What's Wrong with CDSL Share Price? | Reason Behind CDSL Price Stuck.
TLDRCDSL, a company that has seen a 517% return in 5 years, experienced a recent slowdown. The video explores whether its potential remains, comparing it with NSDL. It delves into CDSL's business model, revenue sources, and market share in the depository sector. Despite a temporary growth spike due to Covid, CDSL's sustainable growth rate is estimated at 15-17%. The company's revenue is diversifying, with growth in transition charges, online data services, and KYC agency business. However, CDSL's management lacks transparency, unlike NSDL, which could affect investor analysis and trust.
Takeaways
- 📈 CDSL has provided a significant return of 517% over the last 5 years but experienced a recent slowdown.
- 💡 The perception that opening more accounts leads to higher profits is central to CDSL's business model.
- 🔄 CDSL and NSDL are major players in the depository industry, with CDSL being the market leader since 2019.
- 🌐 The digitization of share certificates in 1996 led to the establishment of NSDL, with CDSL following in 1999.
- 🔄 CDSL's main revenue source is from Annual Issuer Charges for companies that dematerialize their shares online.
- 💼 NSDL and CDSL both charge fixed fees set by Sebi, but NSDL has a larger share of the custody value despite charging the same rates.
- 📈 CDSL's growth rate was temporarily increased to 25%-27% due to the Covid-19 surge in stock trading, but it has returned to a steady 15%-17%.
- 🔄 CDSL's revenue is derived from multiple sources including Transition Charges, online data charges, and KYC services.
- 📊 CDSL dominates the market with approximately 65% share in the KYC agency business and 55% in transition values.
- 🚀 The company's future growth is expected to be gradual, with a focus on maintaining and increasing its market share across all sectors.
- 🛠️ CDSL's management is criticized for not revealing enough data, unlike NSDL, which makes analysis more challenging for investors.
Q & A
What was the return given by CDSL in the last 5 years?
-CDSL has given a return of 517 percent in the last 5 years.
What is the primary business model of CDSL?
-CDSL's primary business model involves dematerialization of shares and providing demat accounts, charging Depository Participant Charge and Annual Issuer Charges to companies for making their shares available online.
How does CDSL generate revenue from discount brokers?
-CDSL generates revenue from discount brokers by charging them for the Depository Participant Charge, which is then passed on to the customers.
What is the significance of the transition to a digital system for share certificates in 1996?
-The transition to a digital system in 1996 was significant because it addressed the issues of physical share certificates getting lost or stolen, and it led to the creation of NSDL to securely hold these digital shares.
How does CDSL's revenue growth compare to NSDL's?
-CDSL's revenue growth is at a compound rate of 25%, while NSDL's is at 15%, although CDSL's growth was temporarily increased due to the Covid surge in share trading.
What is the role of CDSL in the growth of online data and KYC services?
-CDSL plays a significant role in the growth of online data and KYC services by charging for these services and dominating around 65% of the market.
Why has CDSL's share price been stuck despite the company's overall good performance?
-CDSL's share price has been stuck because the extraordinary growth experienced during 2020-2021 due to Covid was temporary, and the company has returned to its previous continuous growth rate of 15% to 17%.
What are the two main types of businesses CDSL operates in?
-CDSL operates in two main types of businesses: Recurring Business, which includes issuing charges and is a steady income stream, and Non-Recurring Business, which is inconsistent and depends on special events or market conditions.
How does CDSL's management approach transparency and data sharing?
-CDSL's management is not very transparent and does not share a lot of data, often citing confidentiality as the reason, which contrasts with NSDL's more open approach.
What is the potential future growth rate for CDSL based on the current trends?
-Based on current trends, CDSL is expected to have a gradual growth rate of 15% to 17%, without sudden increases as experienced during the Covid period.
Outlines
📈 CDSL's Business Model and Comparison with NSDL
This paragraph introduces the video's focus on CDSL, a company that has seen a significant return of 517 percent over the last five years but experienced a recent slowdown. The discussion will explore whether the company's potential remains. CDSL's business is primarily based on the belief that opening more accounts leads to higher profits. The company has a side business, but its main revenue comes from elsewhere. A comparison is made with NSDL, another major player in the industry. The video is divided into two parts: the first part examines CDSL's business model, and the second part discusses the company's remaining potential and significant negative factors that could hinder its progress. The speaker, Prasad, welcomes viewers and sets the stage for understanding the factors behind CDSL's past success. The history of physical share certificates and their digitization in 1996 is explained, leading to the establishment of NSDL, promoted by NSE, to securely hold these digital shares. CDSL, promoted by BSE, was introduced later and took time to catch up, eventually overtaking NSDL as the market leader in 2019. The demand for online share trading and the rise of discount brokers like Zerodha, Groww, Upstox, and Angle.br is also discussed, highlighting their reliance on CDSL for storing shares and the associated charges for these services.
💹 CDSL's Revenue Streams and Market Share
This paragraph delves into CDSL's revenue streams, emphasizing that despite having a smaller share of custodial value, NSDL generates nearly the same revenue as CDSL. It is revealed that NSDL has attracted many large companies with substantial nominal values, while CDSL has a good mix of clients. The annual issuer charges, which are fixed by Sebi, are explained, along with the fact that these charges are the same for all companies regardless of the value of their shares. CDSL's income from annual fees is highlighted as a continuous and increasing revenue stream. The paragraph also discusses the company's transition charges, which contribute to a significant portion of its revenue. The growth of CDSL's market share in various areas, including demat accounts and KYC services, is noted. The speaker mentions a fundamental analysis course and its benefits, before concluding that CDSL's business model is strong and modern, with growth evident in every sector. However, the company's management is criticized for not revealing much data, unlike NSDL, which is more transparent.
🔄 CDSL's Business Cycles and Future Growth
The final paragraph discusses CDSL's business cycles, distinguishing between recurring and non-recurring business segments. The recurring business, which includes issuing charges, is described as a no-brainer business model that consistently generates income. The non-recurring business, on the other hand, is more dependent on special events or market conditions. The speaker emphasizes that while CDSL is a strong company with increasing market share, its management's lack of transparency poses a challenge for investors. The paragraph concludes by encouraging viewers to share their opinions on CDSL and to share the video with others for increased awareness. The speaker also invites viewers to look forward to the next video in the series.
Mindmap
Keywords
💡CDSL
💡Return on Investment (ROI)
💡Business Model
💡NSDL
💡Demat Accounts
💡Discount Brokers
💡KYC
💡IPO
💡Market Share
💡Transition Charges
💡Custody Value
Highlights
CDSL has provided a return of 517 percent in the last 5 years but experienced a slowdown in the past year.
The perception in CDSL's business is that opening more accounts leads to more profit.
CDSL's majority revenue comes from a source unknown to many.
CDSL and NSDL are the two major players in the depository industry.
CDSL overtook NSDL in 2019 to become the number one player.
Discount brokers like Zerodha, Groww, Upstox, and Angle.1 use CDSL for their demat accounts.
CDSL charges a Depository Participant Charge for storing shares, which is passed on to the customer via the broker.
NSDL and CDSL have fixed charges set by Sebi, and cannot determine their own rates.
NSDL has a larger share of the custodial value despite both depositories charging the same.
CDSL has a mix of large and small companies, whereas NSDL attracts more large companies with substantial nominal values.
CDSL's annual income from issuing charges has been increasing, with a 47% market share in revenue.
Transition Charges contribute to 22.9% of CDSL's revenue, with 55% of the transition values in India going to CDSL.
CDSL earns revenue from online data charges and KYC services, with a 65% market share in the KYC agency business.
CDSL's business is divided into recurring and non-recurring segments, with the latter being dependent on market conditions.
CDSL's growth rate returned to a steady 15-17% after the temporary surge due to Covid.
CDSL's management is not very open with data, unlike NSDL, which shares more information.
Investors should not expect the same growth seen in the past two years but should recognize CDSL's strong and modern business model.
CDSL's business is cyclical, with increased demat account openings during bull markets.
CDSL's recurring business model ensures steady income from issuing charges and KYC services.