
Nuvama has initiated coverage on BSE Limited, assigning a ‘Buy’ rating with a target price of ₹6,730, implying a 23% upside from current levels. The brokerage anticipates a revenue and adjusted profit after tax (APAT) compound annual growth rate (CAGR) of 39.9% and 70.8%, respectively, over FY24–27, projecting a return on equity (RoE) of 37.9% by FY27. This optimistic outlook is attributed to BSE’s adaptability and diversified revenue streams, including its dominant StAR MF platform, Asia Index Private Limited (AIPL), and colocation services.
Nuvama acknowledges potential challenges stemming from the Securities and Exchange Board of India’s (SEBI) recent reforms in the index derivatives market. However, it believes BSE is well-positioned to navigate these changes. The brokerage notes that discontinued contracts constitute only 21.3% of BSE’s index option premium volumes, compared to 46.9% for the National Stock Exchange (NSE). Additionally, BSE’s active customer base, currently between 1.5 million to 2 million monthly users, presents significant room for expansion relative to NSE’s 4.2 million. Nuvama estimates BSE’s equity index option average daily premium turnover volume (ADPTV) market share will increase from 3.1% in FY24 to 14.9% in FY27.
The brokerage also highlights that increased contract sizes are expected to reduce clearing charges, thereby enhancing EBITDA margins over FY24–27. Furthermore, BSE’s diversified revenue streams, such as the StAR MF platform—which held an ~85% market share in FY24 and achieved 63% year-over-year revenue growth—are projected to contribute significantly to its financial performance.
Jefferies recently upgraded BSE to a ‘Hold’ rating with a target price of ₹5,250, expressing concerns about stretched valuations and over-optimistic market share expectations. Goldman Sachs initiated coverage with a ‘Neutral’ rating and a target price of ₹5,060, citing balanced risk-reward dynamics.
BSE Limited, established in 1875, is Asia’s oldest stock exchange and operates a diversified business model encompassing transaction charges, services to corporates, and other securities services. The exchange has demonstrated adaptability in the evolving regulatory landscape and continues to explore avenues for growth, including the expansion of its index business and colocation services.
Key risks identified by Nuvama include potential adverse regulatory changes, over-dependence on the equity index options segment, macroeconomic slowdowns, and technology infrastructure or security challenges.