Hi Yogeshji..a nice writeup..
Correct me if i am wrong, the FVTPL accounting should not have any impact on the EBITDA from operations..hence true cash flow from operations should remain unaffected by the FV of finanacial instruments..
Secondly you mentioned that CDSL's operating cashflow has consistently lagged net profits especially over last 3 years.. I think the Operating cash flows are also impacted by the huge amount of tax outflow paid by the company:
I feel the taxes here includes the profit on investments and other income so shouldn't this also be adjusted? (will result in about 12-15crs tax savings with the assumption of tax paid as % of PAT of 37-40%)
"CDSL also relies more on fees from IPO and corporate actions than transactions compared to NDSL. These sources of revenues are more volatile than transaction fees. In bear markets, these sources of revenues will not grow."
I have taken the segment wise data from CDSL AR for the past 9 years, except for the Transaction charges which has seen more volatility (though this is compensated by new revenue streams) majority of the high revenue streams have shown a steady revenue base (also considering a bear market phase).
Also on the IPO revenue stream (have to check why they have shown data from 2014 maybe they commenced operations from this phase) there has not been a year where a dip has been seen.
Lastly while I agree the valuations remains steep, we also need to consider the following factors while investing: Debt-free, cash generating co (Cash/Investments per share of ~Rs.25) with strong margins and no fixed capex requirements and likely sustainable business growth in forseeable future (they have been appointed custodians for Sovereign gold bonds and GST e-suvidha schemes).