NSDL Bags 'Neutral' Rating As Motilal Oswal Initiates Coverage With 8% Downside

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Motilal Oswal Report

With its leadership in depository services, robust infrastructure, scale advantages, affluent client base, and strategic subsidiaries, National Securities Depository Ltd. is well-positioned to capitalize on market growth.

We expect NSDL to deliver a revenue/Ebitda/PAT CAGR of 5%/14%/15% over FY25-28, reflecting the company’s strong market position, diversified revenue streams, and growth potential in India’s expanding capital markets. The company’s operational efficiencies and tech-led scale-up are expected to improve its Ebitda margin over the same period.

Given the duopoly nature of the industry and NSDL's superior pricing power, depositories deserve premium valuations.

However, we believe the stock is fairly valued, and all the positives are priced in at current levels. Hence, we initiate coverage on NSDL with a Neutral rating and a target price of Rs 1,200 (premised on ~45x FY28E P/E).

Prolonged weak market sentiment or tighter regulatory interventions on fee structures could weigh on transaction volumes and pressure monetization, leading to lower-than-expected earnings growth.

However, a sharper-than expected rise in retail participation, stronger IPO activity, or any favorable regulatory stance on pricing could accelerate revenue and drive faster earnings growth than our estimates.

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