Zerodha now owns 2% of BSE vs 1.6% as on Sept. I am laying importance to this as Zerodha being a very large broker now and with its fintech capabilities must have a good understanding of the market place (or exchanges).
Even though the flip side of investing in BSE is that 1) operating profit is low. 2) other income too will fall with drop in yields
Zerodha is basically a discount broker and It is also trying its hands in AMC business - True Beacon.
Zerodha Broking has invested in only BSE Limited as per their shareholdings in Trendlyne and the invested amount is worth 52.7 crores. Their core earnings are estimated to be 400 crores per year. Zerodha gave itself a modest market capitalization of 1 billion $ - ~7000 cr INR to buyback 65 crores worth shares from its employees in June 2020. It is valued at 3 billion $ - ~21000 cr INR by another firm Hurun. Looking at the way Zerodha founders have set it up and did raise the platform without taking external funding from 2010, I see their business chemistry as pioneers. A pioneer looks at the big picture.
Given their background in trading, in case they wanted to set aside their profits as financial assets in the form of buying shares, they had ample of opportunities in the market especially in Q2 & Q3 of FY21.However, they bought only the shares of BSE Limited.
I see the below possibilities -
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Zerodha is neither listed nor sold stake to any PE player so far. It is using its cash to buyback shares at modest valuation so that the value of the remaining shares will go up. Advantage to existing share-holders who are not submitting during buyback.
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Zerodha would have understood there is a disproportionate opportunity in BSE Limited stock which is not very clear to others. This can be due to insider information or based on their market research in trading. Looking at the revenue streams of BSE, I see only BSE Star MF and India INX as the ones which can give that edge for now. The stock is available below book value and so downside risk is covered.
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Like ICE bought NYSE, Zerodha may be planning to slowly take over BSE Limited. They can leverage their existing fintech capabilities and get more market share. Some people try to hold the BSE bull by its horns and fulfill their fantasy. If Zerodha buys Bombay Stock Exchange Limited, it is a material for a nice movie :). Trader --> Broker --> Exchange Owner. The market cap of BSE is hovering below 3000 cr and Zerodha can get this by external funding based on the valuation it is commanding.
.BSE (Bombay Stock Exchange)- Bet on Financialization?
As per the above article - In case of an existing exchange or a depository, any entity may acquire up to 100% shareholding and lower its holding 51% or 26% in 10 years, Sebi said.
Disclosure - Invested. Portfolio - Southern_Cross's Portfolio
I just wanted to Clarify on one point: could Zerodha be purchasing this stock on behalf of some one else? Are brokers allowed to do this?
OR
We are certain that Zerodha is investing in its own capacity?
Zerodha can invest by itself or by means of its asset management firm True Beacon.
You can see the share-holding pattern of BSE Limited in the below link.
https://www1.nseindia.com/corporates/corporateHome.html?id=spatterns&radio_btn=company¶m=BSE
Click on the latest quarter link 31-Dec-2020
Table III gives the share-holding pattern of public where you don’t see Zerodha/True Beacon
Table IV gives the share-holding pattern of non-public and non-promoter, which is essentially trading entities/members share-holding. Like SBI and LIC have stake in BSE Limited, now Zerodha also has. I don’t think it is for trading/investing on behalf of client but investment by Zerodha itself.
I also did some research about their asset management firm True Beacon. They invest only in NIFTY 50/derivatives and not in mid and small caps as per the below article. Hence, this is also ruled out completely.
So, Zerodha’s buying price is above 443 rupees per share considering their purchases in Q2 and Q3 FY21.
Do we have anyone tracking the derivatives volume of Sensex50? While BSE is not making any money on this currently -this could be a real game changer for the future.
Additionally, NSE is currently facing another technical glitch - the rates are not getting updated from the last 10 minutes. Remember this now a serious problem - if you are active in market you would have noted that NSE has been facing issues like this over the last many years with at least one glitch like this every year. Wonder why the institutions continue to ignore BSE.
AJ
Disclosure: Invested in BSE.
Clearly, SEBI cant seem to do much to bring balance in the exchanges. NSE has compliance , ethics and governance issues on a regular basis.
Why is this not big news and where is the accountability?
More coverage on the nse glitch.
Firstly, it is tough to say whether these are just hollow words from SEBI. Secondly, BSE is more compliant and honest vs. NSE and also possesses a better technology. Still, I doubt traders and brokers will move their business to BSE at all.
If SEBI does indeed stop NSE from bringing new offerings, that is a plus for BSE and MCX.
Another interesting article.
Without going into the political aspect of NSE co-location case (which, personally I believe NSE management got off lightly), the competition between NSE & BSE seems to be one of who is inept lesser. In this specific instance and other earlier instances of NSE missteps, BSE doesnt seem to reach out to brokers and tell them they’re better now and/or more professionally managed. Exchanges are high tech places for finance, the better/faster tech interfaces that you produce, the network efforts works in your favour which BSE doesnt seem to do.
I’ve invested in BSE as I believe NSE IPO listing wont happen till the vested parties have no way of profiting from the co-location case to having the last laugh by IPO gains. GOI is petty that way against NSE which is a decent plus for BSE.
I’m disappointed in not seeing new tech/bourses/domain specific trading options that bring in new customers for BSE.
Zerodha is now a major shareholder while HDFC has given buy calls on bse since sometime. This event has the potential to upsert NSE dominance in equity markets.
BSE Star MF Update:
Media Release
BSE StAR MF records a new high with 1.10 Cr transactions in March 2021 and 9.38 Crores transaction in FY 20-21
•BSE StAR MF achieved 1.10 Cr transactions per month in Mar-21 worth Rs.31,464 Cr, net inflow of Rs 4,233 cr.
•During the financial year 2020-21, BSE StAR MF grows 63 % to reach 9.38 Cr transactions and Rs 22,444 Cr net inflow for mutual funds
•Highest ever SIPs of 5.45 lakh registered in a month in Mar 2021 and an average of 3.68 lakh SIPs getting processed every month.
Mumbai, 31st Mar, 2021: BSE StAR MF, India’s largest and leading Mutual Funds Distributor platform has scaled new highs by recording 1crore monthly transactions, the highest ever on the platform.
The former highest monthly transactions was 92.98L in January 2021. BSE StAR MF has helped AMCs, members and their clients in smooth, automated, paperless transactions, witnessing a 19% increase in transactions as compared to the previous month.
In spite of a tumultuous fiscal, BSE StAR MF processed over 9.38 cr. transactions amounting to Rs. 3,33,095 cr in financial year 2020-21, which is 63% growth as compared to 5.75 cr in FY 2019-20. The platform achieved net inflows of Rs. 22,444 cr in FY20-21. Mobile apps added 15.59 lakh transactions with a value of Rs. 8,126 cr in FY20-21.
The platform also recorded highest number of new SIPS registrations 5.45 lakhs on a single month in March 2021 as compared to previous best of 4.97 lakhs in Feb ’21.
In the past quarter, Jan to March 2021, BSE StAR MF added 15.45 lakh new SIPs.
It is also worthwhile to note that BSE StAR MF,
•Achieved Rs. 4,233 cr in Mar ‘21 of net inflows out of total transactions value processed of Rs. 22,444 cr in FY20-21
•Number of unique client code UCC created in BSE StAR MF during FY 20-21 was 1.70 cr and 4.81 cr since inception.
Some of the Key Highlights are:
Turnover:
•Annual Turnover during FY 20-21 was Rs. 3,33,095 Cr.
•For March ‘21 was Rs. 31,464 Cr., compared to Rs. 28,307 Cr. on February ‘21, an increase of 11%
•For Q4 FY 20-21 was Rs. 91,604 Cr as compared to Rs. 80,427 Cr for Q4 FY 19-20, an excellent increase by 14%
Net Equity Inflow:
•For Mar ’21 it was Rs. 4,233 Cr compared to Rs. 2,402 Cr for Feb ’21, an increase by 76%
•For Mar ’21 it was Rs. 4,233 Cr compared to Rs. 2,666 Cr for Mar ’20, a growth of 59%
•During Q4 of FY 20-21 is Rs. 8,079 Cr compared to Rs. 6,260 Cr for Q4 FY 19-20 a increase of 29%
Transactions:
•Annual Transactions increased rapidly by 63% from 9.38 cr in FY 20-21 as compared to 5.75 Cr in FY 19-20.
•For March ‘21 was 1.10 cr an increase of 19% as compared to 91.98 lakhs for February ‘21.
•For March ‘21 was 1.10 cr has significantly increased by 56% as compared to 70.36 lakhs for March, 20.
SIP Book Size:
•Total StAR MF’s SIP book size is 78.99 lakh as on date.
•For Mar’21 the platform registered 5.45 lakh new SIPs amounting to Rs125.44 Cr.
•For Feb’21 the platform registered 4.97 lakh new SIPs amounting to Rs 120.31 Cr.
IFA’s:
•Distributor count has seen a huge increase to 69,524 (as on March 2021) from 56,861 (as on March 2020).
BSE StAR MF App (StAR MF Mobility) has processed over 19.28 lakh transactions since its launch, amounting to Rs 11,007 crore. The app was launched to help distributors and IFAs (Independent Financial Advisors) register clients on real-time basis and execute paperless transactions. Because of the superior support system and distribution reach of BSE StAR MF, the platform has grown exponentially with over 69,000 registered distributors in India.
This along with an update on pranurja can make the next AGM interesting.
DCB Bank invests 5 cr each in India INX and India ICC for 2.89% & 4.93% stake respectively. Implying a valuation of 173 and 101 cr to them.
Huge volume difference today in BSE and also 9% up. Apart from the below news about Star MF, I could not find the reason behind this move.
I think last few days stock price’s rise can be contributed to below news. Thanks!
Why is margin coming low every year? NSE seems to ba having good margin.
PowerPoint Presentation (nseindia.com)
BSE_13052021165939_OutcomeBoardMeeting.pdf (nseindia.com)
Consol Mar 21 - Class.xlsx (nseindia.com)
The results, presentation and dividend has been announced.
Dividend of Rs 21 per share declared
My analysis
BSE is showing stellar volume growth in some segments(Just look in Investor Presentation). Everyone knows the volume growth in StarMF and IFSC but i was surprised at their growth in equity derivatives and commodity derivatives segment which i had previously thought to be improbable. But the possibility of BSE invading the castle of NSE does not seem that stupid as previously thought as Equity derivatives segment got a 7% market share from 0% previously. It would be interesting to see how they monetize all their segments without losing market share.
The only issue still is the bottom-line. It has not expanded yet but this was a profitable quarter for them if one excludes investment income which was not happening earlier.
It is a multi-year story with a good margin of safety for me. I still think they are in the process of building great assets and full-monetization may take some time.
Disclosure: Holding both BSE and CDSL. Major positions in my PF