India's only listed depository, CDSL, has reached a milestone of 10 crore demat accounts due to the stock market boom. The podcast discusses CDSL's role as a safe keeper of shares, its revenue generation through managing listed shares and transaction fees, and its diversification efforts. It also explores the potential risks associated with the depository business.
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Quick takeaways
CDSL has seen a significant increase in demat accounts, thanks to the surge in retail investors in the stock market.
CDSL's profitability is strongly influenced by market cycles, with a bear market and regulatory changes posing risks.
Deep dives
CDSL's Role in Stock Market Investing
CDSL is a depository that plays a crucial role in stock market investing in India. With the introduction of dematerialization of shares, CDSL emerged as a safe keeper of digital entries replacing physical share certificates. Over the years, CDSL has gained market share in DMAT accounts, particularly as retail investors flocked to the stock market. CDSL's revenue streams include recurring fees, transaction fees, and value-added services such as e-voting.
Diversification, Costs, and Risks
CDSL has been diversifying its business by offering services like KYC checks and document storage for the insurance industry. With low IT costs and efficient operations, CDSL has managed to grow its profits at a faster rate than revenues. In a bull market, CDSL benefits from increased DMAT account openings, trading activities, and IPO issuances. However, the company is highly dependent on market cycles, and a bear market could significantly impact its revenue sources. Regulatory changes and potential fee reductions also pose risks to CDSL's profitability.
India’s only listed depository hit a massive milestone of 10 crore demat accounts. The number of demat accounts has jumped by nearly 5x since 2020. So in today’s episode for 25th November 2023, we have to talk about the business of the Central Depository Services Limited (CDSL).
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