Release Date: August 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Central Depository Services (India) Ltd (NSE:CDSL, Financial) reported a 65% increase in total income for Q1 FY25, reaching INR287 crore compared to INR174 crore in the same quarter last year.
- Net profit for the quarter surged by 82% to INR134 crore, showcasing strong financial performance.
- The number of demat accounts registered with CDSL increased by 42% year-on-year, reaching 12.55 crore as of June 30, 2024.
- CDSL's Board approved the issuance of bonus shares in a 1:1 ratio, marking the company's 25th anniversary.
- The company has made significant investments in technology to enhance its platform, ensuring it remains robust and resilient.
Negative Points
- Technology costs have nearly doubled year-on-year, raising concerns about the sustainability of such expenses.
- The company does not provide forward-looking guidance, leaving investors uncertain about future financial performance.
- There is uncertainty regarding the impact of compulsory dematerialization of private company shares, as it depends on market conditions.
- The reduction in transaction charges from June 1, 2024, may impact revenue, although the full effect will be seen in the next quarter.
- Employee costs showed a sequential dip, raising questions about the company's staffing and compensation strategies.
Q & A Highlights
Q: What is driving the steep growth in technology costs, and how is CDSL preparing for the compulsory dematerialization of private company shares?
A: Nehal Vora, CEO, explained that as an infrastructure company, CDSL invests proactively in technology and human resources to maintain best-in-class platforms. For the dematerialization of private company shares, CDSL is prepared with the necessary technology and human resources to handle the expected load, although it will only apply to companies meeting certain conditions.
Q: Can you provide insights into the split of business from brokers versus mutual funds within the KRA segment?
A: Sunil Alvares, CEO of CDSL Ventures Limited, stated that most transactions occur on the exchange platform, making it difficult to distinguish the split between mutual funds and brokers.
Q: How has the reduction in transaction charges affected CDSL's financials, and what is the outlook for insurance revenue?
A: Nehal Vora, CEO, mentioned that the transaction charge reduction, effective June 1, has not yet shown a full quarter impact. Latesh Shetty, CEO of CDSL Insurance Repository, noted that they are signed with 44 insurance companies and have completed 1.4 million policies, with total income for the quarter at INR99 lakh.
Q: What is the rationale behind cutting transaction charges, and how does it relate to the True to Label charges?
A: Nehal Vora, CEO, explained that the transaction charge cut was due to economies of scale, aiming to encourage more market participation. The True to Label charges are still under consideration and will be finalized after board and SEBI approvals.
Q: How does CDSL plan to handle the potential impact of real-time settlement on transaction charges?
A: Nehal Vora, CEO, stated that real-time settlement is optional and currently does not affect transaction charges, which are based on debits regardless of settlement frequency.
Q: What are the growth prospects for the insurance repository industry, and how might IRDA's decisions impact CDSL?
A: Latesh Shetty, CEO of CDSL Insurance Repository, indicated that the industry size is currently under 10% of annual policies, and growth prospects depend on IRDA making repository services mandatory.
Q: How does CDSL approach technology investments, and are these costs capitalized?
A: Nehal Vora, CEO, emphasized the importance of maintaining world-class technology platforms, with costs capitalized according to Indian accounting standards where applicable.
Q: What factors contributed to the significant growth in IPO and corporate action charges?
A: Girish Amesara, CFO, attributed the growth to a higher number of IPOs and corporate actions, driven by market dynamics.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
