CDSL is a business that did well during the pandemic. Take look at the company’s Q1 numbers 👇

The Story So Far…

CDSL is Central Depository Services Ltd, in the business of holding securities in the dematerialised form and enabling their transactions. Like the two stock exchanges in India namely BSE and NSE, the depository services are again a duopoly; the only two players being CDSL and NSDL. The latter is not yet listed.

The company was founded in 1999 and got listed in 2017 on NSE. The IPO issue price was Rs. 149/-; it had a bumper listing with the shares opening at Rs. 250/- at 68 % premium to its issue price. But since then it’s been a roller coaster ride.

Subsequent to the bumper listing, the share price was on a painful march southwards reaching new lows in 2019. The fortunes started reversing in Q3 of FY 19-20; the share price started climbing again. March 2020 was a good buying opportunity with the equity markets world over in red. And since then the CDSL share price almost doubled.

The duopoly nature of the depository business in India gives CDSL a moat that is prized by investors. It’s growth graph has been impressive too👇.

The Dividend Story

In the brief 2 year period of it’s listing, the dividend payout has been made every year and has been increasing👇

Positives

The company’s revenue streams are recurring in nature. It includes transaction charges, account maintenance charges and settlement charges paid by DP’s and annual fees, corporate action charges and e-voting charges paid by companies and KYC charges paid by intermediaries. This is good !!

CDSL’s main costs are employee costs, IT related expenses which are largely fixed in nature. This is again good !!

The company is debt free.

Negatives

But the competition from NSDL is fierce and this is the major threat.

Conclusion

When the share price was in it’s 200s, it was a great buy and am not sure whether the share price will go back to those levels, unless a correction happens in the broader equity markets or very bad news from the company itself. The Q2 results are awaited.

Till next post, take care !!