CDSL Faces Investor Caution After Q2 Profit Decline Despite Revenue Growth

Central Depository Services (India) Ltd (CDSL) saw its stock fall nearly 3% after reporting a 13.6% YoY drop in Q2 net profit to ₹140.21 crore, despite healthy revenue growth driven by IPO, corporate actions, and data charges. Higher operating and technology costs weighed on margins. The results prompted cautious reactions from brokerages: Motilal Oswal maintained a ‘Neutral’ rating with a target of ₹1,520 (5% downside), citing strong core drivers—steady demat account additions, KYC activity, and unlisted company admissions—but flagged ongoing tech and manpower investments as a drag on profitability. JM Financial downgraded to ‘Reduce’ from ‘Hold’, keeping a ₹1,500 target (5.5% downside), citing risks from lower market turnover volumes impacting transaction revenues. Both firms acknowledged positive catalysts, including the upcoming LIC integration with CDSL’s insurance repository (by Nov 2025), which could boost policy and account growth. JM noted a 30% YoY rise in insurance policies issued. While long-term fundamentals remain intact, near-term concerns over cost pressures and muted trading volumes are tempering investor sentiment. The depository’s ability to leverage scale amid rising investments will be key to future performance.