Why CDSL share is falling? | CDSL share analysis 2023 (with ENG subtitles)
TLDRThe video from Yadnya Investment Academy discusses the 40% drop in CDSL stock value, attributing it to three main factors. Firstly, the company's business model as a toll operator in the stock market, earning from transaction fees, has been impacted by a decrease in new Demat accounts and trading activity. Secondly, the market share of CDSL, which had significantly increased, may have reached its peak, limiting further growth potential. Lastly, the sale of BSE's stake in CDSL, leading to an increase in free float, has affected investor sentiment. The video suggests that while the company's long-term prospects remain positive, the rapid growth experienced in the past two years may not be sustainable, leading to a market correction.
Takeaways
- 📉 CDSL's stock price has fallen by almost 40% in the last year, moving from around Rs.1500 to Rs.900.
- 🤔 The main reasons for the stock price fall are threefold and will be discussed in detail in the analysis.
- 📈 CDSL's initial stock performance was lackluster until COVID-19, after which it experienced a rise and stability.
- 💡 Understanding CDSL's business model is crucial to grasp the reasons behind the stock's performance.
- 🛣️ CDSL operates as a toll company for the stock market, earning from transaction fees, account maintenance, and settlement charges.
- 🏢 As a registrar, CDSL is involved in managing the registration of DMAT accounts and company listings, holding a duopoly with NSDL.
- 🔄 CDSL's major clients include prominent brokers like Zerodha, Groww, Upstox, and Angel One.
- 📊 The revenue breakdown for FY22 showed that transaction charges were the highest earner at 36%, followed by annual issuer charges at 21%, and online data charges at 21%.
- 🚀 Post-COVID, retail participation in the capital market increased significantly, leading to a surge in Demat accounts and a rise in CDSL's transaction fees.
- 📈 CDSL's market share increased from 45-46% in FY17-18 to 70% in FY22, largely due to partnerships with major brokers.
- 📉 The stock price fall can be attributed to a slowdown in the market and a decrease in new account openings, affecting revenue from transaction and KYC charges.
Q & A
What is the primary reason for the decline in CDSL's stock price?
-The primary reason for the decline in CDSL's stock price is the decrease in the number of new Demat accounts being opened and a slowdown in trading activity, which has led to reduced revenue from transaction charges and KYC charges.
How has the COVID-19 pandemic affected CDSL's business model?
-After the COVID-19 pandemic, there was a significant increase in retail participation in the capital market, leading to a surge in the opening of Demat accounts and an increase in trading activities. This resulted in higher transaction charges and KYC services revenue for CDSL.
What is CDSL's role in the stock market?
-CDSL acts as a toll company of the stock market, earning money by charging transaction fees, account maintenance charges, and settlement charges from brokers, listed companies, and other intermediaries of the capital market.
What is the significance of the duopoly between CDSL and NSDL in the Indian stock market?
-The duopoly between CDSL and NSDL is significant as they are the only two companies approved by SEBI to manage the registration of Demat accounts in the stock market. This gives them a unique position and significant influence over the market structure.
How did CDSL's market share evolve over the years?
-CDSL's market share increased from 45-46% in FY17-18 to 70% in FY22. This increase was due to their attractive fee structure and partnerships with major brokers like Zerodha and Upstox.
What are the main revenue streams for CDSL?
-CDSL's main revenue streams include transaction charges, annual issuer charges, online data charges (from KYCs), IPO and corporate action charges, and other charges from insurance companies and warehousing services.
How has the growth in the number of Demat accounts impacted CDSL's revenue?
-The growth in the number of Demat accounts has directly impacted CDSL's revenue positively. As more accounts are opened and trading activities increase, the revenue from transaction charges and KYC services also rises.
What is the future outlook for CDSL's business?
-The future outlook for CDSL's business is tied to the overall growth of the Indian capital market. While there is potential for continued growth, the rapid increase in revenue and market share seen in the past may not be sustainable in the future.
What is the role of BSE in CDSL's operations?
-BSE, as the parent organization of CDSL, has played a significant role in its operations. However, due to regulatory requirements, BSE has reduced its stake in CDSL to avoid conflict of interest, and there are plans to sell more shares, which could impact CDSL's market dynamics.
How has the market's perception of CDSL's valuation changed?
-The market's perception of CDSL's valuation has changed due to the slowdown in new account openings and trading activities. Investors now believe that the rapid growth experienced in the past two years is not sustainable, leading to a correction in the stock's valuation.
What steps can CDSL take to maintain its growth trajectory?
-To maintain its growth trajectory, CDSL could explore new revenue streams, expand its market share, enhance its technological offerings to cater to changing market needs, and form strategic partnerships with more brokers and financial institutions.
Outlines
📉 Introduction to CDSL Stock and Business Model
This paragraph introduces the topic of discussion, which is the CDSL stock and its significant 40% drop in value. The speaker invites viewers to explore Investyadnya.in for more information on financial planning products and portfolio reviews. The core business model of CDSL is explained as a toll company for the stock market, earning revenue through transaction fees from brokers, listed companies, and other intermediaries. CDSL operates in a duopoly with NSDL, managing the registration of Demat accounts and various financial services. The speaker emphasizes the importance of understanding CDSL's business model to grasp the reasons behind the stock's performance.
💹 Revenue Breakdown and Growth Factors
The speaker delves into the revenue streams of CDSL, highlighting that the majority comes from transaction charges related to Demat accounts and trading activities. The paragraph discusses the increase in retail participation and Demat accounts opening after COVID-19, which significantly boosted CDSL's revenue. The growth in transaction charges and KYC services is noted, with the speaker providing specific percentages from FY21 and FY22 to illustrate the point. The paragraph also touches on the increase in CDSL's market share, attributed to strategic partnerships with major brokers like Zerodha and Upstox.
📉 Decline in Market Conditions and Impact on CDSL
This paragraph addresses the reasons behind the decline in CDSL's stock value. The speaker explains that the rapid growth in Demat accounts and trading activity, which occurred during the COVID-19 pandemic, has slowed down, leading to a decrease in transaction charges and KYC fees. The speaker also mentions that CDSL's market share has reached a high point, making it challenging to achieve the same level of growth as before. The paragraph suggests that the market's expectations for CDSL's growth have not been met, resulting in a correction in the stock's valuation.
🔄 Market Share and Ownership Changes
The final paragraph discusses the challenges CDSL faces in increasing its market share, given that it has already reached a significant level. The speaker notes the listing of NSDL and the competitive landscape between the two entities. The paragraph also touches on the recent divestment by BSE, CDSL's parent company, due to regulatory restrictions. The speaker concludes by offering to conduct a detailed analysis of CDSL if there is enough interest from the audience, inviting viewers to comment on the video.
Mindmap
Keywords
💡CDSL
💡stock fall
💡COVID-19
💡Demat accounts
💡transaction charges
💡KYC services
💡market share
💡BSE
💡valuations
💡revenue growth
💡sustainability
Highlights
CDSL stock fell by almost 40% and the video aims to explain the reasons behind this fall.
There are three major reasons for the fall in CDSL's stock value.
CDSL is a toll company of the stock market, earning money from various intermediaries including brokers and listed companies.
CDSL's business model is based on transaction-based fees, account maintenance charges, and settlement charges.
CDSL and NSDL form a duopoly managing the registration of DMAT shares in the stock market.
CDSL's major clients include significant market players like Zerodha, Groww, Upstox, and Angel One.
The company's revenue was significantly boosted by the increase in retail participation and Demat accounts post-COVID.
CDSL's transaction charges revenue increased from 20-25% to 35% due to increased trading activity.
CDSL's market share increased from 45-46% in FY17-18 to 70% in FY22.
The decrease in new Demat account openings has led to a decline in transaction charges revenue from 36% to 29% in 9 months of FY23.
KYC charges revenue also saw a decrease from 21% to 15% in the same period.
The market growth that occurred in the last two years is not considered sustainable by the market.
CDSL's parent, BSE, is planning to sell more stake in the company, increasing the free float in the market.
The company's sales growth and profit growth have significantly decreased in the last year.
The market is adjusting to CDSL's valuations, considering the recent growth as not sustainable, leading to a stock correction.
The video offers to provide a detailed analysis of CDSL's full business model, valuation, and future prospects upon audience request.