NSDL IPO Explained: Understanding the Business of Depositories

The stock market recently saw a big moment when NSDL, India’s oldest and largest depository, launched its Initial Public Offering (IPO). This means that for the first time, the general public could buy shares of NSDL and become part-owners of the company. The IPO opened on July 30, 2025, and closed on August 1. It was a big hit and got fully booked on the very first day. The price range was set between ₹760 and ₹800 per share.

When NSDL’s shares got listed on the stock exchange on August 6, they started trading at ₹880, which is about 10 per cent higher than the IPO price. By the end of the day, the stock had gone up even more and closed at around ₹936, giving early investors almost 17 per cent profit on day one.

This strong debut has made many people curious about what NSDL actually does. It may not be as well-known as companies like Zerodha or Groww, but NSDL plays a very important role in the stock market system. To understand why this IPO matters and why people are so interested in NSDL, let’s first understand what a depository is and how it works.

What is a depository?

A depository is an organization that holds securities, such as stocks, bonds, and mutual fund units, in electronic form on behalf of investors. In India, there are two depositories.

CDSL — Central Depository Services India Limited

NSDL — National Securities Depository Limited

Just like a bank is a financial institution in which money is deposited, depositories act as banks in which an investor can deposit his/her securities.

A bank has branches through which people are able to have an exchange of money with it. For a depository, this same feature is done by a depository participant or DP; it is an intermediary between investors and depositories.

As an investor, you interact with depositories through Depository Participants (DPs), such as broking firms, banks or financial institutions. These DPs are authorised by the depositories to offer depository services. You can open a Demat account with a DP only if it is registered with a depository. A Demat account enables you to hold your securities in electronic form, eliminating the need for physical share certificates.

A DP could be a financial institution, a broker, a custodian or a bank. You can open a demat account with any DP. For example, Zerodha and Groww are popular DPs which is used by most new investors.

Depositories also facilitate various corporate actions, such as dividends, bonus issues, rights offerings and mergers. They ensure seamless communication between issuers, investors and other market participants.

Difference between CDSL and NSDL

Although there are not numerous differences between the features of NSDL and CDSL, here is a table that highlights the primary distinctions between NSDL and CDSL:

NSDL and CDSL differences lie in the following points:-

CDSL works for BSE and NSDL works for NSE; however, the stock exchanges can use either of the two depositories for trading and settlement of securities.

Another difference between the two is their promoters. NSDL is promoted by IDBI Bank Ltd., Unit Trust of India, and NSE. CDSL is promoted only by BSE as of December 2019.

CDSL was established in 1999, and NSDL was established in 1996.

There is a difference between CDSL and NSDL demat account numbers. Demat accounts held with CDSL demat accounts have 16 numeric digits in them and NSDL demat accounts have two alphanumeric digits — ‘IN’ and 14 numeric digits.

CDSL has 599 DPs registered with itself and NSDL has 278 DPs registered on its system. This is according to the latest numbers.

If you see, the NSDL and CDSL difference lies only in their names, promoters and account number formats. The essence of both the depositories is the same. They offer similar services, they work the same way and their strategy is the same.

How Does a Depository Earn Money?

The depository earns money by charging fees for different services. These fees are usually collected from DPs, companies, or clearing houses. Sometimes, the cost is passed on to investors by DPs.

Here are the main ways they earn revenue:

1. Transaction Fees

Whenever you buy or sell shares, the depository processes the transaction. For every debit or credit entry in a demat account, the depository charges a small fee.

2. Annual Account Maintenance Charges (AMC)

Depositories charge a yearly fee for maintaining your demat account. These charges are collected from DPs, who may pass them to the investor.

3. Custody Fees

Depositories charge companies (whose shares are held in demat form) a fee for keeping their securities in electronic form. The fee is based on the number or value of securities held.

4. Corporate Action Charges

If a company announces a dividend, bonus shares, rights issue, or stock split, the depository processes these and charges the company for it.

5. Value-Added Services

Depositories offer extra services like:

e-voting for company meetings

e-KYC for opening accounts

consolidated account statements

pledge and unpledge of shares

alerts and mobile services

Companies or intermediaries pay for these services.

6. Interest on Float

Depositories hold cash balances (from fees and operations). This money is often kept in fixed deposits or short-term instruments and earns interest.

Characteristics of the Business Model

Capital expenditure: The services provided by depositories mainly requires only tech infrastructure, so the need for capital expenditure is very low. Once the system is set up, adding more users is low cost.

Stable income: Depositories have recurring income due to annual account maintenance charges from DPs and custody charges from issuers (companies whose securities are held in demat form).

Regulatory support: SEBI mandates demat for trading, so demand is steady.

High profit margin: After setup, running costs are low, so profits are high. If you take a look at the annual report of CDSL, you will see that its sales figure is around 1000 Cr and its operating margin is 60%.

The strong response to NSDL’s IPO shows how important depositories are in the stock market. They may not be as well-known as trading apps, but they play a key role in keeping your shares safe and making transactions smooth.

With more people investing in the stock market, companies like NSDL will only grow in importance. Understanding what depositories do helps us see the bigger picture of how the market works and why these silent players matter so much.