Understanding the Risks of NSDL’s Upcoming IPO
As the much-anticipated Rs 4,011.6 crore initial public offering (IPO) of the National Securities Depository Limited (NSDL) opens for public subscription on Wednesday, July 30, investors are keenly evaluating the potential opportunities and risks associated with this significant market event. In its Red Herring Prospectus (RHP), NSDL has outlined several risks that could impact its business and, consequently, investor returns. Here, we delve into these risks to provide a comprehensive understanding for potential investors.
1) Business Risks
Founded in 1996 as India’s first securities depository, NSDL plays a crucial role in the country’s securities market. Beyond depository services, its subsidiaries—NSDL Database Management Limited (NDML) and NSDL Payments Bank Limited (NPBL)—offer a diverse range of services, including database management, insurance repository solutions, and payment bank operations. Any setbacks in these areas could significantly affect NSDL’s overall revenue.
2) Revenue Concentration from Depository Services
A substantial portion of NSDL’s revenue—over 50%—is derived from its depository services. This heavy reliance means that any decline in transaction volumes, growth in demat accounts, or pricing pressures could adversely impact the company’s financial health.
3) Competition from CDSL and Others
NSDL faces intense competition from Central Depository Services (India) Limited (CDSL), which reported a staggering 15.29 crore demat accounts in 2025, compared to NSDL’s 3.94 crore. This competitive landscape raises concerns about market share and profitability, making it essential for NSDL to innovate and enhance its service offerings.
4) Regulatory Risks
As a regulated entity, NSDL and its subsidiaries must comply with the provisions set forth by various regulatory bodies, including SEBI, RBI, IRDAI, and UIDAI. Any changes in regulations or failure to adhere to existing ones could have serious implications for NSDL’s operations and reputation.
5) Failure to Execute Growth Strategies
The company’s ability to implement its strategic plans effectively is crucial for its growth. Any failure in expanding service offerings or market reach could hinder revenue generation and overall business performance.
6) Cybersecurity and Data Breach Risks
Given its position as a critical market infrastructure institution, NSDL is a potential target for cyberattacks. A successful breach could lead to data loss, regulatory penalties, and a significant loss of investor trust, all of which could have long-lasting effects on the company’s reputation and operations.
7) Dependency on Technology Infrastructure
NSDL’s operations heavily rely on stable and secure technology systems. Any prolonged outages or technological failures could disrupt services, leading to market-wide issues and eroding investor confidence.
8) Conflict of Interest
NSDL has acknowledged potential conflicts of interest between its responsibilities as a securities depository and the interests of its shareholders, which include major banks and financial institutions. For instance, one of its directors, Sriram Krishnan, also serves on the board of a competing entity, India International Depository IFSC. Such conflicts could adversely affect NSDL’s business and financial outcomes.
9) Risks Involving Third-Party Vendors
NSDL utilizes various third-party vendors for its operations. Any deficiencies or interruptions in their services could negatively impact NSDL’s business and reputation. The reliance on complex IT networks and systems further complicates this risk.
10) Pending Legal Proceedings
NSDL is currently involved in several outstanding legal proceedings at various levels of adjudication. The outcomes of these proceedings could lead to further liabilities, impacting the company’s financial stability and investor confidence.
Investment Details
The price band for the NSDL IPO has been set at Rs 760–800 per share, with a minimum investment of Rs 14,400 for retail investors, based on a lot size of 18 shares. The IPO will be entirely an offer for sale (OFS) of up to 5.01 crore equity shares by existing shareholders, including IDBI Bank, NSE, Union Bank of India, SBI, and HDFC Bank. Notably, NSDL will not receive any proceeds from this offering.
Conclusion
Investing in NSDL’s IPO presents both opportunities and risks. While the company has established itself as a key player in the Indian securities market, potential investors must carefully consider the outlined risks before making investment decisions. As always, thorough research and due diligence are essential for navigating the complexities of the stock market.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own and do not represent the views of the Economic Times.)