CDSL crosses 6 crore active demat accounts

The Central Depository Services Limited (CDSL) has just crossed 6 crore demat accounts. This was disclosed by CDSL in a press release. What is more interesting is that the last 1 crore accretion from 5 crore demat holders to 6 crore demat holders happened in a span of just about 3 months. This is the best representation of the growing equity cult in India. Most of the registration of new demat accounts is shifting from metros to Tier II and Tier III cities.

While CDSL has more than 6 crore accounts, NSDL currently has about 2.5 crore demat accounts. However, in terms of custody value, NSDL is much larger. With a total custody value of around $4.15 trillion, NSDL accounts for chunk of the overall investment custody value in India. However, it is CDSL that has been a lot more aggressive in going to the smaller towns and cities and spreading the equity cult across these places.

The opportunity is still fairly huge. While the total number of demat accounts at CDSL stand at 6 crore and for CDSL and NSDL jointly it stands at 8.5 crore demat accounts, it is just about 6% of India’s population. That shows that the equity cult may have started spreading but a lot way from taking firm roots and ensuring greater participation of retail investors in the equity wealth creation. But this shows that India is on the right track. 

Ironically, the pandemic had been one of the major reasons for the surge in demat accounts. Since the start of the pandemic, crores of retail investors flocked to the Indian stock market. In addition, other asset classes like debt were giving returns less than inflation so the investors started naturally gravitating towards equities.

In a way the fear of missing out or FOMO effect has also been a reason for the surge in demat accounts. Another key reason was the surge in the IPO cult in the last one year. In the calendar year 2021, Indian companies raised close to Rs.1.33 trillion through IPO.

The number is expected to get closer to Rs.2 trillion in 2022. The LIC IPO alone was expected to add about 1 crore demat accounts, most of them going into the kitty of CDSL. Clearly, it is a combination of the FOMO effect and the slew of IPOs that have resulted in this demat surge.

This has also reflected in the quarterly numbers. For the Dec-21 quarter, CDSL reported a 55% surge in net profit at Rs.83.63 crore. During the previous year quarter, CDSL had posted a net profit of Rs.54.03 crore. The signal of extremely healthy net margins in the business comes from total income growing 58% to Rs.162.93%giving a net margin of more than 50%. That is something unheard of in any of the services business.

The impact of these numbers and the phenomenal growth is seen in the price performance. The stock has been a multi-bagger in the last one year and is currently quoting at around Rs.1,400 per share. It has added nearly 2 crore demat accounts in the last 6 months. Nehal Vora, Managing Director of CDSL, calls it the dividends of digitization. Incidentally, CDSL is the only listed depository in India, apart from being the largest by demat accounts.