₹3199
*Average Price as per 7 May, 2024
Fundamentals
FACE VALUE
1
BOOK VALUE
359.77
NO OF SHARES
495000000
EPS
167.8
SALES
16352
INDUSTRY PE
82
DIVIDEND
90
DIVIDEND YIELD
1.5
PE
35.76
PB
16.68
PS
18.16
MARKET CAP
297000
EQUITY
49.5
PAT
8306
MESSAGE
2022-23
OVERVIEW
A comprehensive guide to buying NSE Unlisted Shares:
First Stage: Name Approval and Paperwork Drafting
KYC Document Submission: The first step involves providing KYC (Know Your Customer) and fit and proper documents, including a Copy of Client Master List (CML), PAN card, Aadhar card, and a cancelled cheque.
Drafting Paperwork: NSE Shares Transfer Process is presently a complex exercise and it involves getting approval from NSE Shares Transfer Committee. The Approval Comes in 2 stage ( Stage 1 & Stage 2). It Involves several agreements On Rs 500 stamp paper each by buyer and seller.
Submission to NSE: Once the paperwork is finalized, we submit both buyers & seller Documentsto the NSE for clearance. Stage 1 Approval have been Streamlined and can be procured within a week if all documents are provided and no objection raised by NSE.
The checks are to comply with the shareholding criteria norms as follows:
1.Buyer is a Foreign National (cap of 50% of overall shareholding)
2.Buyer is a existing trading member of NSE (cap of 50% of overall shareholding)
Second Stage: Verification and Finalization
Client Confirmation: The client must also provide a letter confirming their agreement to proceed with the purchase of the NSE unlisted shares.
Verification Letter:
The Buyer will have to get a letter from his DP On the DP's letter head confirming the Demat Details and the transaction. Additionally, a letter from the client themselves may also be required in some cases.
Submission and Processing: Here to give the final consent NSE can take anywhere between 1to 6 months. After, which share are credited to buyer Demat account.
Important Considerations
Timeline: The entire process of buying NSE unlisted shares can take up to 3-7 months, depending on various factors such as document verification and regulatory approvals.
Documentation Charges: Clients should be aware of documentation charges, which typically include stamp paper costs and other necessary document fees. These charges are essential for facilitating the NSE share transfer process and ensuring compliance with legal requirements.
Remarks- All the payments must be completed before going ahead with 2nd stage documents.
NRI Clients - Shares cannot be delivered to an NRI-repatriable account, nor can money be accepted from an NRE account. Shares can only be delivered to non-repatriable demat accounts, and only funds from NRO bank accounts will be accepted.
NSE was incorporated in 1992. It was recognised as a stock exchange by SEBI in April 1993 and commenced operations in 1994 with the launch of the wholesale debt market, followed shortly after by the launch of the cash market segment.
1993 : NSE recognized as exchange in India
1994 : Screen based trading introduced by NSE
2000 : Derivatives trading in India was offered through launch of index futures by NSE
2002 : ETFs in India were introduced by NSE
2008 : Currency derivatives were introduced in India by NSE
2011 : Commenced trading in index futures and options contracts on the FTSE Index
2016 : Promoted NSE IFSC, the international stock exchange in India’s first IFSC SEZ at gift city Gandhinagar
2021 : NSE registered investor base surpasses 5 crore unique investors
NSE’s market share in cash equities has grown consistently over the past two decades – from 63% in FY02 to 81% in FY12 and further to 92% in FY22. Introduction of co-location facilities in 2009 led to a sharp spike in its market share over the ensuing few years due to increased algorithmic (algo) trading.
Unlike global exchanges, NSE have high dependency on transaction charges: while BSE’s dependence is low due to poor market share.
Transaction Charges
Treasury income on clearing and settlement funds
Tech and information solutions
Services to corporates
·Listing fees
·Book building fees
·Mostly derived from listing income that is not impacted by market activity
· Book Building is linked to primary fund raising
Data dissemination fees
·Live Data feeds to third party aggregators
·Historical data for back testing
· Impacted primarily due to level of subscriptions and revision in pricing policies
Income from Investments and deposits
·Income from own cash (not clients money)
·Linked to investment yields
Other Income
·Recurring in Nature
·Mostly derived from rent and training institution, etc
Under penetration of capital markets
More corporates expected to tap the financial markets.
NSE winning the client race
Demat accounts have increased fivefold from 2.2 crores in FY14 to 11.3 crores currently. In contrast, NSE now has 3.4 crores active customers, up from 40 lakhs in FY14—a nearly 9x increase.
NSE gaining market share
NSE holds a 93% market share in cash segment and almost 99% market share in the F&O segment.
INSIGHT
Financial Insights
IN FY24 NSE’s revenue has grown at a CAGR of 28% whereas PAT has grew by 13%.
Particulars (in Cr.) | FY24 | FY23 | FY22 |
Total Revenue | 16,352.00 | 12,765.00 | 8,874.00 |
EBITDA | 11611 | 9428 | 6,499.26 |
PAT | 8306 | 7356 | 5,198.29 |
EPS | 167.80 | 148.61 | 105.02 |
Dividend | 90 | 80 | 42 |
Dividend: NSE has announced a final dividend of Rs. 90/share (pre bonus).
Bonus Issue: Along with the dividend the company has also annouced bonus isuue of 4 shares for every 1 share.
Segment wise revenue split
Revenue increased by 59% in FY-23 from FY-22 and PAT increased by 41% in FY-23.
Particulars | FY-23 | FY-22 |
Trading Services | 10173 | 6965 |
Colocation Charges | 614 | 433 |
Data feed services | 273 | 225 |
Listing services | 180 | 184 |
Index Licensing Services | 150 | 116 |
Strategic Investments | 328 | 256 |
Other Segments | 1047 | 695 |
Total | 12765 | 8874 |
A deep-dive on surge in options volume:
Equity options Average daily volume surged 25x over the last 5 years to INR 152.4tn. This surge in options was due to the following factors:
NSE has a near-100% market share in equity derivatives. Equity option and futures accounted for 76% and 12% of FY23 transaction income.
Deep Dive into the transaction Charges
Transaction income the dominant revenue driver for NSE -
For NSE, transaction income accounts for a large share of total revenue (including clearing revenue) - 79% on average over FY21-23. The share is lower in case of BSE on account of lower volume. Transaction income consists of fee paid by a broker basis the product and size of the trade. Both NSE and BSE maintain a fee structure across different product segments based on traded value. NSE offers a competitive fee structure in case of the cash segment. However, in derivatives, NSE’s transaction charges are significantly higher than that of BSE, given its market dominance.
Stable fee structure - Exchanges ensure a stable fee structure across product segments. However, NSE recently revised its charges by rolling back the 6% increase in transaction charges on equity cash and derivatives segment it took during Dec’20. The previous increase in charges was primarily due to its requirement to build a corpus of INR 15 bn for the Investor Protection Fund. On the other hand, BSE revised its charges upwards in Dec’22.
NSE India Conference Call Takeaways FY-24
·NSE is the largest exchange in the world in terms of number of contracts for the 5th time and is 3rd in the cash segment.
·Volumes at the Gift city continue to grow at a healthy pace and reached INR 3.5 trillion contracts of open interest.
·In the clearing segment, NSE has 93% market share in cash segment, 96% derivatives in derivatives segment and 85% in currency segment.
·The company has plans to issue bonus shares and will continue to give better dividends.
·Transfer of shares take 4-5 months as the process is different from listed player. NSE is trying to bring in automation in transfer process and reduce this time period.
NSE Gift City Opportunities
Gujarat International Finance Tec-City (GIFT) can be a huge potential opportunity.
NSE Backed by Marquee Investors
Shareholding pattern as of FY-23
Name of the shareholder | Shareholding percentage |
LIC | 10.72 |
Aranda Investments Ltd | 5 |
Stock Holding Corporation of India Ltd | 4.44 |
SBI Capital Markets Ltd | 4.33 |
Veracity Investments Ltd | 3.93 |
SBI | 3.23 |
Crown Capital Ltd | 3.17 |
PI Opportunities Fund | 3.00 |
TA Asia Pacific Acquisitions Ltd | 2.33 |
MS Strategic Ltd | 2.30 |
Peer Comparison
The NSE Colocation Saga – An Hindrance on its road to IPO
The NSE colocation case refers to a scandal involving allegations of unfair access to market data and trading systems at the NSE. Colocation services allow traders to place their servers in close proximity to the exchange's servers, reducing latency and potentially providing an advantage in high-frequency trading.
NSE was alleged that certain high-frequency traders were given preferential access to NSE's trading systems, potentially allowing them to gain an unfair advantage over other market participants. These allegations raised concerns about market integrity and fairness.
SEBI launched an investigation into the matter, were the investigation focused on whether NSE officials had provided preferential treatment to certain brokers, potentially allowing them to access market data faster than others. The investigation has been ongoing for several years, and there have been various developments and legal proceedings related to the case.
2022: Court sends Chitra Ramkrishna to judicial custody under the
money laundering act.
2023 : SC directed the market regulator to refund the NSE Rs 300 crore deposited under disgorgement orders.
IPO Plans
In December 2016, NSE filed for its IPO (size : 10000 crore) which was a complete OFS by the existing shareholders. However the IPO was called off due to the allegations of some brokers allegedly getting preferential access to its algorithmic trading systems.
In January 2020, the NSE announced that it had initiated discussions with Sebi regarding its IPO and expressed optimism about unveiling the public issue by September, pending necessary approvals.
The listing of NSE has been postponed for several years due to a series of corporate governance issues. These concerns include the involvement of its former chief executive officer Chitra Ramakrishna in the 2015 co-location scam and problems related to various technological failures.
Valuations
NSE at the current market price of 4500, is trading at a discount of almost 50% from its listed peer BSE.
Particulars | NSE | BSE |
CMP (1st April, 2024) | 4500 | 2700 |
Market Cap | 222750 Crores | 36575 Crores |
EPS (TTM) | 157.68 | 56.35 |
P/E (TTM) | 29 | 48 |
P/S | 17 | 40 |
Chicago Mercantile Exchange (CME) which is one of the largest and most influential derivatives exchanges globally, has a similar revenue model like NSE and is operating on similar margins as NSE. CME which is an exchange of such a saturated market like US is trading at a P/S ratio 14 currently.
NSE Unlisted Share Price Journey
NSE Unlisted Shares were introduced into the unlisted market in March 2021 at a price of 1700 per share and the stock then made a high of 4500 in November 2021. Since then the stock underwent into a correction and made a low of 3000 per share at December 2022. NSE Unlisted Shares rallied to a share price of 4850 per share in March 2024 which is also the all-time high of the stock currently.
Stake Sell by Fairfax India
During the fourth quarter of 2023 and the first quarter of 2024 Fairfax India entered into agreements to sell its equity interest in NSE for gross proceeds of approximately $189 million (15.7 billion Indian rupees). The original cost of the company’s investment in NSE was $26.8 million.
On January 29, 2024 the company completed one of the sales and received gross proceeds of $132.3 million (11.0 billion Indian rupees).
The remaining sales are subject to customary closing conditions and are expected to be completed in the first quarter of 2024.
At December 31, 2023 there were 105,398,509 subordinate voting shares and 30,000,000 multiple voting shares outstanding.
SECONDARY NAME
ISIN
CDSL
NSDL
INDUSTRY
SECTOR (READ ONLY)
SHARE HOLDINGS
Name of Shareholder | Holdings |
---|---|
Life Insurance Corporation of India | 10.72 % |
Aranda Investments Mauritius PTE Ltd | 5 % |
Veracity Investments Limited, Mauritius | 5 % |
Stock Holding Corporation of India Limited | 4.44 % |
SBI Capital Markets Ltd | 4.33 % |
SAIF II SE Investments Mauritius Limited | 3.55 % |
State Bank of India | 3.23 % |
Other | 63.73 % |
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