NSDL Revenue Jumps 66%, But Is Profit Growth Strong Enough: What Investors Need to Know from Q1?

NSDL reported a sharp 65.6% year-on-year increase in consolidated revenue from operations to ₹516.6 crore in Q1 FY27.

However, the improvement in profitability was much smaller. EBITDA increased 12% and net profit increased 9.7%, while the operating profit margin fell from 26.8% to 16.4%.

This does not necessarily mean NSDL’s core depository business has weakened. The larger reason is the changing revenue mix. NSDL Payments Bank is growing rapidly and adding significant revenue, but the increase in consolidated expenses is limiting the conversion of that revenue into profit.

For investors, the quarter presents two different stories. The core depository franchise continues to gain scale and generate highly profitable recurring revenue. At the same time, the Payments Bank is making NSDL larger, but not yet proportionately more profitable.

NSDL Q1 FY27 Result Highlights

• Revenue from operations increased 65.6% year-on-year to ₹516.6 crore.
• Operating profit increased only 1.7% to ₹85 crore.
• Operating profit margin declined from 26.8% to 16.4%.
• EBITDA increased 12% to ₹145 crore.
• Net profit increased 9.7% to ₹98.3 crore.

On a sequential basis, revenue increased 12.7% and net profit increased 8.8%. However, operating profit declined 2.3% from the March quarter, while the operating margin fell from 19% to 16.4%.

The result was therefore much stronger at the revenue level than at the operating-profit level.

Why Did NSDL’s Profit Grow Much Slower Than Revenue?

The biggest reason was the sharp increase in consolidated expenses.

NSDL’s total expenses increased 89.4% year-on-year to ₹431.9 crore, much faster than the 65.6% growth in operating revenue.

Employee expenses increased 41.5% to ₹54.2 crore, while other expenses more than doubled to ₹357.5 crore. As a result, operating profit increased only 1.7% despite the large increase in revenue.

This is also why operating profit provides an important view of the quarter. NSDL’s EBITDA increased 12%, but EBITDA includes the benefit of other income. Consolidated other income increased 26.2% to ₹43.9 crore.

In comparison, operating profit measures the earnings generated more directly from business operations. Its limited growth shows that the large revenue increase did not produce similar operating leverage.

Operating leverage means profit growing faster than revenue because costs do not rise at the same rate. During this quarter, the opposite happened. Expenses grew faster than revenue, resulting in margin pressure.

NSDL Payments Bank Is Driving Consolidated Scale

A major part of the increase in NSDL’s consolidated scale came from NSDL Payments Bank.

The bank’s standalone total income increased 134% year-on-year to ₹314.1 crore. Its CASA customer base increased from 28.3 lakh to 49.5 lakh, while UPI acquiring volumes increased 2.9 times to ₹20,740 crore.

The Payments Bank added around 6 lakh new accounts during the quarter, taking its active customer base to 50 lakh. It also operates through services such as Aadhaar-enabled payments, micro-ATMs, prepaid cards, cash management and UPI acquiring.

These numbers explain why NSDL’s consolidated revenue grew much faster than its standalone depository revenue.

However, the Payments Bank’s standalone numbers cannot be directly added to NSDL’s consolidated numbers. Consolidated figures differ because of accounting adjustments and the elimination of transactions between group companies.

The broader point remains the same. Payments Bank is currently the main driver of NSDL’s consolidated revenue growth, while the core depository business remains the main source of operating profitability.

NSDL’s Core Depository Business Remains Profitable

NSDL’s standalone financial performance provides a clearer view of the core depository business.

Standalone revenue from operations increased 13.2% year-on-year to ₹182.2 crore. Standalone net profit increased 7.9% to ₹89.1 crore. This was close to the consolidated profit of ₹98.3 crore, showing that NSDL’s subsidiaries added substantial scale but only a limited amount of incremental consolidated profit during the quarter.

The core business remained highly profitable, with a standalone operating margin of 43.8% and a net profit margin of 40.6%.

However, there was some pressure even within the standalone business. Operating profit declined marginally from ₹80 crore to ₹79.8 crore, while the operating margin fell from 49.7% to 43.8%.

The reason was faster cost growth. Standalone expenses increased 26.5%, compared with 13.2% growth in operating revenue. Employee expenses increased 37.8%, while technology-related expenses increased 53.8%.

This suggests that NSDL is investing in people and technology, but investors will eventually expect these investments to produce stronger operating leverage.

Recurring Depository Revenue Is Growing

The quality of NSDL’s core revenue improved during the quarter.

Recurring fees accounted for 55.5% of standalone operating revenue, compared with 48.2% in Q1 FY26. The increase was led by annual custody fees, which grew 30.3% to ₹101.1 crore.

Annual custody fees are charged to listed and unlisted companies, mutual funds, depository participants and users of NSDL’s distributed ledger technology platform.

Other important revenue streams also reported healthy growth:

• Pledge fee increased 28.5% to ₹17.2 crore.
• e-Voting revenue increased 31.3% to ₹8.9 crore.
• Corporate action and IPO revenue increased 19.9% to ₹18.9 crore.
• Settlement fee remained almost flat at ₹14.8 crore.

Other transaction charges declined 34.9% to ₹21.3 crore, partly limiting overall standalone revenue growth.

The increasing contribution from custody fees is positive because recurring income is generally more stable than transaction-linked revenue. It makes NSDL less dependent on short-term movements in trading and capital-market activity.

NSDL Is Adding Demat Accounts Faster Than the Industry

NSDL’s operating performance remained healthy during Q1 FY27.

The company added 14.7 lakh gross demat accounts and 12.4 lakh net accounts during the quarter. Total beneficiary owner accounts increased 12.7% year-on-year to 4.56 crore.

NSDL’s indicative share of gross incremental accounts increased from around 17.5% in Q1 FY26 to 18.7% in Q1 FY27.

The wider industry’s incremental account additions increased 4.9% year-on-year, while NSDL’s additions increased 18.7%. This indicates that NSDL grew faster than the industry during the quarter.

The company also added six new depository participants, increasing its total DP network to 317.

This matters because NSDL has traditionally been stronger among institutions and investors with larger portfolios. Faster account additions show that the company is also improving its presence in the broader demat market.

NSDL Continues to Dominate by Custody Value

NSDL had ₹535 lakh crore of securities under custody at the end of Q1 FY27.

The company maintained an 85.8% share of total demat custody value. It also held a 66.8% share of the custody value belonging to individuals, non-resident Indians and HUFs.

NSDL’s market position is even stronger in institutional and debt securities. It services 99.9% of the value of foreign portfolio investor demat holdings and has a 97.6% market share by value in listed debt securities.

The company also had more than 1.15 lakh registered issuers and a 69.9% issuer market share.

This explains the strength of NSDL’s business model. CDSL may have more demat accounts, but NSDL holds a much larger share of the value stored within India’s demat system.

Other Income Supported Profit Growth

NSDL’s standalone income from investments increased 27.2% year-on-year and 51% sequentially to ₹37.5 crore.

At the consolidated level, other income increased to ₹43.9 crore from ₹34.8 crore in Q1 FY26 and ₹28.5 crore in Q4 FY26.

This income helped EBITDA and net profit grow faster than operating profit.

There is nothing unusual about a cash-rich financial-infrastructure company earning income on investments. However, investors should separate profit generated from business operations from income earned on cash and investments.

If operating profit remains weak while investment income continues to support net profit, the quality of profit growth will need closer attention.

What Should NSDL Investors Track?

The most important number to watch is not consolidated revenue alone. Payments Bank can continue driving rapid top-line growth, but investors need to see whether that growth begins contributing meaningfully to consolidated profit.

Within the depository business, investors should track annual custody fee growth, operating margins and NSDL’s share of incremental demat accounts.

Technology and employee costs also need monitoring. These investments can support future growth, but margins may remain under pressure if costs continue growing faster than core operating revenue.

Finally, other income should be separated from operating performance. Stronger net profit growth supported by investment income is not the same as stronger growth in the underlying business.

Author’s Take

NSDL’s Q1 FY27 result was strong in terms of business expansion, but the 66% revenue growth headline overstates the improvement in underlying profitability.

NSDL Payments Bank is scaling rapidly and expanding the company’s addressable market. However, consolidated expenses are also rising sharply, which has limited profit growth and compressed margins.

The core depository business remains the strongest part of NSDL. It continues to earn high margins, increase recurring custody revenue, gain incremental account share and dominate the market by custody value.

The long-term opportunity therefore remains intact. But for earnings growth to accelerate, NSDL must convert the scale created by its subsidiaries into stronger operating profit. Until that happens, investors should judge the company using profit growth and operating margins, not consolidated revenue growth alone.