National Securities Depository Ltd Q1 FY2027 Concall Summary

Key Takeaways

• Revenue surge masks margin mix: Consolidated total income jumped 61.6% YoY to ₹560.5 crores, but the spike came from a low-margin banking project with heavy pass-through costs, pulling consolidated PAT margin to 17.5%.
• Demat market share is turning: Incremental market share in net demat account additions rose to 17.6% from ~14% last quarter, driven by fintech channel growth (2% to 20% of new adds) and 21 exclusive new DPs now ramping up.
• Investments front-loaded, margin recovery promised: Standalone employee costs rose ~40% as last year's 98 hires flow through, and technology capex continued; management expects operating leverage to normalize margins as these investments mature.
• Custody and pledge income provide structural ballast: Annual custody income grew 30% YoY on 60,000 new companies added over two years, while pledge income benefits from a market shift toward shorter-duration MTF books where NSDL's custody dominance pays off.
• What to watch next quarter: Whether banking revenue normalizes to Q4 levels as guided, whether fintech integration progress converts to visible account numbers, and whether the IPO pipeline actually materializes into higher activity.

The Revenue Story: One Project Drove the Headline, the Base Grew Quietly

• Banking project inflated the top line: A specific card-business project onboarded a large customer set during Q1, bringing a joining fee with significant pass-through sharing with a partner; this single project drove the bulk of the 65.6% YoY consolidated revenue growth, but carried low margins.
• Normalization ahead: Management expects banking revenue to return to normalized rates from Q2 onwards, similar to Q4 levels; as acquired customers pivot to transactions, associated banking services should improve both revenue quality and profitability.
• Standalone revenue grew cleanly: Revenue from operations rose 13.2% YoY and 6.8% sequentially to ₹182.2 crores, with PAT up 7.9% YoY to ₹89.1 crores and a PAT margin of 40.6%, reflecting the core depository business strength.
• Custody fees compound quietly: Annual custody income grew 30% YoY because NSDL added about 60,000 companies over FY25 and FY26, taking folio count to ~14 crores; these are largely unlisted companies where NSDL holds 70%+ market share, creating a recurring revenue base that grows with every new incorporation.
• Pledge income rides a market tailwind: Pledge and unpledge count grew ~15% YoY, and the market trend toward shorter-duration margin trade funding books structurally benefits NSDL because of its large custody presence and better-quality customer base.

Chandok: "So, this is more as a front loading of an opportunity, which is project related opportunity, which has got a pass through with a partner at the time of onboarding. So, that onboarding journey actually peaked in this quarter."

Demat Market Share: The Fintech Pivot Is Working

• Incremental share turned sharply: NSDL's share of net new demat accounts rose to 17.6% in Q1 FY27 from ~14% in Q4 FY26 and ~15.5% in Q1 FY26, reflecting a multi-quarter effort to win new distribution.
• Fintech channel transformed: Fintech contribution to new account additions moved from ~2% a few quarters back to almost 20% now, driven by relationship building with new fintech brokers, friction reduction, back-office vendor workshops, and positive word-of-mouth endorsements.
• Ramp-up is gradual by design: Fintech onboarding takes ~4 months plus 1–2 months of testing before comfortable ramp-up; multiple new fintech brokers started their journeys over the last 4 quarters and ramp-up has now started taking shape, with recent quarters higher than earlier ones.
• Exclusive DPs lock in flow: 21 new DPs onboarded last year, most exclusive to NSDL, meaning every account they open flows to NSDL; 6 more DPs added this quarter, and many of the 21 are still in early stages of integration or scale-up, so the full benefit is yet to come.
• Product gap is no longer the bottleneck: Management stated product gaps are not a showstopper anymore; some APIs launched by NSDL are not available with competition, per market feedback, and tactical pricing interventions like Yuva and Women's plans (zero settlement charges for first 3 years) now account for 18–20% of incremental demat additions.
• Large fintech integrations are in progress but unproven: Technology integration is underway with certain very specific large customers (discount brokers/fintechs), but no accounts are yet attributable to them.

Chandok: "Having said that, I would just, sorry, just to complete, I would just augment that this progress does not mean anything till we see the outcome in terms of numbers. So, please do not take it away as any kind of a guidance. I want to make it explicit."

Margins: Front-Loaded Costs, Back-Loaded Recovery

• Standalone margin moderated by design: Standalone PAT margin stood at 40.6%, with moderation versus prior periods driven by front-loaded investments in technology resilience and cybersecurity, customer experience through operational automation, and increased talent pool addressing skill gaps and leadership requirements.
• Employee cost jumped on last year's hiring: Standalone employee cost rose almost 40% because net hiring of ~98 employees in FY26 is now flowing into costs this financial year; hiring was largely in technology and cybersecurity, and management indicated they will now be "very cautious" on hiring, with adequacy broadly done.
• Consolidated margin diluted by banking mix: Consolidated PAT margin at 17.5% reflects the low-margin banking project where onboarding revenue carried significant pass-through costs; as the project shifts to transaction-based revenue, margins are expected to improve.
• NDML showed resilience despite regulatory headwind: Despite a 20% cut in KYC fetch charges by the regulator, NDML's KYC income declined only 2% because its business is diversified across ~5 businesses (SEZ online, KRA, insurance repository, etc.), unlike competitors with singular dependencies.
• Technology capex continues: NSDL capitalized ₹7 to ₹8 crores in technology during Q1, with investments across four themes: technology resilience (regulatory and market expectation), customer experience, automation, and infrastructure refresh driven by end-of-life compulsion every 5–8 years.

Chandok: "We have front loaded these investments in manpower and technology to strengthen adequacy of resources and to support infrastructure and future growth. As these investments mature over the medium term, we expect operating leverage to support normalized margins going forward."

The Deposit Base: Structural Growth in Accounts and Folios

• Industry demat growth remains robust: Nearly 70 lakh new demat accounts were added in Q1 FY27 vs 67 lakh in Q1 FY26; total industry demat count crossed 23.16 crore, up 16.3% YoY, expanding the addressable base for all depository services.
• NSDL opened ~12.5 lakh accounts in the quarter, with market share increasing both sequentially and YoY to about 17.5%.
• Unlisted company custody is a quiet compounder: The addition of ~60,000 companies over two years (33,000 in FY25, 30,000 in FY26) grew folio count to ~14 crores; these are largely unlisted entities where NSDL has 70%+ market share, creating a recurring custody fee stream that grows with India's corporate formation rate.
• IPO pipeline should feed further growth: After a relatively muted IPO market in Q1, activity is expected to pick up for the remaining part of the calendar year based on the visible pipeline; IPO benefits flow as a consequence of increased shareholders and accounts, and if volumes are good, NSDL should earn more because the customer count has increased.

Subsidiary & Adjacent Business Performance

• Payments bank gained traction: Retail customers grew 1.7x YoY to 49.5 lakh; the bank ranked among the top 34 banks on UPI remitter transactions and 6th as payee PSP among top 15 banks, though margins were impacted by upfront onboarding revenue sharing from the specific partner project.
• E-voting share expanded: Number of events conducted increased to 900 vs 794 in Q1 FY26; market share increased to 64% from 61%, and the growth reflects normal requirements rather than a preponement of seasonally concentrated Q2 e-AGM business.
• NDML leadership transitioned: Mr. Rajeev Gupta joined as MD and CEO, succeeding Mr. Gupte who completed his full term; the insurance repository business is being transferred from the existing SBU to a separate subsidiary per IRDAI guidance.
• Board approved GIFT City investment: NSDL will hold a 20% stake in IIBH, an associate in GIFT City.

Guidance & Commitments

Key Metrics