Boost for NSE Ltd. & HDFC Securities – STT Collection exceeds yearly target by September’21

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The STT is a direct tax payable on the value of taxable securities transactions done through a stock exchange. It is levied at 0.1 per cent of turnover for delivery-based equity transactions, while for intra-day transactions, the STT for purchase is nil. For sale, it is 0.025 per cent of the turnover.

Collections already stand at Rs 12K crore, compared to Budget target of Rs 12.5K crore by September itself on the back of increased retail participation in the stock market. The collection for the corresponding period last year stood at 8,000 crore and 6,000 crore the year before.

“The market is overheated and the positive sentiment around economic recovery is aiding higher-than-expected revenues. The announcements such as bad bank, relief package for the telecom industry and production-linked incentive (PLI) scheme for the auto sector are all positives,” said a government official.

Rakesh Nangia, chairman, Nangia Anderson India, said there has been a massive inflow of funds into the capital market by all classes of investors, resulting in a jump in STT collection, and if the trend continues, the government’s collections on STT may double this year.

NSE : 

According to data from PRIME Database, the quantum of retail holding in NSE-listed companies has crossed the 7 per cent mark for the first time ever in the quarter ended June 2021. In value terms, retail holding touched a new high of Rs 16.18 trillion from the previous quarter’s Rs 13.94 trillion – an increase of 16 per cent.

Last month, NSE chief Vikram Limaye pointed out that the stock exchange has seen over 50 lakh new investor registrations in the current financial year. This is equal to 62.5 per cent of the total number of new investor registrations, at around 80 lakh, that were added last financial year. The extra retail participation could be on account of the bull run on the stock market, spearheaded by IT and pharma companies. 

New retail investor registration in the stock market directly benefits unlisted companies like NSE limited which has seen an increasing trend of new retail users. In the last financial year 73% of NSE’s profits came from its core operations which is fees on trading of various asset class. With an increasing trend of volume traded, it is safe to say that the transaction fees charged by NSE are expected to be higher in volume for the current period. 

For the year 19-20, NSE enjoyed a market share of about 93% in the cash equities segment, almost 100% in the equity derivatives segment and about 60% in the currency derivatives segment. Over the years, NSE has emerged as a prominent market infrastructure institution in the rapidly changing global marketplace. On the financial front, for FY 2019-20, the consolidated revenue of NSE Group was 3,897.52 crore(y-o-y increase of 11%). Of this, approximately 90% of the revenue was contributed by core operations. The Profit before tax was 2,525.25 crore and the Profit after Tax was 1,884.78 crore (y-o-y increase of 10%). 

NSE ltd. is on a path to a potential IPO. In its annual report for FY20-21, the Exchange says, “NSE has requested SEBI to convey its no-objection to enable it to proceed with its IPO plan and for filing the DRHP. Response from SEBI is awaited.”

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HDFC Securities :

Popular unlisted company, HDFC Securities benefits as well from an increasing user base since one of its revenue streams is brokerage and other fees charged for the different types of products offered by them. The company provides different types of services to its customers like: Equity Trading, Mutual Funds, IPOs, Derivatives, Fixed Income, Exchange-traded Funds, Insurance, Small case, financial tools and calculators, tax solutions and robo-advisory. As retail investors become more aware about the various types of investment products in the market, the demand for these products increases and the revenue generated by brokerage firms is expected to increase as the total brokerage earned would be naturally higher.

HDFC Securities price has almost doubled since February this year and has become a huge prospect for investors all around. The Profit After Tax for the year ended March’ 21 stood at 703 crores, compared to 384 crores for the year ended March’ 20. The PAT increased by 83% year on year while the revenue grew by 62.3% which looks like a prominent trend.

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