NSE’s Strong Performance in Q2 FY25: A Comprehensive Analysis
The National Stock Exchange (NSE) has delivered a solid financial performance in the first half of FY25, showcasing remarkable growth despite facing some challenges. Here’s a detailed breakdown of the key highlights for this period:
- Impressive Revenue Growth NSE’s revenue from operations surged by a significant 35%, rising from ₹6,688 crore in H1FY24 to ₹9,000 crore in H1FY25. This substantial growth can be attributed to an uptick in trading volumes across various segments, reflecting increased market participation and heightened investor activity.
- Surge in Total Expenses Although the revenue growth is commendable, total expenses saw a sharp increase. Expenses, excluding contributions to the Core Settlement Guarantee Fund (SGF), grew by 60%, from ₹1,665 crore in H1FY24 to ₹2,672 crore in H1FY251. A major driver of this hike was a one-time payment of ₹642 crore made in September 2024 to settle a Trade Adjustment Program (TAP) case with the Securities and Exchange Board of India (SEBI). These settlements, while adding to short-term expenses, are crucial for maintaining the credibility and regulatory standing of the exchange.
- Contribution to Core SGF The NSE’s contribution to the Core Settlement Guarantee Fund (SGF) witnessed a significant reduction. While ₹610 crore was contributed during H1FY24, the contribution dropped to ₹160 crore in H1FY251. This decrease suggests that the existing funding levels of the SGF are sufficient to meet SEBI’s regulatory requirements, ensuring operational stability and investor confidence in market integrity.
- Profit Surge Driven by Core Operations Profit from core operations witnessed a strong increase, underscoring the inherent strength of the NSE’s business model. The profit grew from ₹3,893 crore in H1FY24 to ₹5,322 crore in H1FY251. This remarkable growth highlights the robust performance driven by the exchange’s core operational activities, which remain the primary revenue generators.
- Strong Cash Flow Generation Cash flow generation, a critical indicator of financial health, remained robust during the period. The NSE generated ₹5,892 crore in cash from operations in H1FY25, demonstrating its strong liquidity position and ability to fund both current operations and future growth initiatives1. This solid cash flow generation further cements the exchange’s ability to withstand market volatility and make strategic investments.
- Projected Earnings Per Share (EPS) Growth A key indicator for investors, the projected Earnings Per Share (EPS) shows a promising upward trend. Post-bonus and on an annualized basis, EPS is expected to approach ₹401. This reflects positive shareholder returns and the potential for future dividends, offering a favourable outlook for investors.
- Impact of SEBI’s New F&O Regulations The Securities and Exchange Board of India (SEBI) has introduced new measures to curb speculative retail trading in the Futures and Options (F&O) segment. These changes, set to roll out in phases from November 20, 2024, include:
- Reduction of Weekly Expiries: SEBI will limit the number of weekly expiries for index derivative contracts to one per benchmark index per exchange. This change aims to curb speculative trading and minimize risks associated with uncovered option selling1.
- Increased Contract Sizes: The minimum contract size for derivatives will rise from ₹5-10 lakh to ₹15 lakh, ensuring that participants take on appropriate levels of risk when engaging in the derivatives market.
- Higher Margin Requirements: SEBI will implement an additional extreme loss margin (ELM) of 2% on all short options positions on expiry days to protect investors from extreme market fluctuations. These regulatory changes are expected to affect the trading volumes in the F&O segment, with analysts projecting a potential reduction of up to 40% in NSE’s options premium turnover1. This has raised concerns about the potential impact on NSE’s revenue from the F&O segment.
- NSE Market share –
NSE continues to dominate with over 90% market share across all categories. Over the past four years, its revenue growth has outpaced BSE by more than three times, solidifying its position as India’s leading exchange.
- Cash Market – 93%
- Equity Futures – 99.88%
- Equity Options- 88.89%
- Currency Futures – 98%
- Currency options- 100%
- Interest Rate Future – 100%
- Debt – 95%
- NSE Mutual Fund- 10%
- Recent Developments and News – 9000% Dividend After 4:1 Bonus: NSE announced a 4:1 bonus issue and a final dividend of ₹90 per share for the financial year ended March 31, 2024. This is the highest dividend ever declared by the exchange.
Conclusion
The NSE’s performance in the first half of FY25 demonstrates robust revenue growth and profitability, despite facing increased costs driven by regulatory settlements. The exchange’s ability to generate strong profits and maintain solid cash flows highlights its operational resilience1. However, the upcoming SEBI regulations are likely to affect the F&O market and could influence future trading volumes. Investors will need to closely monitor how the NSE adapts to these regulatory changes in the second half of FY251. Continued growth in its core operations could bolster its financial standing and further enhance shareholder value.
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