary: NSDL controls a vast share of India’s demat wealth, yet that dominance has failed to translate into the returns investors expected. A closer look at how the depository makes money reveals why market share and shareholder gains are not always the same thing.
When NSDL (National Securities Depository Limited) made its debut last year, the pitch was clear: own the depository and become an owner in the infrastructure behind a large part of India’s capital market. Holding nearly 86 per cent of everything Indian’s own in dematerialised form, NSDL’s IPO was something investors were eagerly waiting for.
However, a year later, things seem dull. The stock trades below its listing price and at roughly 50 per cent of the multiple it reached in the months post listing. Rs 1 lakh allotted in the IPO and sold on listing day became about Rs 1.10 lakh. Held till today, it is still worth about Rs 1.04 lakh. Most retail buyers never got an allotment. They bought at the listing-day close, and their Rs 1 lakh, including dividend, is now about Rs 88,000, versus Rs 99,750 for a Nifty index fund.
What is surprising is that NSDL underperformed despite continued business growth. As investors got a clearer picture of how it makes money, its market-share advantage began to look less lucrative than it first appeared.
How NSDL is paid
When shares went digital in 1996, NSDL became the electronic record of ownership. Every trade settlement, dividend credit and pledge passes through it. It charges companies, not investors. A folio is simply a shareholder record. A company pays the higher of Rs 11 per folio or a minimum fee based on the nominal value of its securities, ranging from Rs 5,000 to Rs 75,000.
A company with more shareholders therefore generates more fee-paying folios, while a closely held company is more likely to pay the minimum. NSDL has roughly 4.6 crore demat accounts and 14 crore active folios, or about three folios per account.
The formula does not capture market value. If every share under NSDL's custody doubled in price, its custody revenue would not change. The Rs 535 lakh crore under custody therefore says more about how difficult NSDL is to displace than how much it can earn.
How NSDL makes money
| FY26 (Rs cr) | Revenue | EBIT (operating profit) |
|---|---|---|
| Depository (NSDL standalone) | 704.7 | 348.8 |
| NSDL Payment Bank | 746.8 | 20.6 |
| Database management | 78.5 | 17 |
| Consolidated revenue | 1,530 | 386.4 |
Half the depository's revenue comes from the annual custody fee, which arrives whether or not anyone trades. That recurring share has risen from 42 per cent of standalone revenue in FY25 to 50 per cent in FY26, making the business more predictable.
The rest moves with market activity. In FY26 it moved down: settlement fees fell 17 per cent and income from corporate actions and IPOs fell 18.5 per cent as trading cooled. Against a cost base that cannot shrink when volumes do, a quiet market shows up in NSDL's numbers. And it cannot charge more for any of it. SEBI fixes depository tariffs and has not revised them in 11 years.
The margin paradox
NSDL's FY26 consolidated EBITDA margin was about 28 per cent, well below its peer, CDSL's (Central Depository Services) 52 per cent. The depository alone runs close to 54 per cent. The table above shows where the difference goes: the payments bank earns more revenue than the depository and almost no profit on it.
A payments bank cannot lend, so it earns no interest spread and must park most deposits in government securities. Fee income is all that is left, and NSDL's bank collects it through agents and corporate partners who take much of it back as commission. Its push into UPI compounds the problem, since UPI transactions generally carry no fee for merchants, so volume arrives without revenue. Deposits of Rs 521 crore as of FY26 generate only around Rs 36 crore of interest before depositors are paid.
The other pressure is temporary by design. NSDL capitalised about Rs 106 crore of technology capex in FY26 and expects a similar level in FY27 as it completes its technology overhaul. This has also lifted depreciation and related costs, but management expects the investment cycle to ease from FY28 once the capex programme is largely complete.
The demat windfall is fading
FY26's growth made NSDL's proxy story look stronger than it was. Annual custody fees rose 36 per cent, driven largely by the government mandate that added about 22,000 unlisted companies to NSDL's register in the first half of FY26. Since NSDL charges the fee when a company joins, registrations and revenue rose together. But the rules changed. From December 2025, a higher small-company threshold exempted more companies, and new registrations fell from over 11,000 in September to 4,446 in December. NSDL now says the opportunity has largely peaked.
What remains is recurring but modest. Over 1.3 lakh unlisted companies have paid the Rs 15,000 joining fee, while recurring fees of Rs 5,000-9,000 generate roughly half of annual custody fees. Most are closely held, have few folios and pay near the minimum, leaving limited room for further growth.
The retail gap is real. The revenue gap isn't
The most repeated criticism of NSDL is that it missed the retail boom. By account count, it did. CDSL has roughly four times as many demat accounts, while NSDL's bank-led participants historically focused less on chasing new investors.
But account count alone misses NSDL's economics. The average NSDL account holds about Rs 1.17 crore, versus Rs 4.6 lakh at CDSL. NSDL is now pushing into retail without giving up its core strengths. It added a record 21 depository participants in FY26, including discount brokers, while active folios rose from 11.5 crore to 14 crore. Its share of new demat accounts reached 17.6 per cent in Q1 FY27, up from 15.5 per cent a year earlier, though it needs to sustain this beyond IPO-led bursts.
The bottom line
CDSL faces the same regulated pricing structure, but its economics are better aligned with India's retail investing boom. It has far more demat accounts, folios and transaction activity, while NSDL has the larger, higher-value custody base. Yet that custody value does not directly translate into revenue. At 44 times earnings versus CDSL's 61 times, NSDL now trades at a meaningful discount.
NSDL remains difficult to displace, but its growth has clearer limits. The unlisted-company demat wave has peaked, tariffs remain unchanged, retail gains are uneven and the payments bank adds revenue but little profit. The key questions are whether margins recover as technology spending rolls off from FY28 and whether NSDL can sustain a higher share of new demat accounts beyond IPO-driven bursts. Until then, the business is secure, but it still needs to prove it can turn that position into durable earnings growth.
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