Central Depository Services (India) Ltd
Investment Thesis
Over a 3-5 year horizon, Central Depository Services (India) Ltd (CDSL) will maintain its market leadership and achieve robust profit growth because of India's secular capital market expansion and CDSL's established network effects and operational efficiency.
Conviction History
Assumptions
CDSL will add over 15 million new demat accounts annually over the next 3-5 years, driven by increasing financial literacy and digital India initiatives.
CDSL will maintain EBITDA margins above 55% over the next 3-5 years, despite moderate inflation in employee and IT costs, due to its fixed cost structure and operating leverage.
CDSL's capital expenditure will remain below 5% of revenue annually over the next 3-5 years, enabling continued strong free cash flow generation.
CDSL will maintain its debt-to-equity ratio below 0.5% over the next 3-5 years, utilizing strong free cash flow for dividends and reinvestment.
No significant regulatory changes or market-wide disruptions (e.g., major cybersecurity breach) will negatively impact CDSL's operations or require substantial unbudgeted capital/compliance expenditure.
Recent Developments
SEBI mandated dematerialization and NAV uploads for Alternative Investment Funds (AIFs), expanding the regulatory scope for depositories.
[NSE] - Pendency of Litigation(s)/dispute(s) or the outcome impacting the Company
CDSL filed an appeal after the Bombay High Court set aside a favorable arbitral award, marking a material escalation in ongoing litigation.