NSE IPO: More diversified than BSE, MCX; listing to complete troika, says Jefferies

NSE IPO: Jefferies on Tuesday said NSE is among the world's most profitable exchanges, excluding regulatory expenses. The brokerage noted that India's largest stock exchange, which has filed draft papers with SEBI for its Rs 30,000 crore initial public offer (IPO), has a more diversified product mix than BSE and MCX, with over 90 per cent market share across most segments. It added that NSE has built a tech product suite comparable to global peers and is expanding its commodities business.

Jefferies said NSE's higher clearing market share and premium to notional turnover in equity options have helped it deliver stronger profitability than BSE. The NSE IPO listing will complete the trioka, the brokerage said. 

Data showed NSE had Rs 28,800 crore in investment assets across government securities and mutual funds in FY26. The stock exchange has provisioned for SEBI actions, and contingent liabilities largely relate to income tax or service tax disputes, Jefferies said. 

"Strong operating cashflows combined with limited capex (3-3.5 per cent of revenues) resulted in NSE distributing 74 per cent and 85 per cent of earnings as dividends in FY25-26 respectively," Jefferies said.

Data showed NSE has 90 per cent market share in most categories, except index options and commodity F&O. The company's clearing corporation (NCL) accounts for 88 per cent market share in cash and 91 per cent market share in F&O. NSE also has a suite of technology and data offerings, which accounted for 13 per cent of its FY26 revenues.

Jefferies said NSE is settling legal issues with SEBI, provisions for which weighed on FY25-26 operating Ebitda margin. Cashflows and balance sheet with limited capex kept payouts high in FY25-26, it said.

Provisions related to the colocation and dark fiber case stood Rs 1,390 crore in FY26. This, in addition to a payment of Rs 670 crore in the TAP matter in FY25, weighed on NSE's FY25 and FY26 operational Ebitda. 

Given the one-off nature of the SEBI settlement fees, should these be excluded, normalised operating Ebitda margin at 76-77 per cent for NSE has been largely stable, Jefferies said.

Overall, Jefferies said, NSE accounted for 70 per cent of Indian exchange revenues. It appears to be the most diversified exchange offering equity cash, index options, single stock options, equity futures, commodity F&O, bonds, and currency derivatives, Jefferies said. 

"NSE's offer for sale stated that PSU general insurers will be offloading a 1.1 per cent stake. We note that three of the four multi-line general insurers (Oriental, National, and United) have solvency below the regulatory threshold of 1.5 times could increase the available solvency capital with these insurers," Jefferies said.

The foreign brokerage noted that equity options has grown 56 per cent compounded annually over FY20-26 against 19 per cent growth in cash market turnover. Options premium's average daily turnover (ADTO) was 70 per cent of the daily cash market turnover in FY26. Hence, derivatives accounted for 70 per cent of operating revenues for Indian exchanges. This, Jefferies said, has resulted in linkage of exchange revenues with market performance cycles, as option trading is closely linked to volatility and not price. 

In comparison to the US, while India trades more option contracts, it is only one-fifth of option premiums.