Earnings Outlook
BSE Oct-Dec numbers seen muted as cash market volume down
This story was originally published at 17:23 IST on 25 January 2025
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By Anshul Choudhary
MUMBAI – BSE Ltd. is likely to report muted quarter-on-quarter performance in the December quarter due to lower volumes in the cash market and moderation in volume growth in options segment. At the same time, better premium realisations, along with lower regulatory and clearing costs, are likely to offset the negative effect of lower volumes in the cash market.
Brokerage firms Mirae Asset Sharekhan and HDFC Securities expect the stock exchange's consolidated net profit to fall 5-14% on quarter, while Motilal Oswal Financial Services expects the same to rise 6%. According to these brokerages, the exchange's net profit is likely to be in the range of INR 3.0 billion to INR 3.69 billion compared with INR 3.47 billion in the September quarter. However, their projections suggest growth will still be robust annually as all three brokerages expect the key metric to triple on the year.
Similar to the profit estimates, Sharekhan and HDFC Securities expect the consolidated revenue to decline on quarter, while brokerage Motilal Oswal expects the same to rise slightly. The company's revenue is likely to come in the range of INR 7.20 billion to INR 7.59 billion as compared with INR 7.46 billion in the previous quarter. However, these projections suggest the revenue is likely to double on year.
BSE is scheduled to report its earnings on Feb. 6. Shares of the company have continued to rise on gaining market share from competitor, National Stock Exchange. Since its September quarter earnings, shares of BSE have risen nearly 30%. So far this year, the stock has risen over 9?spite seeing a 140% rise in 2024, and over 300% rise in 2023. On Friday, shares of the exchange closed at INR 5,835.60 on the NSE, down 1.3%.
While lower volumes from cash market may dent revenue growth in the December quarter, better realisation from the derivatives segment is likely to aid growth. "The regulatory changes did not have any impact on BSE's derivative volume; in fact, there was a shift towards better-margin volumes...," HDFC Securities said in an earnings preview report.
When the Securities and Exchange Board of India announced a slew of measures related to derivatives--including reduced number of expiries, larger contract size, upfront premium collection--there was big concern among analysts that it may hit earnings. While brokerages acknowledged volumes have come down in the derivatives segment, they also pointed out that exchanges are benefiting from higher premiums. "The best ever premium to notional turnover ratio witnessed in Dec'24, offsetting the adverse impact of volume decline (for BSE)," brokerage Motilal Oswal said in its earnings preview report.
Brokerages expect BSE's operating profit to have risen during the quarter on lower regulatory, and clearing and settlement costs. "Exchanges earn on the premium, while regulatory and clearing costs are based on the notional and the number of contracts traded, resulting in cost savings for the exchanges and margin expansion," HDFC Securities had said in a report in December. Brokerage Motilal Oswal and HDFC Securities expect the company's earnings before interest, taxes, depreciation, and amortisation margin to rise around 350 basis points on quarter. During the September quarter, the company had reported a consolidated EBITDA margin of 52%.
Following are the Oct-Dec earnings estimates for BSE Ltd. based on reports from three brokerage firms in descending order by the estimate of net profit:
| Brokerage Name |
Net Sales (in INR mln) |
Net Profit (in INR mln) |
|---|---|---|
| Motilal Oswal Financial Services Ltd | 7,589 | 3,690 |
| HDFC Securities Ltd | 7,430 | 3,302 |
| Sharekhan Ltd | 7,200 | 3,000 |
End
Edited by Ashish Shirke
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