National Securities Depository Ltd Q1 FY2026 Concall Summary

Key Takeaways

• Diversification cushioned a soft market: Revenue spans nine line items, with ~42% recurring custody fees offsetting weaker transactional volumes, so the top line held up despite Q1 market conditions.
• Incremental Demat share jumped 5pp: Market share of new Demat accounts rose from ~10% to 15%, driven by new-age broker scale-up, digitization, and sharper bank-led 3-in-1 account focus.
• Unlisted companies nearly doubled YoY: The unlisted issuer base grew from ~43,600 to 84,064, powering ~30% YoY growth in annual issuer charges and building a recurring-fee base for future periods.
• Payments Bank revenue dipped deliberately: A strategic shift toward higher-quality CASA customers moderated the top line but improved the bottom line; adjacent fee businesses have begun contributing.
• What to watch next quarter: Whether the common contract note mandate sustains its early revenue contribution, the pace of incremental Demat share gains, and any board decision on cash deployment.

Revenue Diversification & Market Resilience

• Nine-line-item structure: Revenue comes from custody fees (issuers, listed and unlisted), settlement fees, joining fees, pledge fees, corporate actions and other charges; the ~42% recurring base provides ballast when transaction volumes dip.
• Diversification as deliberate strategy: Management will continue pressing levers across all nine lines to minimize the impact of market movements, though it acknowledges market risk cannot be fully eliminated.
• Working capital nuance: The cycle is slightly longer than competition because of the unlisted company segment, which now spans 90,000+ entities and typically takes longer to convert.

Chandok: "But to completely say that we would be able to completely wish away the impact of market would not be an accurate way to think about it."

Issuer Base & Annual Charges

• Unlisted boom driving growth: The ~30% YoY rise in annual issuer charges is substantially attributable to the near-doubling of unlisted companies, which bring both one-time joining fees and recurring custody fees that compound into future periods.
• Addressable opportunity still large: The industry currently serves 90,000–95,000 unlisted companies; management estimates roughly 1.8 lakh exist, and more inclusive regulation could expand the addressable base further.
• Disclosure boundary: Management declined to split annual issuer income between listed and unlisted, or between DP and AMC charges, saying such granularity is not being shared at this stage.

Market Share & Broker Ecosystem

• Incremental Demat share jump: The move from ~10% to 15% of new Demat accounts reflects scale-up with new-age players onboarded a few quarters ago, digitization reducing friction, and banks' sharper CASA focus lifting 3-in-1 account attention. No single factor dominates.
• Broker relationship deepening: Effort is underway to deepen ties with existing brokers; some new-age brokers onboarded earlier have started seeing good traction. Management declined to detail specific discount-broker conversations, calling them bilateral.
• Digital decongestion underway: Small, broker-by-broker pain-point fixes are being released month by month and week by week, aimed at improving customer experience incrementally.

Chandok: "And these are not necessarily very big bank de-frictionalization efforts. These are small, small, small, small things that just de-congest pain points."

Common Contract Note & New Revenue Streams

• Mandate now operational: The common contract note requirement (first full month in Q1) forces brokers to upload trade details that were previously optional, attracting charges paid by the broker to NSDL. As the largest service provider, NSDL has already seen additional revenue in the last month.
• Quantification deferred: Management said it will quantify the revenue impact at some point but noted only one month of data exists so far.
• DLT platform monetized: The Distributed Ledger Technology platform for bond-issuer covenant monitoring, which previously earned no revenue, has now started earning.
• Other launches: A proxy advisory recommendation feature on the e-voting platform, API-based mutual-fund-to-Demat conversion, and a unified investor app providing consolidated portfolio views across asset classes all went live.

Payments Bank: Strategic Reset

• Deliberate top-line moderation: Revenue dipped because of a conscious shift to acquire higher-quality CASA customers; controls were put in place to improve customer quality, which moderated the top line but improved the bottom line.
• Adjacent fees emerging: The bank has built roughly 0.3 crore customer accounts with a decent CASA base, and adjacent fee businesses such as the acquisition business have started contributing revenue in Q1.
• 3-in-1 accounts still exploratory: Management is exploring the possibility of 3-in-1 accounts with certain brokers but said conversations remain at an early stage.
• Medium-to-long-term thesis intact: The strategy is predicated on financial inclusion and digitizing India; management continues to invest and sees both themes as medium-to-long-term plays.

Chandok: "So, two plays... one is inclusion. And the other is digitizing India. And I think both these themes are really more medium term, long term plays."

Costs, Technology & Capital Allocation

• Standalone opex decline explained: The sequential drop from ₹90 crores to ₹80 crores was primarily due to a one-off regulatory settlement fee in Q4 FY25; barring that, employee and technology costs rose both YoY and sequentially.
• Consolidated expense drop tied to mix: Transactional business moderated QoQ, and because the model pays large commissions on transactional fees, those commissions also came down, pulling consolidated expenses lower.
• Tech investment stepping up: Four areas identified: automation, cybersecurity/technological resilience, customer experience, and capacity building. Capex this year will be "definitely a more than a multiple" of last year's ₹35 crores.
• Cash deployment: The board demonstrated intent by increasing the dividend from 50% to 100% on face value as an indicative gesture; a further call will be taken in the course of time. Nothing more to report at this stage.
• Disclosure boundaries: Management declined to provide a technology cost breakup or trend, KYC/insurance depository market share, segmental reporting, or EBITDA ex-Payments Bank, though it said it will consider adding disclosures over time through investor presentations.

Chandok: "We are India's infrastructure, critical infrastructure. And in that context, cyber security, we are having more than \$6 trillion of assets under custody. So very strong focus on cyber security."

Guidance & Commitments

Key Metrics