CDSL bounces back after stake sale by BSE, rise in demat accounts

Shares of Central Depository Services Limited (CDSL) were trading 2 percent higher in the afternoon early trade on June 15, bouncing back from the previous session’s losses. A rise in demat accounts in May aided the sentiment for the depository.

The stock slumped 4 percent on June 14 after the Bombay Stock Exchange (BSE) sold 47.44 lakh equity shares, or a 4.5 percent stake, through open market transactions at Rs 985 a share.  At the end of FY23, BSE held a 20 percent stake in CDSL.

At 12.36 pm, CDSL was quoting at Rs 1,036, up 2.1 percent from the previous day’s close.

CSDL, which enables investors to invest in securities by opening an account in an electronic form known as a dematerialised (demat) account, generates revenue from account maintenance, transactions, and settlement charges paid by depository participants.

In May, 33 percent more demat accounts were opened from the previous month with 21 lakh additions, which was in line with the average for FY23, brokerage firm Motilal Oswal Financial Services Limited said in a report on June 14.

In April, 16 lakh demat accounts were created. “CDSL continued to gain market share,” the analysts at the broking firm said.

The securities market sentiment also remained positive in May, with the Nifty rising 2.1 percent month-on-month, the report said.

Typically, a rise in trading activity coupled with new account openings is beneficial for CSDL, as more shareholders and traders buy and sell securities on stock exchanges.

Initial public offerings, a pre-requisite to get listed on the stock exchanges, also significantly impact the financials of the depository company.

For the 2023 March quarter, CDSL recorded net sales of Rs 124 crore, a drop of about 8.7 percent from Rs 136.5 crore in the same quarter of the previous year. Net profit at Rs.63 crore was down 18 percent from the year-ago period.

The stock gained in 2020 and 2021 when there was an upsurge in demat account openings as retail investors, most of whom were confined to their homes due to COVID restrictions, rushed to the market. Turbulent market conditions in 2022, however, saw the stock fall over 40 percent, as the pace of account openings slowed.

Listed in 2017, BSE held 50.05 percent in CDSL but in keeping with the Securities and Exchange Board of India norms, the stock exchange sold 26.05 percent of its stake.

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