National Stock Exchange(NSE)

Deep Dive into NSE

We had first invested in National Stock Exchange Ltd. in December 2019 at around Rs 825/sh, since then this is how the price graph has moved:

August 2020 - Rs 1475/sh
December 2020 - Rs 1675/sh

August 2021 - Rs. 2800/sh

November 2021 - Rs. 3900/sh

This translate to a CAGR of roughly around 63.41%+

Shares of NSE are available with us in the range of 3300-3400/share. You can see further details at : Trade Portal or reach out to us at +919830271248.

NSE has been embroiled in numerous scams, scandals and allegations. It all began with colocation charges and then went on to Yogis, misappropriations and fraudulent hirings. But all said and done, we believe financial numbers are the holy grail of investing and that has been beyond stupendous.

In this newsletter we opine on the way ahead for NSE and its IPO

About the Company

The National Stock Exchange of India Ltd. (NSE) is the leading stock exchange in India and the second largest in the world by nos. of trades in equity shares controlling more than 97% market share in India as well.

NSE launched electronic screen-based trading in 1994, derivatives trading (in the form of index futures) and internet trading in 2000, which were each the first of its kind in India.

NSE is planning for an IPO which will value the company at ~INR 2,00,000 crores. The offer will be made majorly through offer for sale by existing shareholders including SBI, LIC, stock holding etc.

IPO Roadmap

LEGAL OPINION

Legal opinions in against of NSE IPO is that IPO should not be allowed unless the NSE fully complied with the final SEBI verdict in the Algo trading matter and fill the compliance gaps.

Legal opinions in favour of NSE IPO is that even though the Algo scam matter is still sub-judice, there is no stay order given by a court on its proposed share sale. In addition, senior NSE officials who were charged by SEBI in the scam are out of the exchange.

FINANCIAL PERFORMANCE

NSE continued to deliver robust financial performance. The consolidated revenue of NSE Group for FY 2020-21 was Rs 6,202 crores (y-o-y increase of 59%).

Revenue Split (Segment Wise):

Trading Services - 77.43%
Clearing Services - 08.01%
Data feed Services - 02.15%
Index Licensing Services - 02.41%
Strategic Investments - 02.36%
Other Segments - 07.62%

The core operations contributed 91% of the revenue. The Profit before tax was Rs 4,465 crores and the Profit after tax was Rs 3,573 crores (y-o-y increase of 90%).

PERFORMANCE IN UNLISTED SPACE

NSE is trading at a price range of Rs. 3200-3500 in the month of Feb’22 in the unlisted space. Prices have surged tremendously since dec’19 from just INR 825 to INR 4000 which is 5 times ROI in just 2 years with a CAGR of ~64%.

With the capital markets getting broad based, All intermediaries including NSE should see massive growth in their volumes. The Indian growth story is just getting started and NSE seems to be a great way to ride this wave.

On the side of scams and allegations we feel, SAT has already levied a hefty fine on NSE and that episode should get wrapped up soon. The allegations on Chitra and the episode of the yogi, even if true are a thing of the past. The markets are forward looking and will value the company on the basis of financial performance.

Why you should Invest in NSE:

Monopoly in Indian Market: The largest Stock exchange in India by nos. of trades in equity shares controlling more than 97% market share in India as well. NSE has a near 100% market share in equity derivatives.

Robust financials: NSE has a diversified source of revenue and clocked strong CAGR of 23.7% over FY15-21 to INR 6202 Cr.

Consistent Dividend Payer: NSE intends to have a total dividend payout (including dividend distribution and other taxes, cess, levies, if any relating to the dividend) of around 60% of its consolidated profit, net of tax, for the relevant financial year, subject to the aforementioned factors and such other factors as may be decided by the Board from time to time. It recently approved a dividend of Rs 42/sh for the FY 21-22 which is expected to be approved in its AGM sometime in August

FY 21-22 earnings update :

Adding another feather in the cap, the National Stock Exchange (NSE) has reported its earnings for the year ended March 31, 2022. The leading exchange continues to impress investors.
On a consolidated basis, NSE reported a net profit of Rs 5,198 crore for the financial year 2021-22, a rise of over 45 per cent compared to a profit after tax (PAT) of Rs 3,573 crore in the previous financial year.

The leading domestic exchange reported a 53 per cent jump in the Total revenue to Rs 9,500 crore during the year. It had reported a total income of Rs 6,202 crore in the previous fiscal.
Among the income, transaction charge continues to be the main component, giving out a share of 6,965 core. Listing services contributed Rs 184 crore, Colocation charges brought Rs 443 core and treasury income yielded Rs 423 crore during the year.
The operational income of NSE rose 59 per cent to Rs 8,929 crore, while the ratio of operating income and total income improved to 94 per cent from 91 per cent earlier.