Current/non current investments have gone up by almost same amount.
My way to look at this company is completely linked to India growth story. If the later plays out, financial activities are bound to rise in India, which in turn will lead to more equity trading, more currency hedging/trading, more raising money through bonds, more foreign fund flow, more mutual funds participation by retail investors, more inx volumes, more data dissemination, more corporate listings, novel commodity trading products.
The thing is that BSE is investing in many new projects at the moment such as MF platform, INX, insurance platform setting up JV with world’s leading insurance platform, bond platform, along with trying to build volumes in equity and currency derivatives (recent changes to fee structure). They are not charging anything/much for everything other than equity trading/listings/depository at the moment. As volumes build up, many of these streams will start contributing to profits. We are seeing this theme play out at the moment with currency derivatives already.
A lot of investments are being made to maintain the technological edge of BSE.
Another point, which we all know, is the duopoly. If universal exchange theme is implemented, it would be three players. But than field will open for commodity trading as well. Huge entry barriers, investment/cash ~ 2500 cr (half the mkt cap), reasonable valuation (20x trailing…much lower ex-cash), very good mgmt at helm (Mr. Ashish Chouhan), are some of the things which make it a safe (High MOS) investment bet.
Risks are of course there -
- India story doesn’t play out (highly unlikely)
- BSE is unable to make a dent in segments where NSE is present (equity and equity derivatives)
- They have put a huge bet (investments planned for next 5 years) on INX (NSE has their onw INX). We cannot be sure who will come out on top here.
- Till now they have been unable to milk (convert into revenues) their super MF Platform. Talks happened but AMFI didn’t budge. Mr. Chouhan has said they will try to work around this issue in order to monetize the platform.