hi
really liked your write up shared on CDSL earlier and also the risks enumerated in the above post. with respect to the risks though -
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e-kyc could be a terminal risk to the company’s kyc business if the government is serious on taking all KYC ops. in MD’s own words - “ I will not be able to comment on the prospects of the continuation of this business, but then I keep my fingers crossed and then under the fear only, we are doing well. That is the way it is.”
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A part company’s market share gain in demat accounts over NSDL is on account of growth in zerodha’s operations (currently the largest broker with 0.8 mn accounts), which has em-panelled CDSL as a sole depository for its investors, upsetting the incumbent status quo of almost all large brokerages tying up with both depositories. Consolidation among brokerages and working with only one depository could be a risk to the company’s growth going forward. It is important to note here that transaction revenues form an important revenue stream for brokers also since while CDSL and NSDL charge only 5-5.5 INR per debit transaction, the brokerages ramp this up all the way to 13.5 INR per transaction (Zerodha) and 30 INR (Kotak Securities) and pass it on to the final customers.
i think CDSL has a proverbial toll road moat - all the market participants and the listed companies have to pay an access charge to CDSL to transact on the bourses, for using a scalable platform that essentially operates on its own. Exchange patronage and strong linkages with the existing stock market intermediaries create a large entry barrier for new players to come in, already when there is one depository too many.
Im not sure of the network effects of the business though.
link to my entire thesis is below -
hope this helps.
disc: not invested.