Stock price of NSDL falls by almost 7% following latest earnings release - Is the post-listing luster of the IPO titan starting to fade?
In the world of Indian stock exchanges, NSDL (National Securities Depository Limited) recently released its first quarterly earnings report since going public. The report showed a profit rise of 15% Year-on-Year (YoY) to ₹89.63 crore, but a decline in revenue of 7.5% YoY to ₹312.03 crore.
Implications for Investors
- Profit Growth despite Revenue Drop: NSDL's improved cost management and operational efficiency are evident, as total expenses fell 14% YoY, helping to boost profitability despite weaker topline. This signifies strong internal controls and resilience.
- Revenue Decline and Sustainability: The main revenue decline, from banking services, raises concerns about the sustainability of growth and underlying business momentum. While the core depository segment remains strong, investors may question whether top-line pressures will persist and impact future profitability.
- Market Reaction: After an initial strong IPO debut and post-IPO gains, NSDL’s share price saw a brief decline (~3%) following this earnings report, reflecting investor uncertainty about the revenue drop even with profit growth.
- Sequential Improvement in Profitability: The sequential improvement in profitability (+8% Quarter-on-Quarter (QoQ) PAT increase) suggests that quarters ahead might stabilize as NSDL integrates its public company operations and adjusts to market conditions.
For long-term investors, the report signals a need to monitor future revenue trends and segment performance, particularly in banking services, while valuing NSDL’s capability to control costs and generate expanding profits despite top-line headwinds.
Other Notable Points
- NSDL's share price slipped over 6% intra-day on Wednesday, a week after its stock market debut.
- CDSL (Central Depository Services Limited), NSDL's main competitor, reported stronger revenue growth in Q1, with a 15.3% QoQ increase to Rs 2,590 crore.
- NSDL listed at Rs 880 on August 6, which was around 10% above its issue price.
- Operating revenue for Q1 FY26 fell 23% YoY to Rs 312 crore for NSDL.
- NSDL, India's oldest and largest depository, leads in assets under custody, number of companies serviced, and settlement volumes, but CDSL's revenue growth has been stronger.
- Operating expenses climbed 15% YoY for NSDL, but the company's EBITDA still rose 27% to Rs 115 crore.
- In the unlisted market, NSDL admitted 10,392 companies during the quarter.
In summary, NSDL's earnings suggest operational strength but potential challenges in growing revenue, prompting investors to balance optimism from profit growth against caution about declining sales in evaluating future stock performance.
- Exploring New Horizons: As the market evolves, investors might consider NSDL's potential expansion into burgeoning sectors such as DeFi and trading, potentially diversifying its revenue streams and enhancing long-term growth.
- Business Comparison: Comparatively, CDSL, NSDL's main competitor, reported stronger revenue growth in the same quarter, highlighting that investors may favor businesses capitalizing on growth opportunities most effectively.
- Investing Wisely: Given NSDL's robust profitability and resilience, savvy investors may see value in allocating their portfolio towards companies demonstrating such characteristics, signifying a potential foundation for future growth.
- Finance Landscape: Amidst a volatile global market, understanding the implications of NSDL's earnings and the underlying factors impacting revenue growth can serve as a valuable lesson in finance and investing, shedding light on the importance of evaluating the full picture before making investment decisions.
