NSDL Q1 FY27: Market share gains, but margins soften as investments rise

National Securities Depository Limited (NSDL) entered Q1 FY27 with two contrasting themes running in parallel. The core depository franchise continued to scale with healthy account additions and stronger incremental market share. At the same time, standalone margins softened as the company stepped up spending on technology resilience, cybersecurity, customer experience and talent.

On a standalone basis for Q1 FY27, NSDL reported total income of INR219.7 crore, up 15.3% year on year. Revenue from operations rose 13.2% to INR182.2 crore. Profit after tax increased 7.9% to INR89.1 crore, with PAT margin at 40.6% versus 43.4% in Q1 FY26. Management emphasised that quarter on quarter comparisons can be less meaningful due to seasonality in businesses such as e voting and dividend income from subsidiaries.

Operating momentum: accounts, DPs and custody scale

NSDL positions itself as India’s first and largest depository, operational since 1996. The investor presentation highlights a custody value market share of 85.8% by total demat custody value, with custody value at INR535.0 lakh crore in Q1 FY27. This scale underpins the company’s revenue model, where recurring annual custody fees are the largest component.

During Q1 FY27, NSDL added 14.7 lakh gross demat accounts and 12.4 lakh net accounts. Net BO accounts rose to 456.3 lakh, implying 12.7% year on year growth. The quarter also saw an improvement in incremental market share in net demat additions to 17.6%, up from 14.0% in Q4 FY26 and 15.5% in Q1 FY26.

Management linked part of this gain to DP expansion. NSDL reached 317 depository participants as of Jun 2026, with 6 new DPs onboarded during the quarter. In the concall, management also highlighted a shift in the mix of onboarding. Fintech contribution to incremental account additions has increased to around 20% from about 2% a few quarters earlier. Management attributed this to sustained engagement with new age brokers, customisations, improved API capabilities, and endorsements from back office partners.

Standalone financials: strong revenue growth, costs rise faster

Standalone revenue growth remained healthy, but cost growth was higher in Q1 FY27. Total expenses rose to INR102.4 crore, up 26.5% year on year. Employee benefits expense increased to INR34.7 crore, up 37.8% year on year. Technology related expense increased to INR27.6 crore, up 53.8% year on year. Depreciation and amortisation rose to INR9.6 crore.

Operating profit was broadly flat at INR79.8 crore versus INR80.0 crore in Q1 FY26, and operating margin declined to 43.8% from 49.7% last year. Management described this as the result of front loaded investments aimed at strengthening the company’s operating foundation.

The company outlined four areas where technology investment is being directed.

First is technology resilience, which management described as both a regulatory expectation and a market expectation for a market infrastructure institution.

Second is customer experience, including faster resolution of customer complaints and escalations. Management noted overlap between market expectations and regulatory expectations in keeping grievances low.

Third is automation, an internal productivity lever where the company sees scope for AI and machine learning in areas such as processing and surveillance.

Fourth is infrastructure and hardware refresh driven by end of life or end of support cycles, which management described as a periodic compulsion.

Management indicated that as these investments mature over the medium term, operating leverage should support normalised margins.

Financial summary

Revenue drivers: custody fees and pledge activity

The operating revenue breakdown provides a clearer picture of what powered the quarter. Annual custody fee rose to INR101.1 crore in Q1 FY27, up 30.3% year on year. This is the most important line item and reflects the expansion of NSDL’s folio base and issuer ecosystem.

In the concall, management stated folio count is approximately 14 crore, up from about 11.9 crore in the prior year. Management also disclosed that 3,600 companies joined during the quarter and that NSDL typically charges INR15,000 per company as a processing charge at the time of joining. That implies joining fee income of roughly INR5 to INR6 crore embedded within other transaction charges.

Pledge fee grew to INR17.2 crore, up 28.5% year on year and 17.7% quarter on quarter. Management attributed pledge growth to market trends in pledge and unpledge activity, noting that counts have grown about 15% year on year. The company also indicated it benefits from its large custody presence.

E voting revenue increased to INR8.9 crore, up 31.3% year on year. Management clarified that e AGM activity is more seasonally concentrated in quarter 2, while e voting is more need based.

Other transaction charges declined year on year to INR21.3 crore, and settlement fee remained flat at INR14.8 crore.

Consolidated performance: income surge, margin dilution

On a consolidated basis, total income increased to INR560.5 crore in Q1 FY27 from INR346.8 crore in Q1 FY26, a 61.6% year on year rise. Revenue from operations grew 65.6% to INR516.6 crore. PAT rose 9.7% to INR98.3 crore.

However, consolidated operating profit margin fell to 16.4% in Q1 FY27 from 26.8% in Q1 FY26. Expenses rose sharply, and management indicated that the payments bank’s revenue expansion played a major role in consolidated topline growth.

Management stated that NSDL’s standalone profit contributes approximately 91% of consolidated profits. This matters because it suggests that despite the payments bank driving consolidated revenue growth, the core depository business remains the dominant profit engine.

Subsidiaries: payments bank scale up and NDML diversification

NSDL Payments Bank reported operational scale up in the presentation. As of Q1 FY27, it had 5.0 million customers and deposit balances of INR477 crore. The bank reported higher transaction volumes across AePS, UPI acquiring, prepaid cards and micro ATM network.

In the concall, management noted that the bank margins during the period were impacted by upfront onboarding revenue sharing associated with a specific partner project. The onboarding fee is shared significantly with the partner and was described as a pass through. Management expects that once these customers pivot to transaction led behaviour and associated banking services, profitability and margins should stabilise and improve.

For NDML, the presentation highlights a diversified portfolio that includes the national insurance repository, KRA business, SEZ Online, SurePay and other platforms. In the concall, management emphasised that NDML should not be judged only through the lens of KRA downloads because multiple businesses contribute, and strength in SEZ Online helped offset the impact of KRA pricing reduction. Management did not disclose revenue splits within NDML.

What to track from here

NSDL’s Q1 FY27 performance shows traction in the company’s market penetration agenda, supported by DP onboarding and rising fintech participation. The core depository economics remain attractive, with annual custody fee growth benefiting from a larger folio base and a large custody franchise.

The trade off in the quarter is margin moderation. Management has framed this as a deliberate front loading of technology and talent investments. Investors will likely track whether these investments translate into sustained account addition share gains and whether operating leverage restores margins over the medium term.

At the consolidated level, the payments bank adds scale but has introduced near term margin volatility due to partner revenue sharing on onboarding. The key monitorable will be whether transaction revenues and customer engagement improve profitability once onboarding is complete.

NSDL’s quarter can be summarised as steady operational momentum with a clear pivot toward building future readiness, even at the cost of near term margin dilution.