Tech spends of depositories spike: Costs run ahead of employee expenses

The keepers of India’s stock market assets have seen technology costs rise by more than a third in the recently-concluded financial year (FY26).

 

The National Securities Depository Limited (NSDL) has seen technology-related expenses rise 34 per cent year-on-year (Y-o-Y) in FY26. The Central Depository Services Limited (CDSL) spends are up 43 per cent in the same period. This outpaces the growth in total expenses as well as revenue and profit growth for both the depositories. 

A depository holds shares of companies in electronic form via dematerialised (or demat) accounts. 

The two registered depositories in India are CDSL and NSDL which control 100 per cent of the total market. Technology-related expenses rose from ₹68.1 crore in FY25 to ₹91.4 crore in FY26, shows data from NSDL disclosures. 

Spends for CDSL were up from ₹113.2 crore in FY25 to ₹162.2 crore in FY26. 

The details of technology spends are available as part of standalone financials for NSDL, and on a consolidated basis for CDSL. But management commentary suggests the trends can be considered broadly indicative. 

“Our intent is to ensure that the efficiency and the leverage effect of technology rollout will overtake the employee cost. So, it’s becoming a more tech-based company supported by able humans,” said CDSL managing director (MD) and chief executive officer (CEO) Nehal Vora, in a March quarter earnings’ call in response to a question from HDFC Securities analyst Amit Chandra. 

A combination of surging investor accounts, changing product and ecosystems and the need to build scalable systems has played a role in increased spends, according to Vora. 

The employee cost for CDSL was ₹156.5 crore in FY26. This is the first time since listing in June 2017 that technology costs have risen higher than employee costs. Computer technology-related expenses came to ₹9.7 crore in FY18 and employee costs were three times as high (₹30.3 crore). The NSDL employee expenses of ₹116.7 crore remain larger than its technology costs though the gap may be closing. 

Technology costs grew faster than employee costs in FY26. 

“We believe this year is also going to see a very similar number as far as tech capex (capital expenditure) and opex (operating expenditure) are concerned. Broadly similar, there could be some marginal increase in our tech opex, but capex is going to be very similar,” said NDSL MD and CEO Vijay Chandok in an earnings’ conference call in May. 

The spends include the cost of creating technology infrastructure, spending on licences and software and also on cybersecurity, according to details shared with analysts in the NSDL call. 

The total number of demat accounts across depositories is up 6x from 36 million in FY19 to 225 million in FY26, contributing to the need for upgraded technology to handle the load. 

Capital market entities in general have had to increase infrastructure spends for new systems and spending will likely remain high even after the initial system changes. This is on account of maintenance capex, said Satish Menon, executive director at Geojit Financial Services. 

Capabilities to make data available on demand will likely need constant spends. New system requirements will also likely happen more often, necessitating even more capex with every cycle, according to him. 

“Technology changes happen very fast these days and one needs to invest to provide better services to clients,” he said. 

Capital market infrastructure and intermediary companies now have an ongoing need to spend on technology for platform upgradation, and for regulatory and cybersecurity reasons, said independent market expert Deepak Jasani. 

Automation is helping bring down manpower costs creating a likely persistent gap over the technology expenditure, according to him. 

“They are using automation to reduce the number of employees they need...and technology costs will remain elevated,” he said. 

Emails sent to the depositories did not receive a reply.