CDSL Demat account Surge and the likely LIC IPO Boost

If there is one piece of statistic that tells the story of the growing equity cult in India, it is the number of demat accounts. As of the end of November 2021, there are a total of 7.70 demat accounts in India out of which there are 2.46 crore demat accounts with NSDL and 5.24 crore demat accounts with CDSL.

NSDL still corners the lion’s share of assets under custody at $3.92 trillion. However, it is CDSL that scores on the number of demat accounts.

The real growth in demat account numbers has been seen in the case of CDSL. On has to just look at the growth since 2017. The total number of demat accounts with CDSL stood at 1.23 crore in Mar-17 which grew to 2.12 crore in Mar-20. It is post the pandemic that the real growth in demat accounts at CDSL began.
 

Here is the journey of the number of demat accounts at CDSL.

Between Mar-20 and Mar-21, the number of demat accounts with CDSL grew to 3.34 crore. By Sep-21, the demat accounts had grown to 4.64 crore and by the end of November 2021, the number of demat accounts with CDSL had grown to a whopping 5.24 crore demat accounts.

The number of demat accounts with CDSL is not only more than twice that of NSDL, but also growing at a much faster rate.

The big story now is the LIC IPO. The government has already committed that the IPO would hit the market before the end of March 2022 so that the divestment receipts can be shown in this fiscal year.

The government has indicated that a total of 1 crore demat accounts would be opened during the LIC IPO. That is the icing on the cake for CDSL and here is why.

CDSL demat accounts have a lower relative cost structure compared to NSDL. Hence it is expected that out of the 1 crore fresh demat accounts that are likely to be opened in the LIC IPO, CDSL is likely to corner a chunk of these demat account openings.

The stock price of CDSL has already moved up in anticipation of this surge in demat account share in the LIC IPO.

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