Bengaluru-based JainMatrix Investment has come out with its research report on BSE IPO which opened for subscription today. The stock exchange – Asia’s oldest and world’s largest by the number of companies listed – has generally received positive recommendations from brokerage houses. However, JainMatrix has offered it an Average rating, stating high valuations and fierce competition from rival NSE.
The full report, which makes for an interesting read, is available below the text. Here are a few summary points:
BSE is a stock exchange platform which is the first stock exchange in Asia and the world’s largest exchange by number of companies. Income for FY16 was Rs 658 cr. and profits Rs 123 cr. It offers a wide range of trading related services and monitors the listed companies, Sensex index and market activities. New product offerings, start of operations at GIFT city and stake divestment via CDSL IPO are likely to boost financials in the medium term.
However it is an OFS, so BSE doesn’t benefit in IPO. Market shares are low at 39% in currency derivatives and 14% in equity cash. At FY16 P/E of 35.9, and a FY17E forward PE of 21.0, the valuations are high. NSE is a fierce competitor, and is ahead in terms of volumes, growth and profits, reducing BSE to a niche player.
BSE IPO rating is AVERAGE, and investors may look elsewhere for long term gains.
BSE shares 85% of profits as dividend, and plans to continue with high dividend in future, per CEO.
Subsidiary CDSL has recently filed papers for IPO with SEBI. BSE would dilute 26% stake in this IPO.
The unofficial/ grey market premium for this IPO is in the range of Rs. 128-130. This is a positive.
SEBI announced a reduction of 25% in the fee payable by brokers and also decided to amend regulations to enable them to make payments through digital mode. This is a positive for the sector.
Read the full report on BSE IPO rating here