CDSL shares plunge 13% as NSDL IPO gains momentum, investors reevaluate valuation

CDSL shares have fallen 13% in one week as investors focus on NSDL's highly anticipated IPO, which has garnered strong institutional interest. NSDL is the country's largest depository and has a dominant position in institutional custody and infrastructure services. CDSL's rally has cooled as retail growth fades, and its valuation gap with NSDL is notable.

Central Depository Services (India) Ltd (CDSL) shares have experienced a significant drop of over 13% in the past week, as investor focus shifts to the highly anticipated Initial Public Offering (IPO) of National Securities Depository Limited (NSDL). The IPO of NSDL, which began on July 30, has received strong institutional demand, prompting investors to reassess CDSL's valuation.

NSDL, established in 1996, is India's first and largest central securities depository, holding a dominant position in institutional custody and infrastructure services. Its IPO has opened this week, drawing substantial institutional interest. Anchor investors have subscribed to Rs 1,201 crore worth of shares, indicating a listing premium of 15-18% [1].

CDSL, which gained prominence during the post-pandemic retail investing surge, has seen its stock price rally significantly since its 2017 listing at Rs 125. The stock has returned 165% over three years and is up 21.6% in the last 12 months. However, this momentum appears to be tapering off, with shares falling 4% on July 28 after the company reported a 23.7% year-on-year decline in consolidated net profit to Rs 102.40 crore for Q1 FY26 [1].

The valuation gap between CDSL and NSDL is notable. While CDSL's market cap stands at around Rs 32,000 crore, NSDL's upcoming IPO is expected to value it at roughly Rs 16,000 crore, a discount considering NSDL's larger scale across key metrics [1]. NSDL holds securities worth Rs 464 trillion, compared to CDSL's Rs 71 trillion, and has a dominant lead in non-retail investor accounts [1].

NSDL's IPO, which consists entirely of an Offer for Sale (OFS), has been oversubscribed nearly three times, with grey market activity indicating a premium of 16.88-17.12% over the upper end of the IPO price band [2]. The IPO is set to close for subscription on August 1, with shares slated to list on the BSE and NSE tentatively on August 6 [2].

For long-term investors seeking exposure to India's capital market backbone, NSDL's IPO may be worth a closer look, given its strong institutional depth and infrastructure. Meanwhile, CDSL may face short-term pressure as investors reassess valuation premiums in the evolving competitive landscape.

References:
[1] https://m.economictimes.com/markets/stocks/news/cdsl-shares-slide-13-in-one-week-as-nsdl-ipo-picks-pace/articleshow/123014040.cms
[2] https://www.business-standard.com/markets/news/nsdl-ipo-gmp-steady-at-17-despite-market-crash-on-trump-tariffs-125073100509_1.html