Shares of Central Depository Services (India) Ltd (CDSL) fell nearly 3% in early trade on Monday after global brokerage UBS maintained its ‘Sell’ rating on the stock and cut its price target, citing further growth deceleration and earnings risks.
CDSL was trading around ₹1,248, down close to 2–3% in morning deals, even as broader market cues remained mixed.
UBS maintains ‘Sell’, cuts price target
In a fresh research note dated 2 March 2026, UBS maintained its ‘Sell’ rating on CDSL and reduced its 12-month price target to ₹1,250 from ₹1,400 earlier.
The brokerage highlighted three key concerns:
- Further deceleration in growth trajectory
- Impact from rationalisation of KRA (KYC Registration Agency) fee structure
- Elevated cost pressures
UBS expects CDSL’s revenue and profit growth to moderate sharply compared with the strong expansion seen in FY20–FY25.
The brokerage forecasts revenue and PAT to grow at a CAGR of 13% and 10% respectively over FY25–FY28, significantly lower than the 37–38% CAGR delivered in the previous five-year period.
KRA fee revision seen as negative
A major overhang comes from changes in the KRA traffic structure.
CDSL’s subsidiary, CDSL Ventures Ltd (CVL), is the largest KYC Registration Agency in India. SEBI recently revised KYC charges, reducing fees for fetching records and for new record creation effective April 1, 2026.
UBS estimates that the adjustment could reduce CDSL’s net income by approximately 5% annually starting FY27. KRA-related income accounted for around 17% of total revenues in FY25, making it a meaningful contributor.
The brokerage termed the development “unfavourable” for CDSL’s revenue stream.
IPO slowdown adds pressure
CDSL’s income mix includes:
- Annual issuer charges (around 27% of FY25 revenue)
- Transaction charges (around 22%)
- KYC income (around 17%)
- IPO and corporate action-linked revenues
UBS cautioned that lower IPO market activity in Q4FY26 could impact IPO-related income. A softer primary market environment typically weighs on depository revenues, particularly those linked to new account openings and corporate actions.
Costs to remain elevated
UBS also expects cost pressures to persist. Key expense heads include:
- Employee costs
- Technology investments
- Investor education and protection fund (IEPF) transfers
The brokerage projects total costs to grow at a 16% CAGR over FY25–FY28 and expects the cost-to-income ratio to remain elevated in the near term due to increased tech spending and higher employee costs.
Valuation concerns
While the stock has corrected from its 52-week high of ₹1,828, UBS believes valuations remain demanding relative to the revised growth outlook. The new price target of ₹1,250 implies limited upside from current levels.
The downgrade and earnings cuts appear to have triggered selling pressure in today’s session, leading to the nearly 3% decline.
What investors are watching
Going forward, investors will monitor:
- IPO activity trends
- KYC volume trajectory post fee revision
- Cost control measures
- Overall retail participation trends in capital markets
For now, concerns around growth deceleration and earnings impact from regulatory changes have weighed on sentiment, explaining the stock’s weakness in trade today.