The shares of this Market Infrastructure Institution (MII) surged over 7 percent on Monday after the company reported a remarkable 56 percent YoY increase in revenue and strong net profit growth in its recent quarterly results.
Share Price Movement
The share price of Central Depository Services Limited (NS:CENA) increased by 6.8 percent, reaching an intra-day high of Rs.1,515.00 per share, up from the previous close of Rs.1,419.00 apiece. However, the shares have since declined and are now trading at Rs.1,491.85 each. Over the last five years, the stock has delivered returns exceeding 1,200 percent.
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What Happened
Such a bullish movement in the stock price was an outcome of an increase in revenue and net profits of the company in the recent quarter.
According to its recent filing, in the quarter ending September 2024, Central Depository Services (India) Ltd reported a 56 percent increase in revenue to Rs.322 crore compared to Rs.207 crore in Q2 FY24. Furthermore, on a quarter-over-quarter basis, the company saw an increase of 25 percent from Rs.257 crore in Q1 FY25.
In the same period, the company has reported a significant increase in net profit of 49 percent to Rs.162 crore in Q2 FY25, up from Rs.109 crore Q2 FY24 and 21 percent from Rs.134 crores in Q1 FY25.
In terms of return ratios, return on capital employed (ROCE) is currently at 40.2 percent, while return on equity (ROE) is at 31.3 percent. The company has a strong current ratio of 2.42 and a nil debt-to-equity ratio.
Technology Investments
CDSL (NS:CENA) is proactively investing in technology to enhance infrastructure, focusing on hardware, application security, and best-in-class technology platforms. The management emphasised that technology costs have risen significantly due to the need for robust infrastructure and proactive upgrades.
Regulatory Changes
Compulsory dematerialization of private company shares is set to start in the second half of the year, and CDSL is ready for the expected increase in workload. Management is optimistic about growth in the KRA segment, though revenue splits between brokers and mutual funds remain undisclosed.
Transaction charge reductions implemented on June 1, 2024, were made to leverage economies of scale and attract more market participants.
Shareholding Pattern
As of the latest data, the shareholding distribution for Central Depository Services Limited (CDSL) is as follows, promoters hold 15.00 percent, mutual funds account for 13.36 percent, foreign portfolio investors hold 13.70 percent, and banks, financial institutions, and alternative investment funds (AIF) comprise 0.46 percent. The remaining 57.48 percent is held by others.
Company Profile
Central Depository Services Limited is a part of the capital market structure that serves all market participants, including exchanges, clearing corporations, depository participants (DPs), issuers, and investors.
It facilitates the holding of securities in dematerialized form and enables securities transactions. As of June 2024, CDSL held a 77 percent market share in the number of demat accounts. CDSL is the only depository securities company listed on the stock exchange.
Written by – Siddesh S Raskar
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