About National Securities Depository Limited

BUSINESS OVERVIEW

National Securities Depository Limited (NSDL), a SEBI-registered Market Infrastructure Institution (MII), pioneered the dematerialization of securities in India following the implementation of the Depositories Act, 1996. As of March 31, 2025, it stands as the largest depository in India in terms of number of issuers, active instruments, market share in demat settlement value, and assets under custody (Source: CRISIL Report). It also maintains a vast network of 65,391 depository participants’ service centres, significantly exceeding the 18,918 centres operated by CDSL.

NSDL operates a centralized digital depository framework enabling the holding and settlement of securities through Demat Accounts. It supports a broad range of asset classes including listed and unlisted equities, preference shares, warrants, mutual funds, REITs, InvITs, AIFs, corporate and government debt instruments, commercial papers, SGBs, T-bills, and electronic gold receipts.

Its key responsibilities include:

• Maintaining allotment and ownership records via secure electronic book entries

• Asset servicing across dematerialized asset classes through robust systems

• Transaction services, including dematerialization, trade settlement, off-market transfers, pledge/re-pledge management, client securities segregation (CUSPA), and corporate actions

Additional services include e-voting, consolidated account statements (CAS), and blockchain-based platforms for debenture covenant monitoring and non-disposal undertakings (NDUs).

Through its subsidiaries — NSDL Database Management Limited (NDML) and NSDL Payments Bank Limited (NPBL) — it offers a wide array of value-added services:

• NDML: IT-enabled and e-governance solutions, including SEZ automation, skills registry, KYC, and insurance repository services.

• NPBL: A payments bank launched in October 2018, offering inclusive banking services such as AePS, digital banking, domestic remittance, micro-ATMs, UPI, POS, and distribution of mutual funds and insurance products under a B2B2C model.

As of March 31, 2025, NSDL had 39.45 million active demat accounts across 294 registered depository participants, covering over 99.34% of Indian pin codes and 194 countries globally. In FY25 alone, it registered 33,758 new issuers, taking the total to 79,773, and averaged 15,320 demat accounts opened daily.

As of the same date:

• Serviced 99.99% of dematerialized equity, debt, and other securities held by Foreign Portfolio Investors in India (Source: CRISIL Report)

• Held ₹70,167.65 billion in assets under custody for individuals and HUFs, comprising 67.90% of such total assets across depositories

• Held ₹4,676.01 billion in custody for NRIs, making up 85.56% of NRI assets in demat form

• Accounted for 96.98% of dematerialized debt securities value, totaling ₹52,195.07 billion (Source: CRISIL Report)

NSDL is led by Vijay Chandok, Managing Director & CEO, and supported by a team of experienced professionals. Strong corporate governance and leadership have contributed to its sustained growth.

Between FY2023 and FY2025, the company’s:

Revenue from operations rose from ₹10,219.88 million to ₹14,201.46 million

Profit after tax increased from ₹2,348.10 million to ₹3,431.24 million

EBITDA grew at a CAGR of 22.42%, reaching ₹4,929.43 million in FY2025
As of March 31, 2025, NSDL had 450 permanent full-time employees engaged in a range of business activities and had 355 contract employees engaged in a range of business activities. The Bankers to the company are Bank of Baroda, HDFC Bank Limited, ICICI Bank Limited, IDBI Bank Limited, Kotak Mahindra Bank Limited and NSDL Payments Bank Limited.

INDUSTRY ANALYSIS

Depository System in India: Industry Overview and Analysis

Evolution of the Depository System

Until the early 1990s, securities ownership in India was represented through physical share certificates. Settlement of trades followed an 'accounting period basis', taking nearly 10–14 days for completion. This lengthy settlement cycle exposed market participants to elevated credit and market risks, thereby inflating transaction costs.

During the 1970s and 1980s, the capital markets witnessed rapid growth with increased public, rights, and bonus issues, along with private placements. As a result, the volume of physical share certificates surged. Despite the market being dominated by retail investors during this period, the early 1990s saw significant changes with the entry of private mutual funds and foreign institutional investors (FIIs), leading to exponential growth in market turnover. This influx strained the clearing and settlement process due to the reliance on physical documents, making trade execution slower and more cumbersome.

The physical settlement system was riddled with inefficiencies, including risks of theft, fake certificates, signature mismatches, transfer delays, and high costs related to paperwork and storage. The need for a more efficient, electronic-based system became increasingly evident.

Globally, securities were either:

• Immobilized, where physical securities were stored centrally and transfers occurred electronically, or

• Dematerialized, where physical certificates were destroyed and ownership records maintained electronically.

India adopted dematerialization, converting physical certificates into digital form. This allowed seamless credit and debit entries in investor accounts to reflect ownership changes without physical movement of securities.

Legislative and Institutional Framework

To support the shift to electronic settlements, the Depositories Act, 1996 was enacted. Following this, India’s first depository, National Securities Depository Limited (NSDL), commenced operations in November 1996, implementing a direct dematerialization model instead of the phased immobilization route used by many global peers.

NSDL began with just 3 participants and 5 securities eligible for dematerialization. Later, Central Depository Services (India) Limited (CDSL) was launched in 1999, establishing a duopoly in India’s depository landscape.

This development revolutionized trade settlement in India, paving the way for rolling settlements. The Indian market transitioned from T+5 to T+1 settlement cycles between February 2022 and January 2023. In March 2024, SEBI piloted a T+0 settlement system, enabling same-day trade settlements for select equity stocks, further boosting liquidity, reducing risks, and aligning Indian markets with global standards.

Market Dynamics and Growth Drivers

The growth of the depository market is influenced by:

• Increased investor participation

• Enhanced digital infrastructure by brokers and depositories

• Lower transaction costs

• Rising awareness and financial literacy

The Indian depository market is characterized by a high entry barrier with NSDL and CDSL holding dominant positions, both backed by major institutions. NSDL leads in terms of issuers, instruments, settlement value, and assets under custody, while CDSL leads in total demat accounts.

Key Market Statistics (as of March 31, 2025):

• Client Account Growth: Total demat accounts grew at a CAGR of ~27.4% from FY2017 to FY2025 and are expected to grow at 11–12% CAGR till FY2027.

• Depository Revenues: Standalone income of Indian depositories was ₹17.16 billion in FY2025, growing at a CAGR of 22.4% from FY2018. It is projected to reach ₹21–22 billion by FY2027, assuming stable regulatory pricing.

Technological Advancements

Indian depositories continue to evolve technologically to improve compliance, data security, and customer convenience. Emphasis is placed on offering:

• Advanced digital services

• Enhanced product offerings

• Robust risk and compliance mechanisms

Both NSDL and CDSL have diversified into allied services via subsidiaries. For example:

• NSDL: Offers services through NDML and NSDL Payments Bank

• CDSL: Operates via CDSL Ventures Ltd (CVL) and Centrico Insurance Repository Ltd

Global Comparison

Globally, the concept of a depository started with the Depository Trust Company (DTC) in the USA (1973). Countries like South Korea (1974), Japan (1984), Taiwan and Malaysia (1990), and the UK (1996) followed suit. While many countries initially adopted immobilization, India rapidly embraced dematerialization.

India achieved significant dematerialization within three years of launching NSDL, with over 51% market capitalization and 94% settlements in electronic form by 1999. This rapid shift was primarily driven by progressive mandates from SEBI.

Market Share Snapshot

As of March 2025:

• NSDL holds:

  • ~85.06% of total securities (by number)

  • ~86.81% of total securities (by value)

  • Assets under custody: Over ₹500,000 billion

  • Demat value of listed corporate debt securities: ~97.84% market share

• Client Value Comparison:

  • Avg. asset value per demat account:

    • NSDL: ₹11.77 million

    • CDSL: ₹0.46 million

  • Avg. for individual/HUF accounts:

    • NSDL: ₹1.79 million

    • CDSL: ₹0.22 million

Allied and Value-Added Services

Depositories have also introduced several investor-centric services:

• Instant alerts via SMS (NSDL in 2007, CDSL in October 2007)

• Digital Loan Against Securities (LAS): Enables investors to pledge demat securities for quick loans. Depositories facilitate seamless integration with banks/NBFCs, enabling near-instant liquidity for emergencies without selling assets.

  • NSDL offers Collateral Management System for LAS through its DPs.

  • CDSL provides APIs for online pledging, streamlining digital LAS processing.

Industry Outlook

The future of the depository system in India appears robust, supported by:

• Increasing digital penetration

• Greater participation from retail and institutional investors

• Regulatory and market initiatives enhancing accessibility and transparency

• Rising preference for financial assets over physical ones, accelerated by initiatives from SEBI, AMFI, and market stakeholders

While the sharp rise in demat accounts seen during the pandemic years (FY22–FY23) may moderate due to a high base, steady growth is expected as investors continue shifting towards equity and digital investments.

BUSINESS STRENGTHS

1. Pioneer and Market Leader in India's Depository Ecosystem
NSDL is India's first and leading depository, holding the largest market share by number of issuers, active instruments, demat value of settlements, and value of assets under custody as of March 31, 2025 (Source: CRISIL Report). As an early innovator, NSDL introduced direct dematerialization, bypassing the global norm of immobilization, significantly transforming India’s securities market.

2. Technology-Led Product Innovation
Technology forms the foundation of NSDL’s operations. Continuous investments have enabled the creation of advanced depository systems for diverse stakeholders, including DPs, issuers, registrars, and clearing corporations. Notable innovations include Speed-e (for electronic transaction submission), IDeAS (for online depository access), and STeADY (for institutional trade information exchange). In 2007, NSDL pioneered SMS alerts for investors.

3. Robust Infrastructure and Cybersecurity Frameworks
NSDL’s IT infrastructure is designed for scalability, security, and compliance with global risk standards such as those outlined by CPMI-IOSCO. A 24x7 Security Operations Center (SOC) enables real-time threat monitoring, analysis, and response, leveraging the MITRE ATT&CK® framework. Subsidiary NDML is PCI-DSS certified for secure card transaction processing.

4. Stable and Recurring Revenue Streams
A significant portion of revenue is derived from recurring sources such as annual and custody fees, providing stability and reducing dependency on market cycles. This consistent income is bolstered by NSDL’s core depository operations and supplementary services.

5. Diversified Asset Classes and Business Verticals
Demat accounts under NSDL custody include a wide range of instruments: listed/unlisted equities, debt securities, mutual funds, REITs, InvITs, AIFs, government securities, sovereign gold bonds, and electronic gold receipts. As of March 31, 2025, NSDL accounted for 85.06% of total securities by volume and 86.81% by value.

6. Experienced Leadership Team
Led by Managing Director & CEO Vijay Chandok (31+ years of industry experience), NSDL’s senior management brings deep expertise across finance, technology, compliance, and operations. Key leadership includes Prashant Vagal (COO), Kothandaraman Prabhakaran (CTO), Jigar Shah (CFO), Sameer Patil (Chief Business Officer), and Suresh Nair (Compliance Officer). The board is supported by Public Interest Directors with backgrounds in banking, policy, risk advisory, and academia.

BUSINESS STRATEGIES

1. Expanding Growth Potential and Market Penetration
With Demat accounts in India growing at a CAGR of 21.94% from FY2014 to FY2025, and penetration reaching only 13.4% in FY2025, significant headroom exists for expansion. The number of companies with dematerialised securities has also risen sharply—NSDL from 17,835 in FY2017 to 79,773 in FY2025 (20.6% CAGR), and CDSL from 9,887 to 35,922 (17.5% CAGR). Regulatory mandates requiring unlisted public and certain private companies to issue and transfer securities in demat form further support long-term growth. Leveraging robust technological infrastructure and value-added services across depository and subsidiary platforms (NDML and NPBL) positions NSDL as a vital enabler in India’s capital markets.

2. Strengthening IT Infrastructure for Resilience and Efficiency
Enhancing IT systems remains critical for operational efficiency, service quality, and business continuity. Focus areas include building resilience against disruptions, reinforcing information security, and maintaining seamless operations across India’s securities ecosystem.

3. Diversifying Offerings through NDML
NDML continues to expand its product and service portfolio, catering to evolving customer requirements by offering IT-enabled solutions such as e-governance, KYC, digital banking, and regulatory platforms.

4. Scaling Payments Bank Operations
NPBL is enhancing its presence by offering zero-balance accounts, digital payment cards, utility bill payments, recharges, mutual fund investments, and insurance products, aiming to grow its share in the digital payments and financial inclusion space.

5. Leveraging Macroeconomic Tailwinds
India’s strong macroeconomic fundamentals—with real GDP expected to grow at 6.3%–6.5% annually between 2025 and 2028—further support strategic expansion across all verticals.

BUSINESS RISK FACTORS & CONCERNS

1. Changing Investor Preferences
A potential shift in investor interest from securities trading and investment to alternative avenues could reduce demand for NSDL's services, adversely impacting business performance and financial results.

2. Dependence on Trading Volumes
A significant share of revenue originates from transaction-based activities, particularly delivery-based trades. These are heavily influenced by market activity levels, investor sentiment, economic trends, and regulatory changes. Declines in trading volume could reduce transaction fees and negatively affect revenue.

3. IT System Vulnerabilities
The business relies on complex IT networks. Disruptions due to technical failures, cyberattacks, or security breaches could harm operations, reputation, and financials. Although recent years have seen no depository system breaches, past website cyberattacks highlight ongoing risks.

4. Intense Industry Competition
Operating in a highly regulated environment, NSDL faces strong competition, especially from CDSL, in attracting depository participants and expanding account base. Failure to maintain a competitive edge could impact growth and market share.

5. Regulatory Compliance Risks (NDML)
NSDL’s subsidiary, NDML, operates under multiple regulatory frameworks (IRDAI, SEBI, UIDAI, RBI). Non-compliance with these norms could harm reputation and have adverse effects on operations and financial health. NDML also undertakes critical services such as e-governance and digital infrastructure projects, increasing exposure to compliance risk.