BSE was established in 1875 and is Asia’s first Stock Exchange and one of India’s leading exchange groups. Over the past 144 years, BSE has provided a capital-raising platform and provided a platform for trading in equity, debt instruments, derivatives and mutual funds. It also has a platform for trading in equities of small-and-medium enterprises.
We recommend to invest for mid to long term around CMP-300, with a target of 1000 plus.
Here we are giving a brief rational for the same. Subscribe to our services for detailed report, regular updates and active portfolio management.
- The investment industry has been growing well in India since past 20 years and with less than 5 crore demat accounts against a population of 138 crore; it is expected to grow multi fold over the coming years.
- Some might argue that BSE is clocking only about 10k crore TO daily compared to its only competitor NSE which is clocking
- BSE-owned India International Exchange (India INX) has registered an all-time high daily turnover of over Rs 23,060 crore (USD 3.3 billion) on its derivative segment; highest ever since it’ commencement in 2017 on the bourse’s IFSC GIFT CITY centre. The average daily TO at INX is well above 8000 crore.
- It is correct that BSE has been lagging big time behind NSE on the Derivatives front, however it has been gaining in its international operations as can be viewed above. It can be logically expected that the market participant’s desire to diversify will also drive the derivatives volume of BSE higher in years to come.
- Its mutual fund platform STAR MF and SME listing platform has also been growing very well while debt market trading growth has been slack which has been the case with NSE too on account of lack of depth in Indian debt market.
- The profitability metrics has been disappointing around 10% for past 3-5 years but it is warranted by the nature of its business and will not hurt if stock is bought at good valuations.
7. Market cap is a meagre 1400 crores which can times ten in next 5-10 years effectively increasing the share price by same factor.
8. Price to Earnings ratio which we emphasise a lot is below 10 at CMP which is very attractive. BV is 528 Rs per share. Thus, it is evident that the listing price of about 1000 plus was not warranted for this stock. However, as the institutional investors place the stock in their long term portfolio the demand supply gap will become favourable for the long term return of stock price.
9. Dividend Yield is also around 10% and the company is regularly paying attractive dividends.
10. The company’s core business income is from trading turn over in equities and derivatives which is expected to continue to rise as the financial markets penetration grows in India. The secondary source of income is from its exchange related services like CDSL, STAR MF and so on which are providing high margin profits with lower long term fixed costs.
11. Cash flow analysis should be spared with given the financial intermediation type of nature of its business.
12. Its subsidiary CDSL is also listed so any increase in its market cap will boost BSE’s share price also.
13. See Image 2 : The performance of stock exchange share prices have been astounding world over. Here we are giving the charts of world’s leading two exchanges namely; NASDAQ INC, and ICE INC (Intercontinental Exchange Inc).
As it is evident from the chart both the exchanges’ stock prices have given more than five fold return over the past ten years. The market capitalisation of both the stock exchanges are USD 17 and 46 billion respectively; compared to which BSE Ltd market cap is a scanty 200 million USD only, thus having exponential scope of growth.
14. NSE ltd’s public issue which is due to come anytime soon will also provide boost to valuation and demand of BSE ltd shares.
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