Before getting into Central Depository Services Limited (CDSL), let us understand the stock market is not gambling. It's a serious business. For those who still argue it is gambling, let us take it that way. Who makes money in gambling?. Casino Owner or the gambler?. It is very well known, it is Casino owner. If you believe stock market is gambling, then why not invest on casino owner for long term?.
We need to invest in companies which makes money irrespective of market moves to win this finance game. One such company is Central Depository Services Limited. No matter the stock market moves up or down, the investors and traders will participate. As long as they participate, Central Depository Services Limited will make money. The other side of the beauty is the companies and brokers who participate also pays money to Central Depository Services Limited.
Let us understand how does Central Depository Services Limited works. Central Depository Services Limited operates as a financial securities depository in India. It is responsible for holding securities such as shares, debentures and mutual funds in electronic form and facilitating securities transactions. However, CDSL does not interact directly with investors. It offers its services through Depository Participants (DP). DP is an agent of the depository who acts as an intermediate person / company between the investor and the depository. In most cases, it is stockbrokers.
Central Depository Services Limited (CDSL) and National Securities Depository Limited (NSDL) are both government authorized securities depositories in India. Both depositories hold shares in electronic form. CDSL works for the Bombay Stock Exchange (BSE) while NSDL works for National Stock Exchange (NSE).
- Total number of Demat accounts held by CDSL is 4.19 Crores as of 31st July 2021
- Number of authorised depository participants are 599 as of 31st July 2021
Central Depository Services Limited charges fees for transaction made by customers in their Demat accounts. These charges are collected by stockbrokers and passed on to CDSL. There are many forms of revenue for CDSL
- Annual Maintenance Charges:
Each listed securities is required to pay an annual maintenance fee to the depository. This is fixed by the regulator SEBI. Currently is it charged at the rate of Rs. 11 per folio (ISIN position) depending on the face value of the paid-up capital.
- Transaction Charges:
Investors and traders should pay a fixed amount to CDSL for every transactions they make. This is processed through the stock brokers during the transaction. Zerodha charges are as follows: DP charges are levied by the Depository (CDSL) and the Depository Participant (Zerodha Broking Limited) at Rs. 13.50 + 18% GST per day per scrip (stock) for the stock sold on investors holdings.
If an investor sell 50 shares of X in the morning and 50 shares of X in the afternoon, the total applicable DP charges will be Rs. 13.50 + 18% GST. If an investor sell 50 shares of X in the morning and 50 shares of Y in the afternoon, the total applicable DP charges for the day will be Rs. 13.50 + Rs. 13.50 = Rs. 27 + 18% GST.
- KYC Services:
CDSL offers KYC services through its subsidiary CDSL Ventures limited (CVL). CVL is the largest KYC registration agency in India. This contributes to the 60% of the market share. The main revenue in this segment includes the one time fees for KYC creation and additional fees for retrieval of data.
- IPO and Corporate Actions:
For corporate actions like stock splits, payment of dividends, bonus and so on, CDSL charges the issuing company a fixed amount based on the number of unique identities. CDSL also also facilitates the crediting of securities in IPO.
- Other Sources:
Apart from the above sources, CDSL also earns through Account maintenance fees, e-voting fees, ECAS fees and others.
The majority of income comes in the Annual maintenance charges from the listed entities. These days there are many investors and traders participate in Indian stock market. Hence there are more number of transactions every day. Infact it is increasing every day and it will lead to increase in revenue for CDSL and stock brokers. Whether the investor and trader making profit or not, they need to pay this fees for every transaction. Also the listed companies pay the fees for their processes. This way CDSL will continue to make profits irrespective of market moves.
52 week high of the company share is 1734.40. The current market price of the company is 1499.80. This means the company is trading at a discount of 13.53% from its all time high / 52 week high. Book value of CDSL is 88.04. Market capital is Rs.15,672 crores as of 01.01.2022.
Revenue, Net Profit, Earnings Per Share (EPS) and Book Value (BV) are consistently increasing inspite of corona pandemic or any other issues. Promotors (Government of India) is holding 20% of the share and FIIs are increasing their share holding percentage every year consistently and their holding now is 8.57%. General public is holding 41.92% of share in CDSL. It is every individuals decision to think over and invest appropriately in a company which behaves like casino owner.
I am not a SEBI registered advisor and this blog is not an investment / trading advice. This is only for informational / educational purpose. Please consider your financial advisor before investing.
Have a Great Day
B G Nareshkumar
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