India’s most powerful financial institution isn’t a bank or an insurance company. It’s the National Stock Exchange (NSE) — a technology-led dominant force that powers the country’s capital markets and extracts value from virtually every market interaction. NSE is arguably the most profitable exchange in the world by operating efficiency. How NSE Makes Money? If you’ve ever bought a share, traded an option, or tracked the NIFTY 50, chances are NSE made money from it. But the story goes far beyond simple transaction fees.
In FY25, NSE reported INR 19,177 crore in total income and INR 12,188 crore in net profit, representing a staggering 47% increase in profits over FY24. With a PAT margin of 58% and an EBITDA margin of 74%.
This article takes a comprehensive look into NSE’s business model, structural advantages, strategic divestments, NSE IPO delays, and how regulatory shifts in the commodities and energy space could redefine India’s trading landscape.
Most Profitable Exchange: A Marketplace That Monetizes Everything
NSE’s business model is built on monetizing every layer of the capital market value chain. From order matching and clearing to market data and listings, it charges a fee at each junction.
NSE Revenue Streams:
- Transaction Fees
- Colocation, Connectivity, and Data Sales
- Listing Services
- Index Licensing and Subscriptions
- Clearing and Settlement Services
- Investment Income & Miscellaneous Revenues
Let’s break down NSE’s Earning:
#1 Transaction Fees: The Engine Behind NSE’s Earnings 💰
Transaction Fees Revenue: INR 13,623 crore in FY25 (71.35% of total)
Every buy or sell order — whether in equities, derivatives, or currencies — contributes to NSE’s revenue. The sheer trading volume turns minimal per-trade fees into mammoth earnings. Even after regulatory steps to curb speculation (e.g., limiting weekly options), derivative volumes, especially in NIFTY 50 index options, remained resilient.
The derivatives market now contributes the lion’s share of exchange revenues, making NSE the largest derivatives exchange globally by volume. Even with growing competition, NSE continues to hold over 87% share in options premium turnover.
#2 Colocation, Connectivity & Data Monetization 🛠️
Revenue: INR 1,564 crore in FY25 (9.24%)
- Data Centre & Connectivity: INR 1,157 crore
- Feed Services & Terminal Access: INR 407 crore
NSE provides colocation facilities allowing brokers and institutional clients to host their servers close to its trading infrastructure. In high-frequency trading, every microsecond counts. NSE monetizes this speed advantage.
Data services are another goldmine. With millions of data points flowing every second, NSE charges a premium for real-time feeds, analytical dashboards, and access to historical databases, making it indispensable to fund houses and prop desks.
#3 Listing Services: NSE as a Capital Formation Enabler
Listing Services Revenue: INR 314 crore in FY25 (41% growth YoY)
FY25 saw:
- INR 18.7 lakh crore raised via debt
- INR 4.3 lakh crore through equity
- 242 company listings (Mainboard + SME)
NSE earns through IPO processing fees, annual listing charges, and compliance-based subscriptions. It remains India’s preferred listing venue due to its deep liquidity, wide reach, and strong investor base.
#4 Index Licensing & Subscription Revenues 🌐
Licensing & Subscription Revenue: INR 121 crore in FY25 (0.63%)
NSE’s proprietary indices such as NIFTY 50, Bank NIFTY, and NIFTY Midcap are used by global ETFs, Indian mutual funds, and passive strategy products. The exchange earns licensing fees for index usage and data access. As passive investing grows, this revenue is expected to become increasingly significant.
#5 Clearing & Settlement and Other Revenues 🚧
Clearing & Settlement Revenue: INR 321 crore in FY25 (1.87%)
NSE’s clearing subsidiary, NSE Clearing Ltd, ensures trade settlements and risk management. This segment more than doubled its revenue YoY, reflecting volume growth and efficient risk practices. Investment income from reserves and one-time divestment gains also support the bottom line.
Major Divestments in FY25: Leaner and Sharper Moves
- TalentSprint sold to Accenture: INR 245 crore
- NSEIT sold to CL Educate: INR 230 crore
- Protean eGov stake (20.31%) sold via OFS: INR 1,387 crore
These exits help NSE concentrate on its exchange business and redeploy capital toward scalable, recurring revenue areas like data and ESG.
⚡ Electricity Derivatives: MCX Sparks a Sectoral Shift
In a landmark move, SEBI approved MCX to launch cash-settled electricity futures, referencing spot prices from IEX. This opens up a new financial market for power contracts, similar to crude oil or gold derivatives.
Market Dynamics:
- MCX: Gains first-mover advantage in electricity as a financial asset.
- IEX: Faces pressure but may benefit via benchmark pricing and possible fee-sharing.
- Market Impact: Higher efficiency in hedging electricity price risks for discoms, corporates, and traders.
Could NSE Disrupt This Too?
With 11.3 crore investors, best-in-class tech, and dominant infrastructure, NSE’s entry into energy and commodities could immediately challenge both MCX and IEX.
- Unified account for equities + F&O + commodities would be a game-changer
- Seamless UX would attract both retail and institutional flow
What Trades on NSE: Derivatives Landscape (June 2025)
Index Derivatives:
- NIFTY 50, Bank Nifty, Fin Nifty, NIFTY Midcap Select, and NIFTY Next 50
- Weekly options allowed only on NIFTY 50 after SEBI’s 2024 circular
Equity Derivatives:
- 180+ actively traded stocks
- New additions: KFin Tech, Blue Star, Amber Enterprises
- Scheduled removals: Hindustan Copper, Delta Corp
Contract Specifications:
- Rolling 3-month cycle (near, next, far)
- Cash settlement only
- Lot sizes updated quarterly based on volatility and price movement
NSE also offers tools like option chains, margin calculators, and backtesting platforms via APIs and third-party brokers.
NSE vs BSE: Valuation Distortion
Despite operational supremacy, NSE’s implied valuation trails that of BSE. Here’s a snapshot:
| Metric | NSE | BSE |
|---|---|---|
| FY25 PAT | ₹12,188 Cr | ₹525 Cr |
| RoE | 45% | 15% |
| P/E (Unlisted) | ~53x | ~84x |
| EBITDA Margin | 74% | ~45% |
Market Feedback Loop:
- BSE’s stock has surged 20x in 18 months, driven by scarcity premium
- Investors use BSE as a proxy play for NSE
- Once NSE lists, pricing gaps may correct
Final Thoughts
NSE’s margins, scalability, and recurring income streams make it a perpetual engine of financial value. From core trades to new verticals like ESG, cloud colocation, and international linkages, its reach is expanding.
If the NSE were to enter the commodities or energy markets, it could significantly transform these segments, leveraging its scale and infrastructure. Such a move has the potential to diversify NSE revenue streams and substantially enhance its earnings, replicating the success it has achieved in the equities and derivatives markets.
Really really an insightful write up.
It’s very useful informatiin.
Excellent feedback for the NSC’s proposed IPO.