Hi, As BSE gets a big share from Investment income. I wanted to focus more on this part of the balance sheet.
Can someone help me in understanding.
Net gains / (loss) on derecognition of financial assets measured at amortised cost: 3074 for 2019. What can be this ?
Net gains / (loss) arising on financial assets measured at FVTPL: 8958 for 2019. What is this ?
Divident income, is this from CDSL ?
Hope you find this useful!
Best regards,
AJ
CFO is negative in BSE for last 2 years , Because of Accounting reasons like other income /Investment income are subtracted.
But when i compared other compaines with similar pattern which has more significant other income, those compaines CFO are positive (example Care rating).
Can someone share their though on BSE negative CFO.
Please read the thread since beginning. It has some coverage about cashflow of BSE.
After reading the thread, if you have some queries, please put forward specific point with cashflow and numbers.
Enclosing my reply on cashflow link. But if you are genuinely interested, please read full thread. BSE (Bombay Stock Exchange)- Bet on Financialization?
Bse seems to have lost the plot not only on equities trading but also commodities. This is as per their investor presentation.
They do mention registration by new brokers but the business doesnt seem to be there.
At the moment, they are market leaders in segments which do not generate profits but are laggards in segments where competitors are minting money.
My post may sound criticsl of bse’s management but I did expect more from them.
Ps: none of the explanations by anybody till date has cleared my question as to why bse lags so much in equity trading. We are talking of a duopoly here where competitors dont have easy entry and nse isnt exactly free of scams.
NSE wins due to liquidity - it results in nice network effect attracting all big sellers/buyers. BSE is terribly low in volume. Exchange is nothing without volume.
It is big eats small. Only way to increase volume is patronise the big brokers /FII flow.
Q4FY20 CCT Notes
DPR at 95%. DPS 17. Total dividend 77.87 cr.
STAR MF
Due to COVID pressure, BSE has agreed to lower rates in negotiations with AMCs.
Platform contributed 61% of net equity inflow in Apr-20, 3806 cr out of 6212 cr for the entire industry. Last year it was 64-65%.
SIPs registered at 24.37 Lacs in FY20 against 16.06 Lacs in FY19.
Value of orders increased to 2.23 Lac Cr. in FY20 from 1.61 Lac Cr. in FY19.
Revenue of 44.74 cr in FY20 against 29.03 cr in FY19. Contributed 12% of total revenue in FY20 against 8% in FY19. Market share is at 74%.
Have SEBI approval to start E-KYC. SEBI announced 7 agencies that can do EKYC services. This will be another avenue for revenue generation for us. Don’t know how much value this will add in the first year. Together this KYC to IFA and AMCS and commissions settlement will provide a lot of value addition to the industry. AMCs do not have to deal with 58k IFAs, they can go with us if they want. We will do customer support through our CRM. Hopefully, this will get us a more in-depth relationship with both sides.
For EKYC one AMC has agreed to take the entire cost. This was the first of the AMCs the revenue model still has to evolve. In current times we want to bring this to market ASAP. The number of investors registered with us are 4.99 cr, these are not unique as each broker gives them their own code and duplication is there. But this number is 2x our competitor. On PAN number basis unique customers are 3 cr. Larger than all depositories, AMCs put together. They are at 2.25 cr. We are now the largest repository of investor details in terms of their KYC. Our subsidiary has SEBI approval to get into KRA (transcripts mentions GRA) business. It would hook into the EKYC business. But it has to go through some legal process.
We will start EKYC next week on a beta basis, only after a month or so we can figure out how much to charge. Currently, it will happen on a goodwill basis.
Have started collecting commissions for IFAs from AMCs, will become an interesting way to earn additional income. IFAs have physical limitations and thus can deal with only a few AMCs. We are providing them with the ease of business, not through us they can deal with all 40 AMCs. To calculate and collect the commission for each of them was becoming difficult. We received representation from the IFA community. 7 AMCs have agreed to allow us to collect the commission of behalf of IFAs. We will charge them small amounts to ensure the service is commercially viable to us.
Realized Rs. 9 per transaction this year. Might come down to 6/7/5 next year. AMCs have gone through difficult times, AUMs are down. SEBI has asked AMCs to cut costs down.
Many of them who are considered competitors are actually one of us, we are the Intel inside of the mutual fund industry. So, currently, what I said in April, we had 61% of the value in April 2020 for the net equity inflow. I was talking about the industry as a whole.
Usually, that would be because of the data availability only from NSE and MFU. But because the AMC announced the inflows for the last year in equities that is where we could figure out that we were like 66% or something. If they had not declared the inflow last year of the entire industry, we wouldn’t have figured out, because that kind of data is not easy coming. So, whatever data comes and I think there is a qualitative difference between the values of x platform versus value trade on y platform because there is one platform which does only, what I call, basically kind of short-term funds. And so each trade would be like Rs. 10 crores or Rs. 20 crores for them. And so they might be doing like 10 trades a day and it might look like Rs. 1,000 crores in a day, while for Rs. 1,000 crores on BSE you will require like 20 lakh trades, okay. So value, in a way is a bit of a misnomer in this comparison. But we are comparing for the sake of it, because we want to show our market share and at least have some consistent basis. And that’s where basically it’s not an apple-to-apple comparison right. And it’s very similar to saying the number, I mean, if you have say 1 lakh contracts open in currencies in India vis-à-vis equities in India, equity derivatives is Rs. 5 lakh, currencies is Rs. 75,000. So it’s like 8 times more, right? So they are not apple-to-apple, but people look at the numbers and think both of them are same. Similarly, BSE’s numbers are primarily on equity sort of numbers, which are small transactions by retail guys. And that’s where the numbers in some ways are misleading because we are collecting 65% or 62% of the entire industries net inflow in equities, for me, there is nothing comparable. Because others RTA is doing, mutual funds website is doing, other platforms doing and so on and so forth. So, this is a revelation to us also, because we were made to believe that we are very small. And now only we have come to know that small means 65%.
Insurance Broking
Holds 40%. The network of insurance broking and mutual fund distribution shall complement each other. Started with only auto, integrating with general, life, health. Have nearly 1000 POS. Technology is going to change insurance distribution. Takes a couple of minutes to sell insurance. Quotations come automatically, and the policy is handed out in a few minutes.
In that structure we have two entities, one is the distributor entity which has the license, and other is the technology entity which provides the technology. As of now, we have started having the commissions from the insurance companies on the distribution side, and we are also passing on. This is, what I call, a commercial issue, but the commissions in on premium basis as a percentage of premium varies in different types of insurance. So, an auto will have different vis-à-vis health, vis-à-vis life, and the work required also will be of different types and all. So it’s not a one shot, but this industry has a much larger commission framework compared to any other financial sector distribution framework as of now.
INX
ADTV at $2.2 Bn in FY20 from $ 766 Mn in FY19. 93% of this is from equity derivatives and rest from commodity derivatives.
Market share of 82% in derivatives and 100% in the bond listing. 27% of Indian issuers of debt security in international markets have listed on INX.
USDINR - Launch May 8th 2020. ADTV at $55 Mn and $18 Mn for futures and options respectively till 19th May.
The Finance Ministry established the International Finance Services Centres Authority (IFSCA) through a notification on April 20, 2020.
Made loss of 33 cr, expect same next year.
Currency
ADTV of 11740 cr and 15763 cr in future and options segments for FY20. Market share at 40%.
Commodity
Market share of 23% in cotton, 25% in guar seed. ADTV 203 cr in FY20.
Bonds
Raised 3.5 Lac Cr. in FY20 by 452 issuers. Market share at 58.4%. Total debt raise on this platform has crossed 11.17 Lac Cr.
Equity
ADTV of 3024 cr in recent quarter against 2535 cr in previous. In derivatives, ADTV was 3639 cr this quarter against 475 cr in previous.
Power Exchange
Current stake at 41.08%, need to drop it down to 25% post grant of license. Power exchange has been basically mired in some sort of, what I call, opposition from the existing competitor. So whenever there is a hearing by the regulator of that business, some opposition comes up and then they ask for time and all. Each time we have come further, but then we are not able to get that license. So we still keep our fingers crossed when we will get the license, and then last few months has been this COVID thing. So hopefully, the license is near, but how much near, I have no idea, because it’s not easy to predict what happens in that hearing.
The dates have not come in because of this COVID thing. But they were supposed to happen every sort of a month or so, each time they give a time of a month. But in the last two months it has not happened. So as soon as the regulator decides, probably as and when Delhi opens up and things and all offices start working well, probably we will get that hearing.
CPs
Started listing CPs issued after 27th Nov-19. 120 issuers have done 1385 issues and listed CPs worth 5.3 Lac Cr.
Listing Fee
Increase fee in the exclusive segment by 50k for 100 cr company and 25k for 100-200 cr.
Provisions
Provided 18.61 cr for contribution to ISF & IPF as said by SEBI. 50% of ILFS exposure was provisioned last year, the other 50% is provisioned this year to the tune of 7.98 cr.
SGF
SGF at 432.79 cr. As per the requirements arising out on August 27, 2014, SEBI circular, for contribution by the exchange to core SGF, BSE needs to contribute to core SGF of all the clearing corporation through which its trades are cleared. BSE has already contributed Rs. 15,072 lakh to Indian Clearing Corporation, which is in excess by Rs. 12,388 lakhs as compared to the requirement. As of March 31, 2020, of the above mentioned curricular relating to core SGF, based on the transactions executed on BSE and which are cleared by other clearing corporations, the requirement of core SGF is Rs. 1,264 lakhs as of March 31, 2020. The board of companies decide to represent to SEBI for allowing to utilize the excess contribution by BSE lying with the Indian Clearing Corporation to be adjusted with the said contribution to the other clearing corporations requirement. Clearing corporations have also represented to SEBI that the contribution by exchanges towards core SGF of clearing corporation may be allowed to be contributed in the form of bank fixed deposits or government securities, companies are awaiting clarification from SEBI in this regard. In view of the above, no contribution has been made to other clearing corporations and the company has not taken any charge for the contribution to core SGF in the current year’s statement of profit and loss.
Interoperability
It was supposed to increase our market share but it didn’t. we had not bargained for a situation where existing clients’ business gets known to the competition through their clearing corporation, putting more pressure on those guys to trade on another exchange, because they get more information. And so, those are the things which are something which has come out and we will have to live with the realities and create our own niche. when we started, the entire inter-process, there were larger software vendors also, third-party vendors who are not ready with it, so it also took them a lot of time. In the meantime, there was no much yield for us as well on that part, because the technology vendors were not ready.
Basically what happens is, we don’t create market share targets. In a way, we are basically, what I call, we figure out what could potentially do things if these things take years of lobbying, and sometimes they are approved with some conditionalities or even without conditionalities, when they actually come out, they come out differently. So each act which comes out, it looks like a sort of sure shot, but it’s a 5, 10 years’ work, and sometimes it may succeed, sometimes it may not succeed. So generally we don’t do any market share kind of projections based on clearing corporations, but it’s a nice thing to have, directionally correct. And if it happens, it may give you, what I call, and non-linear returns. So we try to work on non-linearity more than pure linearity. Of course, once the business stabilizes then you can project linear part of it. But these are our non-linear shots, some of them succeed, some of them don’t, some of them take a longer time, and so on and so forth.
Cash & Investments
1600 cr in cash and MF (unrestricted). CDSL market cap. is 2500 cr and we hold 20% of that. BSE building was valued at 800 cr many many years ago. We don’t have any exposure to Franklin Templeton Mutual Fund Schemes.
Here is a possible situation for BSe’s stake in CDSL. Can BSE hold its current stake in CDSL similar to how Mr. Uday Kotak has not reduced his stake in Kotak Mahindra bank? Kotak Mahindra has not reduced his stake as per SEBI guidelines but instead capped his voting rights to 15%. Why can BSE not do the same? I as an investor wouldn;t want BSE to reduce its stake in CDSL further.
Secondly, there was a recent colocation case at NSE where various brokers were given a favourable advance access to the NSE servers. Why has BSE not got any advantage due to this event at all? Also, is it correct to assume that NSE is colluding with the big bulls to make sure its equity cash and equity derivatives position remains dominant? why were liquidty and volumes not carried to BSE platform?
It seems like Monopoly for NSE. That is now how capitalism works, there always opportunity to undercut and balance. BSE has the balancesheet to change the game at least more evenly. Why the skew?
Any one has any clues or inputs
thanks for sharing this. 1600 cr cash and MF unrestricted means, security deposit from brokers, etc is separate and not part of this ?
As confirmed by the management in the concall the 1600 Cr cash is there own money and not the deposit from brokers.
anyone understands this BSE EBIX? how it works ? and whats the terms and condition of this JV what is BSE cut ?
BSE sysmatically loosing market share to NSE. In FY2020, cash market share of BSE has reduced now further to single digits. One reason for me extit BSE was lost market dominance even in cash market. While it has niche segment of 1500 odd compnaies which are listed only on BSE and as monopoly charge very high exchange fees, it does make an optimum business to invest for me. Even liquidities on those counter is very low and so it daily turnover. Enclosing a table from Rakesh Mohan paper on Indian financial market for IMF.
Discl: My view may be biased due to my exit from BSE. Not a SEBI registered advisor, Not recommending any investment action. Reader shall do his/her own due diligence before taking any investment action
Its a classic value trap stock.
Aggressive account looks P&L inflated.
Cashflows aren’t there at all if you take out earning from other income.
MF star looks good but god knows how long , far i could scale in 5 years from now.
Other things like INX , EBIX etc nobody knows how they going to pan out ( markets hare uncertainty ) they will never going to price that in until they pan out to something.
I have been questioning this for a long time. NSE is literally dominating the market and I suspect indulgence of malpractices. (NSE is involved in more scams than BSE). It has clear indications of the select few making huge profits through unfair means. Mr. Chauhan also took a veiled jibe when acknowledging that they had to open their client list for interoperability and their clients were pressured to use another exchange. I may have misinterpreted his statement but my hunch is strong on this.
A classic case similar to the chipset makers intel and Amd. AMD has had superlative products like Athlon and Ryzen but intel always had the big company managers in its deep pockets. Govts regularly charged intel for unfair trade practices but nothing has changed in the last 15-17 years. BSE is like the laggard AMD here, and NSE is the bully, Intel.
Hi guys,
I have been writing to the management and trying to put pressure on them to return the funds to shareholders either via Buybacks or dividends. The co has cash worth 2K Cr + 1K Cr of BSE building and the stock is trading below liquidation value. Dividends and buy-backs have been cut. CEO has increased his own personal compensation. And management owns no stocks in the company.
So I’m trying to collect other large shareholders in this company and either replace the CEO or get back the shareholder funds. So far, ~2% of the shareholders have expressed support and willing to sign a note to the board. Lmk if any of you know large shareholders here. I’ve reached out to folks I can find and the board as well. 
My personal investment is relatively not huge, so my interest on this is very limited, but more for curiosity and annoyance than gains.
Thanks,
-Prasanna
Dear Prasanna
Truly appreciate your efforts, CEO has tried to project himself as the brand ambassador of BSE making himself bigger than the institution & shamelessly sought to keep increases in his remuneration though the profitability and market share in core businesses have gone down
Also the board & management have no skin in the game & lot of money has gone down the drain in loss making businesses with not even long term benefits .
I have 1200 shares and am with you
Thanks
