CDSL: A possible multibagger?
Although while several equities are currently trading at considerable discounts to their recent highs, not all of them are presenting themselves as promising long-term investment opportunities.
š«° But one good opportunity, in my view, is being offered by CDSL. [Central Depository Services (India) Ltd.]
Being one of the only two depositories in India (the other being NSDL, which is not listed), makes this market a duopoly, which is nothing less than a benefit by default for the company.
š On studying the financials of the company for Q3 FY23, here are some important insights I noted down:
E-voting income decreased from ~ā¹14.18 Cr in Q2 FY23 to ~ā¹3.78 Cr in Q3 FY23. This is due to the fact that generally, the second quarter of every fiscal year sees the biggest volume of e-voting activity.
The company had a modest decline in the KYC collection on a QoQ basis, from 27.91 lakhs to 26.86 lakhs.
During the quarter,Ā margin pledgeĀ income was ~ā¹3.27 Cr and CASĀ income was ~ā¹5 Cr.
ā¬ļø The value of securities in demat custody [As of December 31, 2022] was ā¹41 lakh crore, a rise of 11% year over year.On the PnL front, theĀ operational incomeĀ stood at ā¹23.07 Cr in Q3Ā FY23 as against ā¹25.8 Cr Q2 FY23 - a de-growth of 10%.
While total income dipped stood at ā¹27.13 Cr, the profit after tax in the third quarter of FY23 was ā¹12.59 Cr as opposed to ā¹13.4 Cr in the second quarter.
š¼ As of December 31, 2022, there were 7.78 Cr investor accounts [it has currently reached a milestone of 8 Cr demat accounts], up 45 lakh accounts from the previous quarter. YoY, there has been a 40% increase in demat accounts. 
š» The stock is currently trading at ~40% down from its all-time-high. Due to geopolitical unrest, an increase in interest rates, and other factors, the revenues for the quarter were affected. The company saw a consecutive drop in the number of KYC records generated and fetched.
The Covid-19 epidemic significantly increased retail investor engagement in the equity markets, which had contributed to CDSL's growth.
But in 2022, the investment and financial sector experienced difficulties. The volatility of 2022 caused investors to flee the stock market, which in turn impacted fintech firms like CDSL. While the number of active demat a/c users have fallen marginally recently, this was expected given the unexpected rally of investors. Nonetheless, India's depository industry is positioned for long-term expansion and CDSLās business is anticipated to be fueled by growing retail involvement, improving investor confidence, consistent mutual fund inflows, and the adoption of mobile trading platforms.
Another reason for the over 10% correction in the stock in this month is because of BSE Ltd.'s OFS announcement. This has led to the stock currently trading at a substantially lower level.
BSE plans to offload 2.5% of its 20% ownership in CDSL through an OFS- investors can take advantage of the chance at a reduced cost if they want to add this possible multibagger to their portfolio. š°
Disclaimer: This post is for educational purposes only & I am not a SEBI regd. financial advisor. Kindly do your own research before taking investment/trading decisions.
Feel free to reach out to me for any queries, suggestions, or just a quick chat!
Till then, stay safe, stay invested!
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