The brokerage house Nuvama Institutional Equities raised the target price to Rs 1,400 from Rs 1,170 per equity share while maintaining a ‘Hold’ rating. The company’s margins contracted in Q4FY25 as CDSL incurred higher expenses due to expansion in technology. Its revenue also slipped as retail activities slowed down.
Nuvama on CDSL: Sluggish retail activity in primary and secondary market
The company’s revenue dropped almost 20% sequentially, while the brokerage pointed out that sluggish retail activity in the secondary market caused the pain. The revenue fell 7% year-on-year to Rs 224 crore. The equity markets globally, as well as domestically, saw a decline owing to a lot of internal and global uncertainties. s
In the primary markets, there were only ten mainboard IPOs during Q4FY25, raising Rs 16,000 crore. This caused IPO and corporate actions charges to decrease by 7.4% YoY and 56.9% quarter-on-quarter to Rs 25 crore.
“We believe a lacklustre secondary market resulted in slower primary issuances; this can continue to have a significant impact on corporate action/IPO revenues in FY26,” said Nuvama in a research note.
Nuvama on CDSL: Higher technology expenses hurt margins
The company’s EBIT margins were affected as there was a strong growth in expenses. The margins contracted 1,573 basis points YoY and 1,073 bps sequentially to 42.4%, resulting in an EBIT of Rs 95.1 crore. CDSL incurred a sharp uptick in technology expenses at 66.9% YoY as management continues to invest in capacity creation and streamlining of processes. Employee/other expenses rose 14.1%/10.7% YoY.
But, higher-than-expected other income of Rs 31.3 crore (up 17.8% YoY and 56.6% QoQ) and a lower tax rate (21.2%, -221 bps YoY and -179 bps QoQ) supported the net profit of Rs 100 crore (-22.4% YoY and -22.9% QoQ).
However, the brokerage house is expecting an uptick in cash market ADTV volumes, which were up 7.7% month-on-month in March 2025 and 1.7% MoM in April 2025.
CDSL stock performance
The stock price of CDSL has fallen 4.3 in the last five trading days. However, the share price has risen 15% in the past one month. It has erased almost 17% in the last six months. CDSL’s share price has given a return of 22% in the previous one year.