National Securities Depository Ltd Q2 FY2026 Concall Summary

Key Takeaways

• Market share gains despite industry slowdown: NSDL added DEMAT accounts at a 4.9% run rate while the industry de-grew ~39%, lifting its incremental retail market share by 770 bps to 17.6%.
• Custody fee surged on structural tailwinds: Sequential custody fee growth of ~₹14 cr was driven by new DLT annual fees, folio expansion from 11.5 cr to 14 cr, and onboarding ~22,000 unlisted companies.
• Costs are front-loaded by design: Technology capex hit ~₹30 cr in H1 vs ₹35 cr for all of last year, and employee strength grew in size and skill sets; management warns this could pressure margins if H2 market opportunity disappoints.
• Unlisted issuer engine is decelerating: With close to 1.4 lakh issuers already onboarded, management says the market has "peaked out and it is slowing down," making future custody fee growth more dependent on new broker wins.
• What to watch next quarter: Whether the large Bombay-based broker and new-age brokers complete integration and start contributing volumes, and whether the unlisted slowdown is offset by listed custody and DLT fee ramp-up.

Market Position & DEMAT Account Growth

• Industry backdrop: DEMAT account additions across the industry fell sharply, with the incremental run rate dropping ~39% YoY in H1 FY26 (1.46 cr vs 2.41 cr). Cash segment ADTO grew a moderate 8.9%.
• NSDL bucked the trend: NSDL crossed 4 cr DEMAT accounts, growing its incremental run rate 4.9% while the industry contracted. Incremental market share in retail DEMAT additions jumped to 17.6% from 9.9%, a 770 bps improvement.
• Primary market strength: Capital raised through IPOs reached ₹71,090 cr across 188 issues in H1, up from ₹56,120 cr across 186 issues a year ago, providing a supportive backdrop for depository services.
• October dip attributed to seasonality: Management noted a drop in October but called it a festival and holiday-driven impact on depository participants, not an abnormal trend.

Chandok: "NSDL as a key market infrastructure institution has continued to play a central role in this transformation, and we are proud to serve as India's largest depository, a position built on trust, tech resilience and transparency."

Custody Fee: The Growth Engine

• Three drivers of the ~₹14 cr sequential jump: DLT annual fees began charging from June end onward and covered 600 corporates; folios grew from 11.5 cr to 14 cr; and ~22,000 unlisted companies were onboarded, each generating annual custody fees plus one-time processing and joining fees.
• Listed and unlisted custody now equal: The bulk of QoQ custody fee growth came from the unlisted space, and the recurring fee split between listed and unlisted custody is now broadly equal.
• Joining fees exist but are not quantified: Unlisted company onboarding carries a ₹15,000 joining fee, which is non-recurring; management declined to quantify its significance within the overall custody fee mix.
• DLT revenue is nascent: Management will not disclose the DLT component of custody fees now, saying it will circle back once the revenue becomes significant.

Unlisted Issuer Segment: Peaking Out

• Dominant but decelerating: NSDL holds 73% market share in the unlisted issuer segment and crossed the milestone of 1 lakh issuers onboarded, but management stated plainly that the market has "peaked out and it is slowing down" because close to 1.4 lakh issuers are already onboarded.
• Run rates expected to slow: With the addressable pool increasingly captured, the pace of new unlisted company additions will decline going forward, removing a key custody fee growth lever.
• Competitive pressure unaddressed: An analyst asked about market share risk given a competitor now also issues ISINs; management did not directly address potential share loss.

Chandok: "As far as the unlisted issuers are concerned, I think we are clearly seeing from a market point of view, things are sort of peaked out and it is slowing down."

Broker Strategy: The Next Growth Bet

• New discount broker onboarded: A Gurgaon-based fintech discount broker was onboarded and has scaled up, with numbers visible in Q2.
• Large Bombay-based broker in pipeline: A very large Bombay-based new company has submitted its application and all necessary integration is underway, though numbers are not yet visible.
• New-age broker engagement: NSDL has engaged and started onboarding potentially very large new-age brokers who are getting started; their numbers have yet to play out.
• Meaningful but contingent: If these brokers complete integration and start onboarding in the next few quarters, they could bring very meaningful volumes, but this is contingent on their own scale-up pace and success.

Chandok: "I think if these people in the next few quarters complete their integration and start onboarding and gain momentum, they could be very, very meaningful numbers coming to our kitty. But that is, of course, contingent on their own scale-up and the pace of their scale-up, et cetera, and how successfully they scale up."

Subsidiaries & New Initiatives

• NSDL Payments Bank crossed milestones: Customer base crossed 0.3 cr (vs roughly half that last year), customer deposits crossed ₹400 cr, and it was accorded Scheduled Payment Bank status in July 2025. Growth was driven by quality customer acquisition with over 100% CASA increase, plus UPI acquisition volumes from new partner onboarding.
• Both subsidiaries profitable as of H1 FY26.
• Product launches: A unified CAF platform for FPI and FVCI registration was launched to simplify and speed up onboarding. The SPEED-e app was enhanced to offer a consolidated view across securities. Proxy advisory recommendations were integrated within the e-voting system for retail investors.
• Upcoming features: Up to 10 nominations per DEMAT account will be operationalized shortly. Systematic Transfer and Withdrawal Plans in DEMAT form for mutual funds are expected soon. Phase 2 of the unified investor app will add mutual fund folios in account statements and open position and margin details.

Costs, Margins & Investment Philosophy

• Technology investment front-loaded: Capital investment reached ~₹30 cr in H1 FY26 versus ₹35 cr for the full previous year, focused on clean air gap solutions, core depository work, cyber security, capacity enhancement, customer experience, and automation.
• People investment rising: Employee strength has grown from March in size, volume and skill sets, particularly in technology and data roles where management says NSDL was historically underinvested.
• Margin risk flagged: Management will not give cost guidance but acknowledged that front-loading of costs could impact margins. If H2 market opportunity plays out favorably, the margin disadvantage will not be sharp; if it disappoints, spends continue and there could be a margin impact.
• Recurring revenue base: Recurring revenue is ~43% of total, comprising listed custody, unlisted custody, and new DLT fees (still small). Non-recurring revenue is ~57%.

Chandok: "We remain resolute on increasing our spends in the right areas and that is right people and technology. So, while we are not giving any guidance on how the costs are going up, I think it is a little bit of discretion you should give it to the Management team that they will spend the money in the right areas with a medium to long term benefits coming out."

Guidance & Commitments

Key Metrics