According to reports from CNBC TV18 and The Economic Times, Jefferies projects that Central Depository Services Ltd. (CDSL) may see a boost to its earnings profile as India's IPO market heats up again. The brokerage maintains its 'hold' rating on CDSL with a price target of ₹1,315, implying a 7% downside from the stock's previous close of ₹1,414.90. Jefferies notes that a pick-up in demat account openings, coupled with a strong IPO pipeline, has piqued investor interest in the depository services provider. However, the brokerage cautions that IPO tailwinds are already priced in, with the relationship between IPO activity and demat additions having weakened over the past 12 months.
As reported by CNBC TV18, India added nearly 33 lakh new demat accounts in August, taking the total figure to 23.77 crore led by an increase in retail investor interest and a strong IPO market. This represented the highest monthly addition since January this year and also the third straight month of growth. Historically, large IPOs have positively impacted 50% of CDSL's operating revenues, according to Jefferies, who estimates that large IPOs lined up this year could add another 3% to 4% to CDSL's earnings. The Economic Times reports that large IPOs in the pipeline could generate about 14.6 million new folios, assuming 35% retail participation, representing roughly 4% of CDSL's folios at the end of fiscal 2026.
According to CNBC TV18 and The Economic Times, CDSL is currently trading at 50 times its one-year forward estimated EPS, which is well below its historical peak multiples of 80 times. However, Jefferies finds a revision in CDSL's recommendation to be difficult as its scarcity premium has eroded and rising competition is also narrowing the margin gap. The brokerage cites three key factors limiting valuation expansion: the listing of NSDL has reduced CDSL's scarcity premium, the company has faced price deflation in transaction and KRA charges, and competition is narrowing the margin gap between the two depositories. The Economic Times notes that the stock's current multiple of 50 times is above the brokerage's target price multiple of 41 times estimated fiscal 2027 earnings.
As reported by The Economic Times, Jefferies estimates that CDSL's earnings per share will grow at a compound annual rate of 19% over the next two years, supported by new demat accounts, IPO-related income and improving margins. The brokerage expects operating revenue to rise from ₹11 billion in fiscal 2026 to ₹18 billion in fiscal 2029, while EBITDA is projected to increase from ₹5.9 billion to ₹9.5 billion over the same period. Earnings per share are expected to rise from ₹22 to ₹35 during this timeframe. The Economic Times estimates that upcoming IPOs could generate total revenue of about ₹190 million and net income of ₹143 million, equivalent to 3% of CDSL's estimated fiscal 2027 profit after tax. The IPOs could also generate at least ₹30 million in IPO charges and expand the margin trading facility, potentially adding pledge income equivalent to 2%-3% of standalone revenue.
As reported by CNBC TV18, 15 analysts have coverage on CDSL, of which six have a 'buy' rating, four say 'hold' and five have a 'sell' rating on the stock. The consensus estimates of price targets imply a downside potential of 4.2% from current levels. The Economic Times notes that the key risk to the cautious view is stronger-than-expected IPO activity, which could drive higher folio additions, issuer charges and IPO income. For now, Jefferies assessment is that CDSL's IPO jackpot comes with a valuation catch: the earnings opportunity is visible, but the stock's premium leaves limited room for further upside. The brokerage expects the pace of technology-cost growth to moderate over the next three years, combined with operating leverage, which could help CDSL expand its EBITDA margin by about 215 basis points by fiscal 2029.
