A brokerage has upgraded Central Depository Services to ‘Buy’ amid signs of a recovery in activity and valuation, despite a challenging FY26. The move follows recent quarterly improvements and a rebound in primary market activity, signalling a potential turnaround for the stock.
Central Depository Services is being upgraded by one brokerage to “Buy” after a weak FY26 and signs that growth is turning a corner. The call comes as the stock has lagged over the past year, with the target price set at ₹1,620 against a current market price of ₹1,311. According to the brokerage, the shares still trade below their long-term average valuation, leaving room for a recovery if activity continues to improve.
The downgrade in momentum last year was marked by slower revenue growth and pressure on margins, but recent results point to a steadier footing. In the quarter ended March 2026, CDSL reported revenue of ₹262.85 crore, up 17% year on year, though net profit fell 20% as other income weakened and margins narrowed. In the following quarter, revenue rose to ₹293 crore and net profit increased 14.8% to ₹117.5 crore, even as EBITDA margin slipped to 47.1% from 50.1% a year earlier.
The brokerage argues that the main drag from lower pricing on transaction charges and KYC-related services is now largely behind the company, while the heavier phase of technology and regulatory spending has also eased. It points to a sharp rebound in primary market activity, with 50 mainboard IPOs in the June quarter versus nine in the previous quarter, alongside a recovery in beneficial owner account additions to about 1 lakh a day from a March low of 70,000. That, it says, should support transaction fees, KYC income and IPO- and corporate action-related revenue.
Longer term, the case rests on CDSL’s ability to convert rising retail participation into sustained volumes. Industry commentary cited around the company’s recent earnings suggests demat account growth has expanded sharply over time, while Securities and Exchange Board of India survey data indicates there is still meaningful headroom for new investors. On that basis, the brokerage believes the current share price reflects the slowdown but not the recovery it expects to follow.
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