BSE Ltd. (NSE: BSE) is the first and one of the largest stock exchanges in India, located in Mumbai. BSE offers trading in equities, derivatives, currencies, and debt securities, and has a wide range of listed companies from various sectors. In addition, BSE provides a number of other services related to stock trading, including data dissemination, market indices, and investor education.
BSE Ltd. is a leading stock exchange in India that reported modest revenue growth of 3.2% quarter-on-quarter (QoQ). The margins adjusted for SGF (securities guarantee fund) contribution were better than expected, indicating better profitability. However, the transaction revenue, which accounts for approximately 31% of revenue, has a high correlation with market activity and is volatile, declining 4% year-on-year (YoY) in 9MFY23 due to a decline in exclusive revenue. Despite this, the StAR MF platform continues to drive growth for BSE, which saw a 47% YoY growth in 9MFY23. However, the exchange continues to lose market share in the cash and derivative segment, with a 7.4% and 1.2% decline QoQ respectively, down 46 basis points each.
The INX (gift city international exchange) and Power exchange appear to be potential revenue drivers but have limited visibility in the near term. It is expected that the growth in transaction charges will moderate in FY23E, but listing revenue (annuity) is likely to support growth. BSE has also announced a 2.5% stake sale in CDSL (Central Depository Services Limited), which will be completed by Q2FY24E. However, despite these potential drivers, the report lowers its profit after tax (PAT) estimates by approximately 2% for FY24E.
In summary, while BSE Ltd. reported modest revenue growth and better profitability margins than expected, its transaction revenue remains volatile. The StAR MF platform continues to be a key driver of growth, but the exchange is losing market share in the cash and derivative segment. However, the focus of the new management on reviving volume growth and investing in new areas of growth, as well as the potential of the INX and Power exchanges, provides a ray of hope for BSE’s future prospects.