ICICI Securities lowers CDSL target on higher costs, slower KYC arm growth

ICICI Securities has trimmed its target price on Central Depository Services (CDSL) to ₹1,180 from ₹1,500, while maintaining a ‘Hold’ rating. The target implies 2.4 per cent downside from the stock’s previous close.  

The brokerage cited margin pressure from rising costs and slower growth prospects for its know your client (KYC) subsidiary after rate cuts. 

ICICI Securities said that depositories remain a structural play on India’s capital markets—supported by rising retail participation and a mix of annuity-like and transaction-linked revenue. However, operating leverage has been limited as continuous investments and higher costs have led to a decline in margins, making earnings growth increasingly dependent on broader market momentum. 

 

The brokerage valued CDSL at 40x FY28E core earnings per share (EPS) of ₹26.6, with free cash investments of ₹111 per share added to arrive at the revised target. The brokerage built in 15–16 [per cent compound annual growth rate (CAGR) each for revenue, Earnings before interest, tax, depreciation and amortisation (Ebitda) and profit after tax (PAT) over FY25–FY28E, and estimates core EPS at ₹19.3/₹22.3/₹26.6 for FY26/FY27/FY28, respectively.  READ | Geojit does a U-turn on Muthoot Finance stock; what suddenly happened?

What supports CDSL?

The brokerage highlighted CDSL’s strengths in a duopoly market:

• Leadership in demat accounts, with an estimated 80 per cent share by number of demat accounts as of February 2026 (based on data on the company’s website, it said).
• Steady non-market-linked income from annuity issuer charges and corporate action-related revenues.
• Market-linked growth drivers such as cash delivery volumes, company listings, and KYC-related revenue.

Key concerns: Costs and KYC rate cuts

The brokerage flagged escalating costs as a key negative lever, noting that margins have historically been cyclical—rising above 60 per cent during strong market phases and slipping to sub-50 per cent in weaker periods. It also cautioned that rate cuts in KYC are likely to translate into lower earnings growth at CDSL Ventures Ltd. 

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