BSE Limited IPO: Spa Securities recommend SUBSCRIBE with long term perspective

SPA Securities | Nov. 4, 2016, midnight


BSE Ltd is world's largest exchange by number of listed companies. It is also India's largest and world's 11th largest exchange by market capitalization, with USD 1.52 trillion in total market capitalization of listed companies. BSE regulate listed issuers and provide a market for listing and trading in various types of securities as may be allowed by SEBI from time to time. It derives revenue from 4 streams namely – Securities Services (39% of revenue in FY16), Services to Corporates (26%), Data Dissemination Fees (4%) and Income from Investments and Deposits (31%). As on 30th June 2016, BSE had 1440 unique members across all segments. In FY16, BSE accepted an average of 284.92 mn orders and 1.55 mn trades in equity shares per trading day, placing it as the 12th most active exchange in the world. BSE reported revenue and PAT CAGR of ~7% and 1% respectively during FY13-16.


  • Strong brand recognition
  • Diversified and integrated business model
  • State of the art infrastructure and technology


Outlook & Valuation


BSE India's largest and world's 11th largest exchange by market capitalization, with USD 1.52 trillion in total market capitalization of listed companies. India’s exchange sector is still at nascent stage as compared to developed and developing economies. Equity as % of financial savings in India is mere 5% compared to 14% in China, 15% in Brazil, 20% in Indonesia and 42% USA. This participation is only going to increase going ahead and that will boost the exchange business. We believe that there is significant growth potential for BSE given - a) Government’s efforts on increasing retail and EPFO participation in capital markets, b) New products and innovations such as REITs, commodity trading and infrastructure investment trusts and c) Information services segment which currently contributes ~4% of revenue vis-à-vis global revenue contribution of ~10-25%. At the upper end of the price band, the stock is available at P/E of 28x based on annualized FY17E earnings. It’s nearest comparable MCX is trading at P/E of 39x based on FY17E earnings. We recommend SUBSCRIBE to the issue with long term perspective.


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