NSDL shares trade 61% higher than IPO price, but Motilal Oswal sees no room for further rally. Here's why

Domestic brokerage firm Motilal Oswal, in its latest report, has initiated coverage on NSDL, the country’s first depository, with a ‘Neutral’ rating and a target price of ₹1,200, signaling an 8% downside from its latest closing price.

While the brokerage remains optimistic about the company’s long-term growth prospects—highlighting its leadership in depository services, robust infrastructure, scale advantages, affluent client base, and strategic subsidiaries—it believes the stock is fairly valued and that all positives are already priced in at current levels.

“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,” said the brokerage.

The brokerage emphasized NSDL’s long-term potential, noting that demat penetration in India is still at just 15% compared with 60% in the US. Motilal Oswal believes NSDL is uniquely positioned to capture both the breadth of new retail investors entering the system and the depth of rising custody value from institutional and corporate issuers.

NSDL dominates institutional, custodian, and large corporate accounts, resulting in revenue per active account of ₹157 in FY25—nearly three times that of CDSL. This institutional skew, the brokerage observed, provides more stable revenue pools linked to custody value rather than purely transaction volumes, thereby underpinning resilience across market cycles.

The depository also services the widest base of issuers in India, including more than 70% of unlisted corporates mandated to dematerialize. This not only generates stable, recurring issuer charges but also creates a sticky moat, as issuers rarely migrate once demat systems are embedded. The growth potential here is significant, given the steady expansion of the unlisted market in India.

Beyond its core depository business, the brokerage said that NDSL has developed meaningful adjacencies through its subsidiaries—NSDL Database Management Ltd. (NDML) and NSDL Payments Bank Ltd. (NPBL). Together, these entities contributed 55% of consolidated revenues in FY25, underscoring their rising importance in NSDL’s overall business mix.

Motilal Oswal expects the company to deliver revenue, EBITDA, and PAT CAGR of 5%, 14%, and 15%, respectively, over FY25–28, reflecting its strong market position, diversified revenue streams, and growth potential in India’s expanding capital markets. Operational efficiencies and a tech-led scale-up are also expected to improve EBITDA margins over the same period.

NSDL share price up 61% from IPO price

The stock made its stock market debut in August 2025, listing at 880 apiece as against the issue price of ₹800 and it continue to maintain the same momentum in the following session to reach ₹1,425 apiece.

At current levels of ₹1290, the stock is trading 61.25% higher than the issue price but 9.5% below from its recent high.

Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.