National Securities Depository

• National Securities Depository is coming out with a 100% book building; initial public offering (IPO) of 5,01,45,001 shares of Rs 2 each in a price band Rs 760-800 per equity share.
• Not more than 50% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not less than 15% of the issue will be available for the non-institutional bidders and the remaining 35% for the retail investors.
• The issue will open for subscription on July 30, 2025 and will close on August 1, 2025.
• The shares will be listed on BSE as well as NSE.
• The face value of the share is Rs 2 and is priced 380 times of its face value on the lower side and 400 times on the higher side.
• Book running lead managers to the issue are ICICI Securities, Axis Capital, HSBC Securities and Capital Markets (India), IDBI Capital Markets & Securities, Motilal Oswal Investment Advisors and SBI Capital Markets.
• Compliance Officer for the issue is Alen Wilfred Ferns.

Profile of the company

National Securities Depository (NSDL) is a SEBI registered market infrastructure institution (MII) offering a wide range of products and services to the financial and securities markets in India. Following the introduction of the Depositories Act in 1996, through the company, it pioneered the dematerialization of securities in India in November 1996. As of March 31, 2025, it is the largest depository in India in terms of number of issuers, number of active instruments, market share in demat value of settlement volume and value of assets held under custody.

As a depository, it provides a robust depository framework that enables market participants to participate in the financial and securities markets in India. It also plays a central role in developing products and services that will continue to address the growing needs of the financial services industry in India. Using innovative and flexible technology systems, NSDL works to support investors, brokers, issuers and other market participants in the Indian capital markets and aims at ensuring the safety and soundness of Indian securities market by developing settlement solutions that increase efficiency, minimize risk and reduce costs. 

Its depository facilitates securities to be held in digital form by investors through accounts known as ‘Demat Accounts’ held with it through depository participants. This includes securities held in dematerialized form with various asset classes namely equities (listed equity and unlisted equity), preference shares, warrants, funds (mutual funds, REITs, InvITs and AIFs), debt instruments (corporate debt, commercial paper, certificate of deposit, pass through certificate, security receipts, government securities, sovereign gold bonds, municipal debt, treasury bill) and electronic gold receipts. 

As part of its depository business, it operates a centralized digital book-keeping system that facilitates the holders of securities to hold and transfer their securities in electronic form and enables settlement solutions in an efficient and cost-effective manner. It also facilitates and maintains complete records of the ownership of securities held in dematerialised form with the company on behalf of the issuer entity. It provides depository services to investors, issuers, depository participants, financial institutions, stockbrokers, custodians, clearing corporations and other market intermediaries and has established an ecosystem for these entities to integrate with its systems.

The objects of the offer are:

• To carry out the offer for sale of up to 50,145,001 equity shares of face value of Rs 2 each by the selling shareholders.
• Achieve the benefits of listing the Equity Shares on BSE. 

Industry Overview

The growth of depository market is linked to several factors such as rising participation from investors, rising digital services which are being provided by brokers and depositories, reducing cost of transactions, rising awareness about capital markets, etc. The depository market in India is a duopoly with high barriers to entry as each of the current depositories are promoted by large institutions. As the first and leading depository in the country, NSDL introduced the concept of dematerialization of securities, revolutionizing the securities landscape in India. NSDL is the largest depository in India in terms of number of issuers, number of active instruments, market share in demat value of settlement volume and value of assets held under custody as of March 31, 2025. CDSL is the largest depository in terms of the demat accounts as of March 31, 2025.

The depository market in India grew at rapid pace in past 3 years. Total client accounts grew at around 27.4% CAGR between Financial Year 2017 to Financial Year 2025 and is expected to grow at 11-12% CAGR between Financial Year 2025 to Financial Year 2027. Standalone income of depositories in India is around Rs 17.16 billion in Financial Year 2025 and grew at CAGR around 22.4% between Financial Year 2018 to Financial Year 2025 and is expected to grow at CAGR of 11% to 12% from Financial Year 2025 to Financial Year 2027 to reach Rs 21 billion to Rs 22 billion by Financial Year 2027 assuming there will not be any regulatory impact on pricing of products and services.

The financial services industry demands latest technology adoption to safeguard and protect data of customers. In line with the industry trend, the depositories in India are continuously not only trying to enrich existing services but also providing new services that can enhance customer convenience and their revenue earning potential. Since depository is a highly regulated industry, compliance and risk management sits at the core of their business, which is being addressed and made more efficient and secure by means of technology adoption.

Pros and strengths

India’s first and leading depository operating wide range of technology-driven businesses: The company is India’s first and leading depository and is the largest depository in India in terms of number of issuers, number of active instruments, market share in demat value of settlement volume and value of assets held under custody as of March 31, 2025. As the first and leading depository in the country, it introduced the concept of dematerialization of securities, revolutionizing the securities landscape in India. It was also one of the initial few depositories globally to directly implement dematerialization, bypassing the traditional two-step process of immobilization and subsequent dematerialization.

Strong focus on technology-led product innovation: Technology serves as the foundation of its ecosystem. It has consistently invested in technology, enabling the development of a state-of-the-art depository system catering to diverse user groups such as depository participants, issuers, registrars, transfer agents, and clearing corporations. In August 2007, it was the first depository to introduce instant messaging alerts (over SMS) to investors. Its comprehensive suite of value-added services includes Speed-e, which facilitates the electronic submission of depository transactions, Securities Trading-information Easy Access and Delivery, an internet-based facility (STeADY) for trade information exchange and institutional client contract notes, and Internet-based demat account statement (IDeAS), an online platform for convenient access to depository accounts. Its strong focus on technology-led product innovation has helped it expands its service capabilities, enhance user experience, and continue to remain relevant in the financial and securities market in India.

Stable revenue base with a significant proportion of recurring revenue: Revenue from annual fees and annual custody fees is considered as a more stable and recurring source of revenue due to its lesser dependence on market cycle compared to revenue from transaction charges. Its core depository services provide it with a steady source of recurring revenues and stability to its business model. In addition to its core depository services, it generates recurring revenue from certain other services.

Robust IT infrastructure, risk management frameworks and cyber-security: To meet the demands of a fast-growing market, it has endeavoured to actively introduce initiatives to augment its IT infrastructure. It has implemented a comprehensive risk management system that incorporates the principles prescribed by the Committee on Payments and Market Infrastructure and the Technical Committee of the International Organization of Securities Commissions (CPMI - IOSCO) and seek to develop appropriate risk management tools to address the material risks that it may faces. It has established a security operations center (SOC) with round-the-clock operations to monitor, detect, analyze, contain, eradicate and respond to any adverse cyber security events.

Risks and concerns

Rely on market activities to execute transactions and generate revenue: A significant portion of the company’s business is transaction-based and is dependent on external factors beyond its control, such as the level of trading activity in cash segment on major stock exchanges in India, and it relies on market activities to execute transactions and generate revenue. The volume and frequency of transactions are influenced by several factors, including investor sentiment, economic conditions, and regulatory changes. Moreover, the level of trading activity on stock exchanges is also influenced by the overall state of the Indian economy, global economic trends, and geo-political developments. Any unfavorable changes in these external factors could lead to a decrease in trading activity, which could have an adverse impact on its business, financial condition, and results of operations.

Rely on complex information technology networks and systems to operate business: It relies on the efficient and secure operation of complex information technology networks and systems to carry out its business. All information technology systems remain potentially vulnerable to damage or interruption from a variety of sources, including but not limited to software and hardware failure, cyberattacks, computer viruses and security breaches. While it has not experienced any cybersecurity incidents on its depository system during the last three Financial Years, its website had once been subjected to a cybersecurity attack in the past. There was no adverse impact on its operations on account of such incident. While risks of such cybersecurity attack have been mitigated, it may still be exposed to such risks in the future.

Closely competes with competitors across businesses in a highly regulated environment: The company is one of the two securities depositories in India and operates in a highly regulated business environment. It is exposed to competition to attract depository participants with attractive terms and increase its customer base. As part of its depository business, it competes with CDSL on parameters such as the number of demat accounts, the number of depository participants registered with the company, the number of active instruments, custody value and the suite of innovative products introduced to the market. It cannot be certain that its competitor will not be able to implement more aggressive and attractive terms for acquisition of intermediaries, increase its technological efficiency, or improve its cost control and risk mitigation mechanisms. Increased competition in a highly regulated environment may adversely affect its business, financial condition and results of operations, as it could lose a substantial percentage of its market share if it is unable to effectively compete with its competitors.

Rely on third-party vendors for operations: It engages third party service providers for certain parts of its operations including for providing services relating to the development of applications and updates to its platform, and product distribution. While all business activities relating to its depository operations are carried out entirely by the company, due to its specialized technological needs as being a depository, it relies on a few third-party vendors to handle critical IT operations for it such as system maintenance, system development and testing, infrastructure management and information security. Due to its reliance on third-party service providers, any shortcomings in their products or services could result in deficiencies, delays, or failures in the services it delivers. Any disruption or inefficiency in the services provided by its third-party service providers could affect its business and reputation.

Outlook

National Securities Depository is a Depository registered with Securities Exchange Board of India under the provisions of Depositories Act, 1996, and Rules and Regulations framed thereunder. National Securities Depository and its wholly owned subsidiaries constitute the Group. The Group provides electronic infrastructure for dematerialisation of securities, facilitates electronic settlement of trades in Indian Securities Market, offers services as a managed service provider, sets-up system infrastructure, connectivity, software application, database management systems, and banking. On the concern side, it derives a majority of its revenue from the banking services of its Subsidiary, NPBL. Any failure to continue to grow its banking services or any impact on banking services regulations in India may hamper the growth of its business, many of these factors remain beyond its control.

The issue has been offering 5,01,45,001 shares in a price band of Rs 760-800 per equity share. The aggregate size of the offer is around Rs 3,811.02 crore to Rs 4,011.60 crore based on lower and upper price band respectively. On performance front, the company’s revenue from operations increased by 11.98% from Rs 12,682.44 million for the Financial Year 2024 to Rs 14,201.46 million for the Financial Year 2025. Moreover, profit after tax for the year increased by 24.57% from Rs 2,754.45 million for the Financial Year 2024 to Rs 3,431.24 million for the Financial Year 2025.

Going forward, as a securities depository, enhancement of its IT infrastructure is a critical aspect of its business as it serves as the foundation for future growth and expansion plans, while ensuring the safety and reliability of India's securities market ecosystem. It places a strong emphasis on operational resilience, strong information security systems and strengthening its IT infrastructure systems to withstand and promptly recover from unforeseen disruptions. Its primary objective is to mitigate the impact of any potential issues, ensuring uninterrupted operations and business continuity, even in the event of unforeseen circumstances.