In the mid-1990s, when the shares of listed companies first began to be held in electronic form, they accounted for less than 1 per cent of the stocks bought and sold on the stock exchanges. This climbed to 99.5 per cent by 2001.
A similar second wave of dematerialisation is now taking place, this time for unlisted companies. This has been the factor in the number of issuers of demat securities rising from around 40,000 companies in 2022-23 (FY23) to more than 100,000 as of November 2025, according to the National Securities Depository Ltd (NSDL) data. Central Depository Services (India) Ltd (CDSL) has seen a similar doubling of issuers from around 20,000 to over 40,000.
The analysis is based on the Securities and Exchange Board of India’s recently released “Handbook of Statistics” with additional updated numbers compiled from disclosures by NSDL and CDSL.
A look at the instrument-wise numbers showed that the number of demat issuers in the listed equity space was up less than 10 per cent between FY23 and FY25.The number of unlisted equity issuers rose over 110 per cent in the same period, suggesting much of the growth has come from that area.
In October 2023, the Ministry of Corporate Affairs had mandated private companies issue securities only in demat form and facilitate the conversion of the existing physical securities into electronic form.In February, the deadline was extended to June this year.
A move towards electronic shareholding serves multiple purposes, including better transparency and improved tax compliance, according to company secretary Gaurav Pingle.
It would be a step towards greater uniformity on stamp duties, which can differ on whether the shares are held in physical or electronic form. There may be some unintended consequences for non-profits, which are formed under Section 8 of the Companies Act, 2013.
“The cost … is very high,” he said. There is an initial fee for converting shares into electronic form. There can also be recurring annual expenditure due to the registrar and transfer agents (RTAs) even if no shares are intended for transfer or no transfers ever take place, said Pingle. The arrival of demat for listed companies largely solved issues such as forgeries, and physical shares not reaching the intended recipient.
“Frauds and fabrication have been brought down…(to)…almost zero. They are almost zero,” said K S Ravichandran, a Coimbatore-based company secretary who has been practising since the time before the advent of dematerialisation. He is founder and managing partner, KSR & Co Company Secretaries.
He added that the latest move could raise costs and compliance burdens for private limited companies. A December 2025 notification may provide some relief, he added. It widened the definition of small companies exempt from the dematerialisation requirement to any company with a turnover of less than ₹100 crore and paidup capital of less than ₹10 crore.
The ongoing shift to electronic form for unlisted shares removes the possibility of backdating share transfers, which is said to have been used to avoid legal or tax liabilities. The dates of transfer cannot be changed in retrospect since transfers now involve depositories.A large number of unlisted companies are dematerialising their shares and the opportunity size is also significant, suggested NSDL Managing Director and Chief Executive Officer Vijay Chandok in an August conference call with investors.
“…based on some guesstimates and assessment … it could be in the ballpark of around 1.8 lakh (180,000) customers … if the regulations become more inclusive, then that number could increase in future,” he said
In an investor call in November, CDSL Managing Director and Chief Executive Officer Nehal Vora said: “… the market share in the unlisted space is 30-32 per cent. The ISIN (International Securities Identification Number, used to identify individual securities) system is under testing between the two depositories. As soon as it is made live, we are hopeful that then there will be a clear level playing field across both depositories. So, we’ll have to wait and watch.”
Emails sent to the depositories did not immediately receive a reply.
