Buy BSE Ltd For Target Rs.4,025 by Prabhudas Liladhar Capital Ltd
Regulatory pressure to weigh on growth
Industry derivative volumes for Aug’26 have contracted by ~6% MoM due to the implementation of CAS. Moreover, stricter bank guarantee norms and the hike on STT in the F&O segment has slowed down overall industry growth. While BSE continues to maintain a strong market share in index options at 35%, it is seeing a lower run-rate. We factor the same into our FY27/ FY28E growth estimates (at 23%/ 20% YoY) for index options. We cut our FY27/ FY28E PAT estimates by 2%-6% and reduce our multiple to 43x on FY28E PAT vs. 49x earlier. Sensitivity analysis shows an impact of 1%-2% on FY27/ FY28E PAT if NSE does not list on BSE. Stock has corrected ~12% over the past month on the impact of regulatory headwinds. Maintain BUY with a TP of INR4,025
Industry volumes facing regulatory headwinds:
With the implementation of Closing Auction Session (CAS), industry derivative volumes have contracted by ~6% MoM in the month of Aug’26. Moreover, tighter collateral requirements from bank guarantee norms and the recent STT hike in the F&O segment is likely to weigh on overall growth. We expect the overall market to slow down as participation from proprietary/ highfrequency traders is down to 60% (from 65% in YTD Aug-25).
Expect FY27E index option volume to grow 23%:
While BSE continues to maintain a strong market share at 35% (YTD), index option volumes have contracted by 27% MoM in Aug-26 due to the implementation of CAS. Assuming a similar run-rate for the rest of FY27E due to regulatory pressure (CAS, STT hike and prop trading norms), we build a lower growth of 23%/ 20% YoY in index options in FY27/ FY28E. We cut our FY27/ FY28E PAT estimates by 2%-6%. However, BSE can explore measures such as raising options fees and messaging fees for its co-location facility to boost profitability. Moreover, new products such as MSCI-linked F&O to support growth
Impact of 1%-2% on PAT if NSE does not list on BSE:
While the current regulations do not provide for the self-listing of a stock exchange, NSE would need approval from SEBI to allow its shares to trade on its own platform. NSE shares could also trade in the “permitted to trade” category even though they would formally list on BSE. Our sensitivity analysis shows a 1%-2% impact on FY27/ FY28E PAT, assuming cash market share does not improve further.
Please refer disclaimer at https://www.plindia.com/disclaimer/
SEBI Registration No. INH000000271
