Jan 23, 2017 - two leading global exchanges are strategic partners of BSE. It ... management, clearing, settlement, mark
IPO REPORT
BSE Limited (BSE) Formed on July 9, 1875, it the first stock exchange in Asia. It has over 5000 companies listed on it, the highest in any exchange around the world. It also India's largest and the world's 11th largest exchange by market capitalization, with US$ 1.52 trillion in total market capitalization of listed companies. Deutsche Bourse and Singapore Exchange which are World’s two leading global exchanges are strategic partners of BSE. It operates in three primary lines of business - the listing business, the market business and the data business. It also offers other services including risk management, clearing, settlement, market data services, IT services and solutions, licensing index products such as the S&P BSE SENSEX and financial & capital markets training.
Industry Overview Globally, there are over 70 major stock exchanges with a market capitalisation of more than US$5 billion. The total global market capitalisation of ‘World Federation of Exchanges’ member (the "WFE Exchanges") aggregated to US$66 trillion at the end of June, 2016. 16 of these stock exchanges had a market capitalisation of above US$1 trillion each. Market capitalisation of the aforementioned 70 major stock exchanges taken together accounted for 86% of the total global market capitalisation. The two major stock exchanges in India are the BSE and the NSE. The market capitalisation of both stock exchanges has gradually increased in line with a rise in trading activities and increasing share prices for listed companies. The steady growth of the Indian economy, growing awareness regarding the stock market, increased participation by foreign institutional players as well as domestic retail investors and increased penetration of share market trading services across India are some of the key factors which contributed to this growth.
21st January, 2017
Details of Issue Price Band (INR) Issue Size (INR):
805 – 806 1,243Cr
Opening Date Closing Date Face Value (INR) Bid Lot Listing on
23rd Jan, 2017 25th Jan, 2017 2 18 NSE
Key Financial Ratios Debt-Equity Ratio (x) Long Term Debt-Equity Current Ratio (x) ROCE (%) RONW (%) Payout (%)
FY16 0 0 1.27 7.98 6.45 70.17
FY15 0 0 1.13 10.73 8.75 32.88
Investment Rationale
Strong brand recognition - BSE is one of the most recognizable brand names in India. According to CARE Research, the BSE ranks third globally in terms of currency options and futures contracts traded in 2015, with 430 mn currency derivatives traded (up 103% YoY). BSE has introduced new products and services from time to time like BSE StAR and BSE SME. Diversified and integrated business model - BSE operates a diversified and integrated business model including trading, clearing and settlement of products listed and traded on the BSE, as well as the provision of data products, IT services and solutions, index products and training. By providing such integrated services, BSE supports its members throughout the entire life-cycle of a trade. Such an integrated approach benefits and keeps costs low for participants and members by providing efficiencies that are associated with having a wide range of services integrated under one entity. State of the art infrastructure and technology - BSE provides electronic systems for entry, trading, clearing, settlement and depository services. It is always looking to improve its IT capabilities, the reliability and consistency of which helps it to maintain competitive position. BSE’s electronic systems include BOLT+ and precision time protocol. BSE’s platforms are interconnected and operated through the same network and workstation, which helps to provide market participants with a seamless experience and efficient operations. To boost investor confidence and transparency, it has also implemented real-time risk management system, which conducts real time calculations of members' margins and limits. Establishment of an international exchange at GIFT City - Through the new international exchange, BSE will look to provide electronic trading platform that will facilitate domestic firms to raise capital in foreign currency by issuing foreign currency dominated bonds. This will be an additional source of revenue for BSE.
IPO REPORT
Key Risks
The Broad market trends and other factors beyond their control could significantly reduce demand for their services and harm their business, financial condition and results of operations. There can be no assurance that will be successful in implementing current and future strategic plans. The company operates in a business environment that continues to experience significant and rapid technological change Trading on their equity derivatives segment is less than that on the NSE and there is no guarantee that they can successfully compete in the equity derivatives segment against the NSE.
Financials Balance Sheet (INR Cr) Particulars Sources Of Funds Share Capital Reserves Total Equity Application Money Total Shareholders Funds Minority Interest Secured Loans Unsecured Loans Total Debt Other Liabilities Total Liabilities Application Of Funds Gross Block Less: Accumulated Depreciation Net Block Capital Work in Progress Investments Current Assets, Loans & Adv. Sundry Debtors Cash and Bank Loans and Advances Total Current Assets Less : Current Liab. and Prov. Current Liabilities Provisions Total Current Liabilities Net Current Assets Deferred Tax Assets Deferred Tax Liability Net Deferred Tax Other Assets Total Assets
FY16
Statement of Profit and Loss (INR Cr) FY15
FY14
11 2,615 0.01 2,625 222 2 2 72 2,922
11 2,561 0.01 2,572 199 4 4 65 2,839
10 2,366 0.01 2,376 188 1 1 60 2,625
555 308 247 2.63 2,062
730 479 251 4 2,276
610 419 190 34 2,186
48 1,610 104 1,762
36 1,452 84 1,573
34 1,469 70 1,574
1,208 77 1,285 477 14 4 11 122 2,922
1,272 83 1,356 217 14 10 4 88 2,839
1,378 58 1,437 137 7.55 12 -5 82 2,625
Particulars Income Operating Income Other Income Total Income Expenditure Operating & Admin Exp Miscellaneous Expenses Interest Employee Expense Total Expenditure Gross Profit Depreciation Profit Before Tax Tax Deferred Tax Net Profit Minority Interest (after tax) Profit/Loss of Associate Co. NP after MI & P/L Asso. Co. Extraordinary Items Adjusted Net Profit
FY16
FY15
FY14
616 75 691
584 41 625
485 46 531
226 126 1 112 464 227 62 166 40 -8 133 36 -0.27 97 -34 131
173 57 1 114 345 280 59 221 51 -7 177 21 -0.28 156 -39 195
117 98 0 88 304 227 32 194 30 5 160 24 -0.41 135 -51 186
Summary of Cash Flow Statement (INR Cr) Particulars Cash and Cash Equivalents at Beginning of the year Net Cash from Operating Activities Net Cash Used in Investing Activities Net Cash Used in Financing Activities Net Inc/(Dec) in Cash and Cash Equivalent Cash and Cash Equivalents at End of the year
FY16
FY15
FY14
80 -18 251 -153
181 -159 97 -39
473 -56 128 -197
80
-101
-125
160
80
348
Valuation: The valuations seems to be reasonable when compared with Multi Commodity Exchange (MCX), only listed company in this space. At the upper end of the price band, Price to Earnings multiple of 21x with 2016-17 earnings, looks decent when compared to MCX which is trading at 40x times its earnings 2016-17. All in all, based on valuations, expected industry growth and strong management outlook, we recommend a SUBSCRIBE for all kinds of investors.
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