Cross-subsidization by NSE has limited monetization opportunities for BSE in the Star MF, INX, and Commodity Derivatives segments in the near term. This was primarily due to a decrease in turnover by 26% YoY in the Equity Cash segment (special rate group) in 1QFY21 and one- While total expenditure of INR1.0b was lower than estimated, overall decline in revenues resulted in largely in-line EBITDA (v/s estimates). NSEs competitive pricing has impacted BSEs ability to charge in the Star MF, INX, and Commodity Derivatives segments. NSEs competitive pricing has impacted BSEs ability to charge in the Star MF, INX, and Commodity Derivatives segments. This was primarily due to a decrease in turnover by 26% YoY in the Equity Cash segment (special rate group) in 1QFY21 and one-off income in While total expenditure of INR1.0b was lower than estimated, overall decline in revenues resulted in largely in-line EBITDA (v/s estimates).

BSE cash market share has slipped to 6.4% vs ~13/9% in FY18/19 and currency derivative segment is also facing tough competition. Investments in INX and newer initiatives (commodity & Insurance distribution) have impacted EBITDA margins (1.1% in 9MFY20, down ~7% YoY). We expect revenue growth of 12.0/10.4% in FY21/22E led by rebound in transaction revenue (better market condition, StAR MF and INX contribution). We expect operating leverage to play out with growth (EBITDA margin of 8.8/14.2% for FY21/22E). BSE has net cash of Rs ~20bn (~77% of MCap) and a dividend yield of ~5%, which limits downside. Risks include rise in competition, loss of market share and increase in investments. We maintain NEU on BSE based on revenue and margin miss in 3QFY20. The core revenue stream is under pressure, margin is in the negative territory due to ongoing investments in new initiatives (INX). BSE cash market share has declined to 6.4% but StAR MF platform is witnessing continued traction. We arrive at a SoTP based TP of Rs 590 by assigning 15x multiple to core Dec-21E PAT (Rs 46/sh), Rs 105/sh for the CDSL stake and adding net cash (Rs 439/sh).

BSE is witnessing continuous decline in core business metrics. Cash market share has slipped to 6.7% vs ~13/9% in FY18/19 and currency derivative is also under pressure. Continued investments in INX and newer initiatives (commodity & Insurance distribution) have impacted EBITDA margins (2.1% in 1HFY20, down ~10% YoY). We expect revenue growth of 12.8/0.3% in FY21/22E led by rebound in transaction revenue (better market condition, StAR MF and INX contribution). We expect some operating leverage to play out with growth (EBITDA margin of 12.0/16.5% for FY21/22E). BSE has net cash of Rs ~20bn (~82% of MCap) and a dividend yield of ~6%, which limits downside. Risks include a rise in competition, loss of market share and an increase in investments. We maintain NEU on BSE based on unexciting 2QFY20. The core revenue stream remains under pressure while new age platform like StAR MF is doing well. Margin expansion will come with growth. We arrive at a SoTP based TP of Rs 585 by assigning 25x to core Sep-21E PAT (Rs 122/sh), Rs 111/sh for the CDSL stake and adding net cash after 20% discount (Rs 351/sh).

26 October 2019 INR22.6b (in-line) were flat YoY. The 9% YoY growth in pharmaceuticals (64% of sales) was offset by 15% YoY decline in Life Science Ingredients (LSI) (33% of sales). Particularly, Generics segment in Pharma and Specialty Intermediates in LSI grew 20%/32% YoY to INR3b/INR2.6b. 450bp YoY (~50bp QoQ) to 66% due to superior product mix. EBITDA margin grew at lower rate of 90bp YoY to 20.7% (in-line) due to higher employee cost (+130bp YoY as % of sales) and other expense (+170bp YoY as % of sales). INR2.2b) due to lower tax outgo. For 1HFY20, sales/EBITDA/PAT came in at INR44b/INR9b/INR4.4b, up 2%/3%/8% YoY. mirror shareholding as that of JLS would be listed on the BSE/NSE. Process would take about nine months. The Pharma entity had sales/EBITDA of INR56b/INR14b and LSI had sales/EBITDA of INR36b/INR4.

BSE has been investing in future growth drivers like INX, Insurance distribution, SME and StAR MF. Out of these only StAR MF has started generating revenue while the rest would need more time. Incremental revenue from StAR MF, volume revival and higher listing fee should lead to revenue growth of 11.1/11.8% in FY20/21E. We expect some operating leverage to play out with growth (EBITDA margin of 11.4/15.8% for FY20/21E). The stock is down 23% in the last 3M due to stress in the tradition revenue stream, continued investments despite slowdown and buyback tax. Value is emerging with net cash of Rs 20bn (~80% of MCap) and a dividend yield of ~7%. Risks include a rise in competition, loss of market share and an increase in investments. We maintain BUY on BSE based on in-line revenue and better margins. Increasing revenue contribution from StAR MF platform and rise in listing fee (exclusively listed) are positives. Buyback of Rs 4.6bn will be completed and tax applicable is only Rs 0.12bn (~3%). We arrive at a SoTP of Rs 655 at 25x core FY21E PAT plus Rs 134/share for stake in CDSL plus net-cash (ex-buyback and with 20% discount).

BSE Limited (BSE) is an India-based stock exchange company. BSE provides a transparent market for trading in equity, debt instruments, derivatives and mutual funds. The Company consists of two business segments: Stock Exchange activity and Depository activity. Stock exchange activity is engaged in facilitating the trading of securities and the activities incidental thereto, and Depository activity provides depository-related services. It also has a platform for trading in equities of small and medium enterprises (SME). BSE also provides various services to capital market participants, including risk management, clearing, settlement, market data services and education. The Company's subsidiaries include Marketplace Technologies Private Limited, Central Depository Services (India) Limited (CDSL), Indian...

Maintain BUY with SoTP of Rs 758 by assigning 25x to Dec-20E core PAT (ex-CDSL), Rs 120/share for the CDSL stake plus net cash. BSE reported weak 3QFY19, with revenue down 9.1% QoQ to Rs 1.05bn. There is visible weakness in core business streams (across listing fees, cash equity and even currencies, where BSE was dominant). BSE continues to lose equity cash market share (-43 bps QoQ to 8.3%), while its grip on currency derivatives also loosened this quarter (-326bps QoQ to 44.0% share). Drop in revenues and ongoing investments in new initiatives led to steep fall in EBITDA margin, (adjusted margin stood at 1% down 796bps QoQ).

Maintain BUY with SoTP of Rs 871 at assign 25x (vs. 30x earlier) on Sep-20E core PAT (ex-CDSL), Rs 129/sh for the CDSL stake plus cash. BSE stumbled in 2QFY19, with revenue crawling up 0.3% QoQ to Rs 1.15bn. There is visible weakness in core business streams (across listing fees, cash equity and even currencies, where BSE is dominant). BSE continues to lose equity cash market share (-117 bps QoQ to 8.7%), while its grip on currency derivatives also loosened this quarter (-469bps QoQ to 47.3% share).

2 November 2018 consolidated operating revenues grew 1.2% YoY to INR1.12b, below our estimate of INR1.2b. The miss was on account of lower other revenues which includes Rent, Training, Recovery charges, etc. Operating revenues exclude Treasury Income from Clearing Corporation. EBITDA at INR93m was below our estimate of INR167m, but included one-time charges totaling INR74m from [1] provision for investment in IL&FS;, and [2] provision for bad debts. Adjusted for the same, EBITDA would have been in line. PAT was INR459m (-31% YoY), 12% miss, which again would have been in line adjusted for the one-offs. revenue grew 1% YoY, revenues from equity cash transactions fell 33% YoY to INR218m, owing to prevailing market conditions. The same is the case for Book Building services too, down 28% YoY to INR72m. Annual listing fees, an annuity in nature, grew 10% YoY to INR472m.

We still see value based on (1) Huge net cash of Rs 26bn (~Rs 509/sh, ~62% of MCap), (2) Increased contribution from new growth engines, and (3) High dividend yield of 4.4%. We maintain BUY on BSE, and our SoTP for BSE factors in Rs 126/sh for CDSL, assigns 30x to FY20E core PAT (ex-CDSL) and add back net cash, which works out to Rs 1,090 (32% upside). BSE posted lower-than-expected numbers in 1QFY19 both on the revenue and margin fronts. Revenue was down 19.2% QoQ to Rs 1.17bn (our est. was Rs 1.38bn), led by 42.2% QoQ fall in transaction revenue (23% of rev) and 9.7% QoQ fall in services to corporate (48% of rev). Exclusive cash segment ADTV slipped 50% QoQ due to weak market conditions and ASM while currency derivative ADTV was up 45.7% QoQ.

We maintain BUY on BSE, and our SoTP for BSE factors in Rs 137/sh for CDSL, assigns 30x to FY20E core PAT (ex-CDSL) and add back net cash, which works out to Rs 1,190 (45% upside). BSE posted better-than-expected numbers in 4QFY18 both on the revenue and margin fronts. Revenue was up 8.6% QoQ to Rs 1.37bn (our est. was Rs 1.27bn), led by 8.2% QoQ rise in transaction revenue (35% of rev) and 7.4% QoQ rise in services to corporate (45% of rev). Exclusive cash segment/Currency Derivative ADTV was up 23/40% YoY in FY18. Margin improved 133bps QoQ to 28.1% (ex one-off) vs. our expectation of 25.0%, led by non-linearity. Margin improvement in FY18 was impressive, +1671 bps YoY to 21.0%.

BSE's 4QFY18 consol. revenue grew 25% YoY to INR1.39b (excl. investment income), above our estimate of INR1.2b, led by continued growth in Services to corporates (+30% YoY). However, EBITDA margin of 20.1% missed our estimate by 130bp due to a surge in other expenses (incl. regulatory fees, CSR and one-time repairs to the building). PAT of INR622m was above our estimate of INR577m, mainly led by better revenues and higher other income. FY18 revenues grew 29%, EBITDA was up almost 5x and adj. PAT rose 30%

BSE has started charging 32 of the 37 asset management companies (AMCs) for services through its mutual fund (MF) platform. This could be an INR150m-200mrevenue opportunity in the next fiscal; however,being the first year, we are currently modeling INR100m revenues from the segment. With ~50% of equity transaction revenues from exclusive segments, dependence one quity transactions where BSE is a distant second to NSE, is <15%. BSE cited that volumes in the exclusively-listed segment are inelastic to transaction charges, and hence, it does not feel the need to reduce the current fee. We note that BSE should be paying out 85%+ of its non-exceptional profits as dividends. And any buybacks like the one currently underway will be over and above the dividends. The combination will keep yields attractive (currently ~5%)

We maintain BUY on BSE, and our SoTP for BSE factors in Rs 148/share for CDSL and assigns 25x to Dec-19 earnings (ex-CDSL), which works out to Rs 1,210 (+43% upside). Bombay Stock Exchange Ltd (BSE) posted better-than-expected numbers in 3QFY18, on both the revenue and margin fronts. Revenue was up 12.7% QoQ to Rs 1.26bn (our est. was Rs 1.15bn), led by 24.8% QoQ rise in transaction revenue (35% of rev) and 8.9% QoQ rise in services to corporate (46% of rev). Change in transaction charges to Rs 1.5/trade and robust growth in exclusive listed shares volume (+51% QoQ) led to a rise in transaction revenue. Margin improvement was sharp (+281bps QoQ to 26.8% vs. our est. of 24.2%), led by non-linearity.

Transaction revenue from exclusively listed stocks BSE has a monopoly with 12001500 actively traded exclusively listed stocks. Taking advantage of this monopoly, BSE took a steep price hike in FY16 from `125/10mn to `10000/10mn. This led to a sharp jump in the illiquid cash equity revenue which now constitute 50% of total cash equity transaction...

We maintain BUY on BSE, and our SoTP for BSE factors Rs 430/sh from CDSL and assigns 25x to Sep-19 earnings (ex-CDSL), which works out to Rs 1,206 (22% upside from CMP). Bombay Stock Exchange Ltd (BSE) posted better-than-expected numbers in 2QFY18, on both the revenue and margin fronts. Revenue was up 7.9% QoQ to Rs 1.11bn (our est. was Rs 1.06bn), led by 11.3% up-tick in services to corporates (48% of rev) and 10.4% QoQ rise in transaction revenue (32% of rev). Margin improvement was sharp (+797bps QoQ to 23.4% vs. our estimate of 15.7%), led by a cut in tech expenses.

At 23/22x FY18/19E earnings (a significant discount to MCX (39/32x FY18/19E EPS) and at par with global averages, BSE merits a BUY. Our SoTP for BSE factors Rs 430/sh from CDSL and assigns 25x to Sep-19 earnings (ex-CDSL) and works out to Rs 1,200 (22% upside from CMP). The Bombay Stock Exchange Ltd (BSE) is Asias oldest stock exchange (estd. 1875 and listed in Feb-17). Long term investors should take cognizance of its recent (if overdue) renaissance under a market savvy management, including its recent listing. With the latest technology platform (6 microsecond response time), BSE claims to be ten times faster than NSE (its much larger competitor).

(a) Strong brand recognition with a track record of innovation (b) Diversified and integrated business model (c) Diversified sources of revenue and strong financial (d) Development and introduction of new products The public issue of BSE consists of offer for sale of 1.54 Cr equity shares by existing shareholders aggregating to Rs. 1,243 Cr (at upper price band)....

We believe that BSE Ltd provides good investment option in the form of 1) Right business and 2) Right valuation. Right business: First listed multi-platform stock exchange with strong business model, management, corporate governance, balance sheet and cash flow. Right valuation: We believe that the IPO has been attractively priced with PER of 35x on FY16 reported EPS vs. 56x for Multi Commodity Exchange (MCX IN) and cash per share of Rs512 (64% of issue price). Further, there is likely to be value...