Is the Street too bullish on NSDL Payments Bank?

National Securities Depository Ltd (NSDL), the rival of Central Depository Services (India) Ltd (CDSL), was listed in August. Investors in NSDL's public issue got shares at ₹1800 apiece and are now sitting on handsome gains of nearly 60%.

- Manish J

The main difference between the two depository companies is that, unlike CDSL, NSDL has a subsidiary NSDL Payments Bank (NPB).

What sets a payments bank apart is that it cannot give loans and must deploy deposits in government securities.

So, the earnings of fund-based banking business cannot be combined with NSDL’s non-fund business of a depository for valuation and assigned a price-to-earnings (P/E) multiple. NSDL’s FY25 standalone Ebitda margin was 53.4%, far above the consolidated 26.4%, weighed down by its banking arm.