CDSL shares fell 2.57% to Rs 1,239.30 on Monday, making it one of the top losers on the NSE in early trade, as investors reacted to a weak set of fourth-quarter results that showed profit declining sharply even as the company’s topline continued to grow.
Central Depository Services (India) Limited reported a 20% year-on-year decline in net profit to Rs 80.2 crore for Q4 FY26 from Rs 100 crore in the same quarter last year. Revenue grew 17.1% to Rs 263 crore from Rs 224 crore — a solid topline showing. EBITDA rose 6.7% to Rs 117 crore from Rs 109 crore. But EBITDA margin fell sharply to 44.4% from 48.7% a year ago — a 430 basis point contraction that explains the entire disconnect between revenue growth and profit decline.
Why profit fell despite rising revenue
The pattern here — revenue up 17%, EBITDA up only 6.7%, profit down 20% — points to costs growing significantly faster than revenue. For CDSL, a market infrastructure institution whose revenue is closely tied to capital market activity levels, the margin compression likely reflects a combination of higher employee and technology costs, investments in system upgrades and regulatory compliance, and potentially elevated other expenses as the company scales its operations. The 430 basis point margin contraction is significant for a business that has historically enjoyed structural margin advantages as a near-monopoly depository.
The sharper fall in net profit relative to EBITDA suggests additional pressure from depreciation, amortisation or tax charges below the operating line — widening the gap between operating performance and reported earnings.
The dividend cushion
The board declared a final dividend of Rs 12.75 per share for FY26 — providing some comfort to long-term shareholders even as the quarterly earnings disappointed. At the current share price of Rs 1,239, that translates to a dividend yield of approximately 1.01%.
CDSL trades at a PE of 54.07 and a market cap of approximately Rs 25,870 crore — a premium valuation that bakes in expectations of sustained earnings growth. A 20% profit decline in a quarter, combined with margin contraction, puts that growth narrative under pressure and explains why the shares are seeing selling pressure despite the broader market holding up on Monday.
The stock remains within its 52-week range of Rs 1,116.30 to Rs 1,828.90 — and is currently trading closer to its lows than its highs, reflecting the re-rating that has been underway as market activity and depository revenue growth have moderated from the peak levels of FY24 and early FY25.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Please consult a qualified financial advisor before making investment decisions.