About the Company

BSE was established in 1875 and is Asia’s first Stock Exchange and one of India’s leading exchange groups. Over the past 144 years, BSE has provided a capital-raising platform and provided a platform for trading in equity, debt instruments, derivatives, and mutual funds. It also has a platform for trading in equities of small-and-medium enterprises (SME).

Q3FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q3FY21 Q3FY20 YoY % Q2FY21 QoQ % 9MFY21 9MFY20 YoY%
Sales 138 125 10.40% 147 -6.12% 423 412 2.67%
PBT 25 100** -75.00% 26* -3.85% 85* 175** -51.43%
PAT 21 99 -78.79% 29 -27.59% 82 172 -52.33%

Consolidated Financials (In Crs)
Q3FY21 Q3FY20 YoY % Q2FY21 QoQ % 9MFY21 9MFY20 YoY%
Sales 162 149 8.72% 160 1.25% 485 474 2.32%
PBT 38 46*** -17% 27* 40.74% 104* 129*** -19.38%
PAT 31 45 -31% 46^ -32.61% 110^ 123 -10.57%

*Contains exceptional item of loss of Rs 14.5 Cr.

**Contains exceptional item of gain of Rs 91.58 Cr

***Contains exceptional item of gain of Rs 32 Cr

^negative tax expense of Rs 19.21 Cr in Q2FY21 & Rs 5.64 Cr in 9MFY21.

Detailed Results

  1. Sales for Q3 were mixed with consolidated revenues up 8.7% YoY, consolidated PBT falling 17% YoY & PAT falling 31% YoY.
  2. EBITDA margin for Q3 was at 33% vs 21% last year.
  3. Average daily turnover rose 44% YoY in the Equity Cash segment in 9MFY21. TC revenue in the segment on the other hand rose 26% YoY.
  4. Equity derivatives saw a meteoric rise of nearly 3 times in Average Daily Turnover in Q3 over Q2.
  5. The currency derivative segment saw a drop in average daily turnover of 32%+ YoY in 9M. This was mainly due to restricted bank timings due to COVID-19 and the merger of nationalized banks.
  6. In the commodity derivatives segment, average daily turnover rose almost 10 times YoY in 9M period. It now has a market share of 64.12% in gold mini contracts.
  7. BSE Star MF saw MF revenue fall 19% YoY in 9M while Average Daily Value of Orders rising 34% YoY in the same period. The average no of daily orders in SIPs and Equity & Debt rose 58% YoY in 9M.
  8. In the services to corporates segment, listing fees were flat YoY in 9M while Book Building & other Services grew 51% YoY.
  9. 106 Securities got been listed in 9M FY21 as compared to 95 securities in 9M FY20.
  10. In the India International Exchange IFSC, total turnover grew nearly 100% YoY in 9M.
  11. BSE Ebix Insurance Broking collected total premium of Rs 64.8 Lacs in Q3 vs Rs 96.1 Lacs in Q2.

Investor Conference Call Highlights

  1. BSE Star achieved a new milestone of processing 92.98 lakh transactions, which is the highest ever in a month, including 4.77 lakhs new SIP registration in January 2021.
  2. The total value of orders processed in the Mutual Fund segment increased by 37% to INR 2.05 lakh crore for the 9 months ended December 31, 2020 from INR 1.49 lakh crore for the 9 months ended December 31, 2019.
  3. The total number of X-SIPs registered under BSE Star increased by 256% to 11.18 lakhs during the 9 months ended 31st December 2020 from 3.14 lakh for the 9 months ended December 31, 2019.
  4. StAR MF platform witnessed a consistent net equity inflow of INR 15,809 crore as against the total net equity outflow in the mutual fund industry of INR 30,546 crore during the YTD.
  5. BSE Star’s market share was at 79%.
  6. On November 14, 2020, BSE launched StAR MF Corporate Direct, a direct investment portal for corporates with more features to further simplify toward end-to-end value-based services to the AMCs, distributors, investors, and MF industry participants.
  7. The Corp direct portal is available for other non-individuals, like HUF partnerships firms, societies, et cetera.
  8. As of January 31, 2021, BSE Ebix registered 3,907 point of sale persons and 2,370 certifications. The platform has 7 general insurance companies, 2 stand-alone health insurance, and 3 life insurance companies currently.
  9. BSE Ebix also plans to offer other insurance products for commercial vehicles like trucks, tractors, auto, taxi, commercial products like fire, liability, shopkeeper insurance, and other personal lines of business like home, personal accident, travel insurance, et cetera.
  10. BSE launched an electronic spot platform for agriculture commodities, known as BSE E-Agricultural Markets, B-E-A-M, BEAM, through its wholly owned subsidiary BSE Investments Limited on December 11, 2020. This platform functions as a national level institutionalized electronic transport commodity spot trading platform facilitating spot agriculture commodities transactions across the value chain, consisting of producers, intermediaries, and ancillary services and consumers.
  11. BSE has yet to get the final approvals for the new power exchange from CERC.
  12. Operating expenses have decreased by 8% YoY while operating EBITDA increased by INR 20.11 crores to INR 11.91 crore for the quarter ended December 31, 2020, as against an operating loss of INR 8.2 crore for the corresponding quarter previous year.
  13. The management states that most of the costs in the exchange business are fixed in nature and thus any rise in revenues is not accompanied by a corresponding rise in expenses. Thus as revenues rise, margins should expand as well for BSE.
  14. Despite the volume rise of 65-70% in BSE Star, the company has seen the price per transaction drop from Rs 10 to Rs 8 to Rs 5 currently. The company is yet to find a way to increase value per transaction.
  15. The management states that in INX, IFSC and their subsidiaries tend to reduce their prices close to 0 which ensures that BSE cannot charge well.
  16. MF revenue has been at Rs 7.6 Cr in Q3 vs Rs 3.66 Cr in Q2.

Analyst’s View

BSE is the largest stock exchange in the world in terms of listed entities. The company has been in this industry sector for close to 150 years and is still at the forefront of the industry in terms of technology and access to tradable products. BSE had a decent quarter with rising volumes in all segments However, BSE Star saw a revenue decline of 19% in 9MFY21 due lowering of transaction costs on the platform from Rs 8 to Rs 5 per transaction. The company is doing well to continue to expand its strength in the equity and commodity derivatives space and continue the growth momentum of BSE Star. The company is still looking for opportunities for value unlocking for BSE Star and has also received a few bids from investors. The company continues to face tough competition from other rivals especially NSE in emerging segments like INX which has forced them to maintain zero charges for the platform. It remains to be seen how the company will get value unlocking from BSE Star and whether it will be able to exercise any pricing power on the platform & how will it handle the trio of new growth businesses going forward. Nonetheless, given the company’s long-standing brand value and its market execution experience, and the potential of its new businesses, BSE can turn out to be a dark horse wealth creator in the next few years.


Q2FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q2FY21 Q2FY20 YoY % Q1FY21 QoQ % H1FY21 H1FY20 YoY
Sales 147 144 2.08% 138 6.52% 285 287 -0.70%
PBT 26* 33 -21.21% 35 -25.71% 60 75 -20.00%
PAT 29** 39** -25.64% 32 -9.38% 61 74 -17.57%

 

Consolidated Financials (In Crs)
Q2FY21 Q2FY20 YoY % Q1FY21 QoQ % H1FY21 H1FY20 YoY
Sales 160 160 0.00% 162 -1.23% 322 326 -1.23%
PBT 27* 33 -18.18% 40 -32.50% 67 83 -19.28%
PAT 46*** 36*** 27.78% 32 43.75% 79^ 78 1.28%

*Contains exceptional item of Rs 14.5 Cr.

**Contains negative tax of Rs 3.18 Cr in Q2FY21 & Rs 5.8 Cr in Q2FY20

***Contains negative tax expense of Rs 19.21 Cr in Q2FY21 & Rs 3.59 Cr in Q2FY20.

^Contains negative tax expense of Rs 11.88 Cr

Detailed Results

  1. Sales for Q2 were mixed with consolidated revenues flat YoY, consolidated PBT falling 18% YoY & PAT rising 28% YoY.
  2. EBITDA margin for Q2 was at 36% vs 27% last year.
  3. Average daily turnover rose 44% YoY in the Equity Cash segment. TC revenue in the segment on the other hand rose 13% YoY.
  4. Equity derivatives saw a meteoric rise of nearly 20 times in Average Daily Turnover in Q2 over Q1.
  5. The currency derivative segment saw a drop in average daily turnover of 36%+ YoY in H1. This was mainly due to restricted bank timings due to COVID-19 and the merger of nationalized banks.
  6. In the commodity derivatives segment, average daily turnover rose almost 6 times QoQ. BSE achieved a market share of 7.05% in “Options on Goods” contracts. It now has a market share of 31% in Gold contracts and 57.32% in gold mini contracts.
  7. BSE Star MF saw MF revenue fall 25% YoY in H1 while Average Daily Value of Orders rising 34% YoY in the same period.
  8. In the services to corporates segment, listing fees were flat YoY in H1 while Book Building & other Services grew 43% YoY.
  9. 65 Securities got been listed in H1 FY21 as compared to 66 securities in H1 FY20.
  10. In the India International Exchange IFSC, total turnover grew 38.6% YoY.

Investor Conference Call Highlights

  1. The Star MF platform witnessed a net equity inflow of Rs. 1,488 crores as against the total net equity outflow in the mutual fund industry of Rs. 734 crores in September 2020.
  2. The total value of orders processed in the mutual fund segment by BSE increased by 38% to Rs. 1,43,062 crores for the half-year ended September 30, 2020; from Rs. 1,03,865 crores for the half-year ended September 30, 2019.
  3. The total number of SIPs registered under this segment increased by 195% to 6.19 lakhs for the half-year ended September 30, 2020, from 2.10 lakh for the half-year ended September 30, 2019.
  4. The total number of XSIPs registered under this segment increased by 9% to 11.33 lakhs for the half-year ended September 30, 2020, from 10.42 lakhs for the year ended September 30, 2019.
  5. BSE has appointed 11,918 IFAs or members over the last seven months, taking their total to 68,587 as of October 31, 2020.
  6. BSE will continue to offer its options trading platform free of cost.
  7. EPFO is now investing 50% in Sensex vs 25% earlier.
  8. The management has stated that once the company sees more liquidity in currency derivatives, it may look to start charging more transaction fees on it.
  9. The company has appointed ICICI Securities Limited to advise on various options to unlock the value in BSE’s StAR MF platform.
  10. BSE Ebix Insurance Broking JV has intermediated issue of 6,597 policies, with premium amounting to Rs. 1.83 crores till 5th
  11. BSE market share in currency derivatives is at 30%.
  12. The BSE SME platform has 326 companies listed on it as of 30th Sep 2020 vs 309 last year. Total migrations to the mainboard have reached 85.
  13. BSE market share in the bond listing space is at 56%.
  14. Operating expenses have decreased by 12% YoY.
  15. The company has no plans to institute transaction charges in equity derivatives.
  16. The company is not charging anything on INX due to a similar policy instituted by NSE.
  17. The management is confident that BSE will come out on top once the best price mechanism is enforced as it has more liquidity and better technology in the background.
  18. The management is confident of BSE50 rising above NIFTY50 and becoming more prominent in due time.
  19. The dividend policy will remain unchanged with most of the operating profit given out at the end of each year.
  20. The company is still waiting on the CERC verdict for its power exchange license approval.
  21. The average realization per transaction on BSE Star was at Rs 5.3 in H1.
  22. Currently, BSE Star MF earns commission from AMCs directly. Going forward, Star MF will be a platform that will help AMCs keep track of the distributor’s transactions and commissions. This will be a win-win situation for all.
  23. The management expects volumes in derivatives to rise due to the relief from the CFTC regulation.

Analyst’s View

BSE is the largest stock exchange in the world in terms of listed entities. The company has been in this industry sector for close to 150 years and is still at the forefront of the industry in terms of technology and access to tradable products. The company is doing well to expand its strength in the equity and commodity derivatives space and continue the growth momentum of BSE Star. BSE Star continues to be the momentum driver for BSE. The company is looking for opportunities for value unlocking for BSE Star and has also appointed ICICI Securities Limited to advise on various options to do so. The company faces tough competition from other rivals especially NSE in emerging segments like INX which has forced them to maintain zero charges for the platform. It remains to be seen how the company will be able to fend off the competition and handle the trio of new growth businesses going forward. Nonetheless, given the company’s long-standing brand value and its market execution experience, and the potential of its new businesses, BSE can turn out to be a dark horse wealth creator in the next few years.


Q1 FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q1FY21 Q1FY20 YoY % Q4FY20 QoQ %
Sales 138 142 -2.82% 131 5.34%
PBT 35 41 -14.63% 1 6900.00%
PAT 32 34 -5.88% 2 1500.00%

 

Consolidated Financials (In Crs)
Q1FY21 Q1FY20 YoY % Q4FY20 QoQ %
Sales 162 166 -2.41% 156 3.85%
PBT 40 50 -20.00% 6 566.67%
PAT 32 41 -21.95% -2 1700.00%

 

Detailed Results

    1. Sales for Q1 were slightly down with consolidated revenues falling 2.4% YoY. Consolidated PAT fell a greater 22% YoY.
    2. EBITDA margin for Q1 was at 35% vs 36% last year.
    3. Average daily turnover rose 39% YoY in the Equity Cash segment. TC revenue in the segment on the other hand fell 26% YoY.
    4. Equity derivatives saw a meteoric rise of nearly 15 times in Weekly Average Daily Turnover and Weekly Average Daily Number of Contracts Traded in the past 5 weeks.
    5. There has also been an over 6X increase in average daily turnover after shifting of weekly expiry of SENSEX 50 derivatives contract from Thursday to Monday w.e.f. June 29, 2020.
    6. Currency derivative segment saw a drop in average daily turnover of 30%+ YoY. It also saw Average Daily Number of Contracts Traded fall to 2.41 million in Q1 from 4.41 million last year. BSE’s market share in this segment was at 31%.
    7. In the commodity derivatives segment, average daily turnover rose almost 2 times YoY. BSE introduced Commodity Options in GoldM and SilverKG and also launched the world’s only Almond Future Contracts.
    8. BSE Star MF saw MF revenue rise 19% YoY with Average Daily Value of Orders rising 59% YoY in the same period.
    9. Average Daily Number of Orders in the platform rose 54% YoY and SIP orders rose 53% YoY. Equity transactions in Average Daily Number of Orders rose 48% YoY while debt transactions more than doubled in the same period.
    10. In the services to corporates segment, listing fees have fallen 11% YoY. Only 19 Securities has been listed in Q1 vs 39 done last year. This fall is entirely attributable to COVID-19.
    11. In the India International Exchange IFSC, total turnover declined 23% YoY.
    12. Consolidated earnings per share were at Rs 7.09 in Q1 vs Rs 7.86 last year.

Investor Conference Call Highlights

  1. BSE has added 740 IFAs / Members over the last four months taking their total up to 57,413 as of 31st July 2020.
  2. BSE has partnered with LIC Mutual Fund for e-KYC services on BSE StARMF Platform.
  3. BSE Ebix Insurance Broking Private Limited, a JV of BSE with Ebix Fincorp Exchange Pte Ltd, has successfully launched Health insurance products on 3rd June 2020 and Life Insurance products on 13th July 2020 in addition to Motor Insurance products which was launched on 7th February 2020. BSE owns 40% in this JV through BSE Investments Limited.
  4. In BSE BOND, during Q1 around 179 issues have successfully raised over Rs.1.17 lakh crore through this platform. BSE’s market share in this segment is 58%.
  5. Along with PTC India and ICICI Bank, BSE had filed a petition with CERC for grant of license for setting up a new power exchange which is currently pending approval. The company owns 41.08% of this entity which will be brought down to 25% as per regulatory requirements.
  6. The company has total cash of  Rs 1400 Cr.
  7. The company may look into demerging the BSE Star platform if the board approves to do so.
  8. The company had reduced TC for AMCs on BSE Star owing to competitive pressure from NSE and AMFI’s collective pressure on BSE.
  9. Currently, there are no plans for redistributing the cash reserves. The cash reserves are there due to the high requirement for regulatory capital.
  10. The company will however continue to do more than 90% of standalone payout to shareholders.
  11. NSE is basically doing cross-subsidization where it reduces prices in new segments to gain market share using earnings from established segments.
  12. The major change in equity derivatives is the shift to Sensex 50 which is around 200-300 points closer to NIFTY and changing the weekly expiry to Monday instead of Thursday.
  13. The yield in investment paper has changed in response to change in mark to market movement.
  14. The management has stated that the company will definitely enter into the electricity futures market in the future.
  15. The management has stated that the company will continue to focus on volumes in equity and equity derivatives and the BSE Star MF platform and the INX.
  16. The company is indeed looking to increase its global footprint and the establishment of INX was the first major step in this direction.
  17. The company no longer needs to keep billing clients who are defaulting in payments due to change in regulations in SEB which allows the company to suspend such companies. BSE has suspended around 1000 such entities.
  18. BSE still is the second largest commodity exchange in India. The 3rd largest exchange has less than 25% of BSE’s volumes. The management anticipates shift of volumes from futures to options for commodity traders in the industry and BSE seems in prime position here considering that BSE is the largest marketplace for commodities options in India and the 2nd largest in notional value.
  19. The company is looking to take up many matters with SEBI regarding the various anticompetitive practices done by rival NSE according to the management.
  20. The company is still not charging anything on commodity options and futures as it wants to reach a baseline in volumes before starting to charge TC on them. The company will indeed avoid premature charging as it may take away liquidity.
  21. The company currently does not have any plans for the real estate assets that it owns.
  22. BSE Star accounts for around 40-50% of revenues for the company. It yields around Rs 15-16 Cr of profit.
  23. The company doesn’t have any distinction between direct and indirect transactions on BSE Star.
  24. The company charges a flat rate of Rs 5 per transaction to every AMC.
  25. INX now accounts for 5-6% of USD INR derivatives market as compared to SGX and DGCX.
  26. The company currently doesn’t have any marketing or promotions in place for the BSE Ebix insurance platform. It will start to go to market aggressively once COVID-19 recedes.
  27. This new platform will be a direct competitor of PolicyBazaar but will have the additional advantage of having physical sales channels through POS distributors while PolicyBazaar is purely web-based. Another differentiation here would be that Policybazaar doesn’t help in final execution which is taken care of by the end insurer while the JV will provide end to end execution.
  28. TC income in the equity segment has fallen YoY as a physical settlement which earned high TC has been stopped by SEBI.
  29. The management has stated that the company is welcome for any strategic investor to come in and it will issue fresh new shares to anyone coming in.
  30. The company’s market share in the entire commodities market is 7.42%. Its market share in Gold minis is 58% and gold options account for 22% of commodity volumes for the company.

Analyst’s View

BSE is the largest stock exchange in the world in terms of listed entities. The company has been in this industry sector for close to 150 years and are still at the forefront of the industry in terms of technology and access to tradable products. The company is doing well to maintain its strength in the equity and commodity derivatives space and continue the growth momentum of BSE Star. Along with the BSE Star MF and international exchange business, the company has launched another platform in a JV with Ebix for insurance to add another future engine for growth. The company faces tough competition from other rivals especially NSE in the emerging segments like BSE Star which has forced them to reduce charges for the platform. It remains to be seen how the company will be able to fend off the competition and handle the trio of new growth businesses going forward. Nonetheless, given the company’s long-standing brand value and its market execution experience and the potential of its new businesses, BSE can turn out to be a dark horse wealth creator in the next few years.

 


 

Q4 FY20 Updates

Financial Results & Highlights

Standalone Financials  (In Crs)
Q4FY20 Q4FY19 YoY% Q3FY20 QoQ% FY20 FY19 YoY%
Sales 130.5 157.5 -17.14% 125 4.4% 542 612.4 -11.50%
PBT 0.5 50.7 -99.01% 100 -99.50% 175.2 218.5 -19.82%
PAT 1.6 43.9 -96.36% 98.5 -98.38% 173.7 201 -13.58%

 

Detailed Results

    1. Operational revenue for the quarter ended 31st March 2020, has grown by 9% to INR 119.56 crore as against INR 109.92 crores for the previous quarter. Percentage of operational revenue — total revenue for the quarter ended March 31, 2020, rose to 77% from 74% in the previous quarter.
    2. Total revenue for the quarter ended March 31, 2020, has increased by INR 7.13 crores to INR 155.79 crore.
    3. During the quarter ending 31st March 2020, BSE provided for an onetime liability of INR 18.61 crore towards provisional for additional contribution to IFSC and IPF as desired by SEBI.
    4. BSE has made a provision of 50% towards its investment made in secured debentures of IL&FS in the previous year.
    5. Considering the unlikelihood of receiving any redemption amount in future, a further provision of 50%, amount of INR 7.99 crore, has already been made in the financials for the year ended March 31, 2020, making it a 100% write-off.
    6. On a consol basis, the profit attributable to shareholders of the company, excluding nonrecurring and exceptional items for the quarter ended 31st March, has remained steady at INR 17.34 crore as against INR 17.14 crore for the previous quarter.
    7. An onetime nonrecurring provision for additional contribution to IPF, as mentioned above, of INR 18.6 crore has been made. This provision has been made in accordance with the finance conclusion by SEBI with respect to certain observations made in the — earlier years.
    8. During the quarter ended 31st December 2019, an amount of INR 32.04 crore was booked as income on the sale of 4% equity in CDSL, and the amount of INR 3.62 crore was paid over the settlement of service tax litigation under Sabka Vishwas Scheme.
    9. The above-mentioned exceptional items have resulted in a loss attributable to shareholders of INR 1.31 crore for the quarter ended 31st March 2020, as against income of INR 45.57 crore in the previous quarter.
    10. Considering the competitive pressure as well as the current economic and business scenario, BSE agreed to accept lower rates for AMCs.
    11. The company has recommended a final dividend for the financial year 2019-20 of INR 17 per equity share, having a face value of INR 2 each subject to the approval of shareholders in an ensuing Annual General Meeting.

Investor Conference Call Highlights

  1. The total number of orders processed in the Mutual Fund segment has risen by 60% to 575 lakhs during the year ended 31st March 2020 as compared to 360 lakhs in the corresponding previous year.
  2. The platform received a record 70.36 lakh orders in the month of March 2020, surpassing the previous best record of 54.43 lakh orders in the month of January 2020.
  3. The total number of orders received in the month of March 2020 was higher by 86% as compared with the orders received in the month of March 2019.
  4. In spite of COVID-19, the platform has processed a record of 11.58 lakh transactions on a single day on 13th April 2020, surpassing the previous best record of 10.10 lakh transactions on February 10, 2020.
  5. Continuing the growth momentum, the platform contributed 61% in net equity flow of INR 3,806 crore out of the entire MF industry’s total of INR 6,212 crore in April 2020.
  6. The total number of X-SIPs registered under this segment increased by 52% to 24.37 lakhs for the year ended 31st March 2020 from 16.06 lakhs for the year ended 31st March 2019.
  7. The total value of orders processed in the Mutual Fund segment increased by 39% to INR 2.3 lakhs — INR 2.23 lakh crore for the year ended 31st March 2020 from INR 1.61 lakh crore for the year ended 31st March 2019.
  8. The income earned in the StAR MF segment increased by 54% to INR 44.74 crore for the year ended 31st March 2020 from INR 29.02 crore for the year ended 31st March 2019.
  9. Income earned in this segment has contributed to 20% of the revenue from operations for the year ended 31st March 2020 as compared to 8% of the revenue from operations for the year ended 31st March 2019.
  10. BSE also has got recently approval from SEBI to start eKYC in the various segments, including the StAR MF segment.
  11. And BSE has also started collecting commissions on behalf of the IFAs who agree for the AMCs who agree to provide this commission through BSE, which will also become an interesting way to add additional income.
  12. BSE-Ebix Insurance Broking Ltd — Pvt. Ltd., a joint venture of BSE with Ebix Exchange Pvt., Ltd., obtained an insurance broking license from insurance regulator, Insurance Regulatory and Development Authority of India, IRDAI. The company successfully beta launched its operation on February 7, 2020, and has booked more than 200 policies as on date.
  13. The company collected the highest-ever fresh premium of INR 6.18 lakh, of which highest collection in a single day of INR 1.1 lakh on 16th March 2020.
  14. It is expected that the network of insurance broking business and mutual fund distribution platforms shall complement and leverage each other for strong growth over time. BSE holds an equity stake of 40% through its subsidiary, BSE Investments Limited.
  15. The turnover at BSE’s subsidiary, India INX at GIFT City, Gandhinagar, has been growing at a fast pace. Average daily turnover in India INX witnessed a growth of 195% to USD 2.2 billion for the year ended March 31, 2020, from USD 766 million for the year ended 31st March 2019.
  16. On November 26, 2019, BSE has announced a framework for listing of commercial paper, enabling the listing on BSE for commercial paper issued on or after 27th November 2019. Until date, 120 issuers have done 1,385 issues of commercial papers and successfully listed commercial papers worth 5.3 lakh crore on BSE.
  17. BSE made total losses of 23 crores on the GIFT City operations, and it will probably continue in the next year as well.
  18. In this COVID scenario, the physical channels have been closed down. So more transactions are going through electronic channels, and BSE is pretty much now 60% of all the value on equities on a net basis.
  19. As AMCs are facing the heat of the market slump, they have requested for a cut in the commission, which BSE has agreed. So, they were now charging Rs. 9 per transaction, which will reduce to 5 or 6 per transaction in the next year.
  20. Facilitating collections for IFAs from AMCs and e-KYC on the BSE platform are two major positive developments recently. These two sources of revenue can really add to the growth engine of BSE Star MF business.
  21. The company’s current market capitalization is less than tangible assets in the book.
  22. Investments have gone down from INR 2020 Cr to INR 158 CR. There are two reasons for the same. One is that they did a buyback last year. That impacted the investment revenues. And then there were some capital gains which were booked on sale of certain investments in the earlier year, which did not repeat this year.

Analyst’s View

BSE is the largest stock exchange in the world in terms of listed entities. The company has been in this industry sector for close to 150 years and is still at the forefront of the industry in terms of technology and access to tradable products. While the company is losing market share in its traditional exchange business to NSE, BSE Star MF business is growing very rapidly. In FY19 it formed just 8% of the revenue. In FY20 the revenue contribution has jumped to 20%. With the long runway of growth in BSE Star MF and international exchange business along with a Star MF style platform for insurance also adds future engines of growth. The market capitalization of the company is less than the tangible assets it possesses. So the stock looks really undervalued at current levels. It would be interesting to see what events can trigger the rerating of the stock. BSE remains an interesting stock to watch out for.


 

 

Q1 2020 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q1FY20 Q1FY19 YoY % Q4FY19 QoQ %
Sales 142.35 146.15 -2.60% 157.5 -9.62%
PBT 41.24 55.21 -25.30% 50.68 -18.63%
PAT 34.36 51.81 -33.68% 43.85 -21.64%

 

Consolidated Financials (In Crs)
Q1FY20 Q1FY19 YoY % Q4FY19 QoQ %
Sales 165.97 164.2 1.08% 182.08 -8.85%
PBT 50.14 58.51 -14.31% 56.28 -10.91%
PAT 41.32 51.5 -19.77% 51.86 -20.32%

 

Detailed Results

    1. The company had a muted quarter with only a 1% rise in consolidated revenues YoY.
    2. Profits for the company fell by almost 20% YoY and 20% QoQ.
    3. Average daily turnover in equity cash fell to Rs 2683 Cr from 3299 Cr in Q1FY19.
    4. Transaction charges for the same segment were unchanged at Rs 22.6 Cr in Q1FY20.
    5. In currency derivatives, average daily turnover remained almost flat with a decline of 2.2% YoY. Average daily number contracts for currency futures rose to 2.82 from 2.75 a year ago while currency options fell to 1.6 from 1.93 a year ago.
    6. Transaction charges income fell to Rs 1.6 Cr from Rs 1.9 Cr a year ago.
    7. The BSE Star Mutual Fund Platform was the standout performer with an 87% YoY rise in average daily orders and revenues from this segment rose to Rs 11.9 Cr in Q1FY20 which is almost double of Rs 6 Cr in Q1FY19.
    8. The total value of orders processed also rose 39% YoY in Q1FY20.
    9. The listing fees for Q1FY20 fell 14% YoY mainly on account of the current economic and market conditions.
    10. The India International Exchange IFSC division saw total turnover rise 615% and a number of contracts saw a rise of 588% over the past year. Both of these were due to a huge spurt in index derivatives while commodity derivatives fell almost 10% YoY.
    11. The company maintained its robust market share figures in almost all the categories that they operate in.
    12. The EBITDA margin for the company came in at 36% which is higher than Q4FY19 which was at 34% but was lower than Q1FY19 margin which was at 39%.
    13. Net profit margin shrank to 25% from 30% in Q4FY19 and 32% in Q1FY19.

Investor Conference Call Highlights

  1. The company has almost 200,000 distributors and around 26,000 direct independent financial advisors on the BSEStarMF platform. The platform now accounts for 12% of all mutual fund transactions, along with 20% of all value and 40% of all new subscribers to the mutual fund industry.
  2. BSE’s market share in this mutual fund aggregator space is currently at 75% and the company aims to maintain its dominance in this sector.
  3. The number of companies listed on the BSE SME platform has risen 19% YoY to bring up the total to 308 companies as of July 2019. Of these 63 have already migrated to the mainboard.
  4. The India INX subsidiary has also seen a growth of 321% in average daily turnover to $1.879 billion in Q1FY20. Of this turnover, around 91% is from currency derivatives while 9% is from commodity derivatives.
  5. The India INX Global Securities Market also accounts for 35% of issuance of debt securities in international markets.
  6. The company is also looking to start a new power exchange along with PTC and ICICI Bank and they have already applied for such a license.
  7. BSE has also set up a JV with Ebix called BSE Ebix Insurance Broking Pvt Ltd for connecting insurance broking. The company shall own 40% of this entity through its subsidiary BSE Investment Limited.
  8. BSE has also hiked their renewal listing fees by Rs 50000 for companies with listed capital of up to Rs 20 Cr and Rs 20000 for companies with listed capital between Rs 100 Cr and Rs 200 Cr.
  9. The management has made it clear that most of the investment into Indian Clearing Corporation has been for putting up regulatory capital and the annual losses for this entity have been at Rs 32 Cr. The company has yet to come up with a plan to monetize it but they remain confident of the market from this entity.
  10. BSE has signed an MoU with Shanghai Stock Exchange for dual listing development of fixed income market and development of a joint trading platform for offshore RMB products.
  11. The management believes that interoperability is a long pending reform in Indian Markets. They have already done so in the equity derivatives division and hope to be able to do so for currency derivatives soon.
  12. The management believes that they are in a good position to capture opportunities from the mutual fund sector because of the simplified and automated distribution network that the BSEStarMF platform brings with it. They believe that the growth potential for this segment is 8x times in the next 3-4 years, even if the industry does not grow at all.
  13. If everything goes according to schedule, the buyback program should be implemented by 1st October this year.
  14. The company has added a lot of different products into the commodity derivatives segment. They have large market share in agricultural commodities but have failed to capture as much in gold or silver contracts. But the company is looking to expand further and provide access to high traded commodities like Brent Crude Oil with tie-ups with ICE and other international exchanges.
  15. ICICI Bank has invested RS 36 Cr for 10% each of Indian International Exchange and India International Clearing Corporation. BSE has invested around Rs 205 Cr into both of these entities till date.
  16. The management is committed to increasing their fixed income (income from recurring operations) portion, keeping their fixed costs controlled and keep bringing their variable income in (Especially in mutual funds). For example, the fixed income mostly comes from listing renewal fees while variable income comes from IPOs and other first time activities.
  17. Since the company has a lot of data, they are looking into ways to be able to monetize this data and experiment with it.
  18. The management has maintained that they will continue to operate in new segments at nominal rates until they establish a robust market presence in these segments after which they may start charging commissions from these segments.
  19. As mentioned earlier, the management has reiterated that they see very large upside potential in the mutual fund sector in India and that the STAR MF platform should do very well as an important tool for independent financial advisors.
  20. Around 75 Cr can be derived annually from listing renewal fees from almost 2500 exclusive listed clients..

Analyst’s View

BSE is the largest stock exchange in the world in terms of listed entities. The company has been in this industry sector for close to 150 years and are still at the forefront of the industry in terms of technology and access to tradable products. The mutual fund platform shall help bring back growth into an exchange which has seen a number of transactions drop for the vast majority of their listed entities barring the top 100-200 ones. The company is also aggressively expanding its product portfolio on offer in order to capture market share in nascent segments and establish themselves at the top in every trading category in India. To push this expansion and market share capture, they are forgoing commissions in a lot of segments. It remains to be seen how long it takes for the company to strengthen its market positioning to be able to start charging commissions without any loss in market share and clientele. Nonetheless, given the storied history and dominant market positioning of the company along with their vast network of market participants both institutional and retail, BSE remains a stock to watch out for particularly given the increased market participation by individual investors and traders, which still has a lot of room to grow.

 

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