NSE analyst call: Strong business momentum; IPO timelines unclear

9 Nov 2022 , 10:31 AM

On the IPO, company did not share any timelines, though said they are working with the regulator to get approvals. business fundamentals remain strong – in H1FY23 NSE’s consolidated Profit After Tax grew 53% year-on-year to Rs34.6 billion; this is after it delivered 65% PAT CAGR over FY20-22. Growth in H2FY23 would moderate due to high base; as such for FY23 and FY24. Analysts at IIFL Securities estimate PAT of Rs67 billion and Rs72 billion respectively.

Ashish Chauhan takes over as CEO and MD

Ashish Chauhan has been appointed as the MD and CEO of NSE in August 2022 (SEBI approval came in July 2022, while shareholders’ approval came in August 2022). In the maiden analyst call, Mr. Chauhan shared his vision for the company saying focus to be on:

1. Strengthening regulatory and compliance activities, and investor protection
2. Building robust IT systems to ensure more compliant, secured and efficient trading and clearing system
3. Focusing on core business and divesting non-core activities
4. Launching new products such as Bond index futures, Gold receipts, Electricity Futures, IFSC exchange, etc.

Equity Options – key driver of earnings

Option volumes, after growing at 130% p.a. over FY20-22, are up 112% year-on-year in H1FY23. It now accounts for 60% of NSE’s total income (including treasury income) versus only 25% in FY20. Increase in Option volumes is a combination of:

1. Ramp-up in weekly options
2. Increase in retail participation in the last 2 years — record number of demat accounts opened
3. Implementation of peak margin regulations that have increased margin requirement of traders, thereby pushing volumes in options
4.  The 6-10% tariff hike taken in January 2021 also supported faster revenue growth

Uncertainty continues on IPO timelines

NSE management shared that they are working with SEBI to meet all their requirements; however, no timelines for the IPO were shared, given the uncertainty. Having said that, management remains committed to address all pending cases, so as to expedite the IPO process.