C D S L (CDSL)

FairStock Score: 41/100 — MIXED

Score breakdown: P/E: 0/3 · ROCE: 2/2 · Growth: 1/2 · Dividend: 0/1

Key Financials

Strengths

• Zero debt, with ROE of 27.05% and ROCE of 41.96%, indicating a highly profitable and well-capitalized business.
• Strong cash generation with free cash flow of ₹245 crore, supported by Piotroski F-Score of 8/9 and Altman Z-Score of 9.57.
• Long-term growth record: 5-year revenue CAGR of 25.76%, and latest quarter net margin of approximately 44%.
• Critical depository/clearing infrastructure creates a franchise-like business with high entry barriers and customer stickiness.

Concerns

• Valuation is far above conservative measures: Graham Number is ₹207.82 and DCF intrinsic value is ₹129.12 versus price of ₹1,323.60, implying a margin of safety of -512%.
• Recent growth has stalled: sales growth is only 0.72% and profit growth is -14.28%, exposing earnings to capital-market cycles.
• Promoter holding is only 15%, raising questions about governance and alignment with minority shareholders.
• Dividend yield of 0.98% is low, offering little income support at an expensive price.

AI Analysis

Let me evaluate CDSL the way I would any business. First, is it a business I understand and does it have a durable moat? CDSL operates critical depository and clearing infrastructure in India. That is a capital-light, regulated franchise with high barriers to entry and strong network effects. The financial health confirms the quality: no debt, ROE of 27.05%, ROCE of 41.96%, Piotroski score of 8/9 and Altman Z of 9.57. It generated free cash flow of ₹245 crore. Over five years, revenue compounded at 25.76%. The latest quarter shows ₹304 crore revenue with ₹133 crore net profit, a net margin near 44%. That is a wonderful business. But a wonderful business is not a wonderful investment at any price. At ₹1,323.60, the market cap is ₹26,589 crore, the P/E is 55.83 and the P/B is 15.71. Graham's conservative number is only ₹207.82, and the DCF value is ₹129.12. That is a massive negative margin of safety, around -512%. The market is paying top rupee for perfection at a moment when growth has stalled: sales rose only 0.72% and profit fell 14.28%. This tells me the business is tied to the capital-market cycle, and activity has slowed. The dividend yield of 0.98% gives little income while you wait. With promoter holding at only 15%, I also want to know who is aligned with minority owners. A low stake does not destroy the franchise, but it demands closer scrutiny. I would wait for a lower price, a clear resumption of profit growth, or both. Patience is the investor's greatest ally.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer