IPO-bound NSE is set to change the exchange game

For almost a decade, BSE—Asia’s oldest stock exchange—was India’s only listed equity exchange. Investors seeking exposure to the country’s booming capital market had only one listed route. That exclusivity helped create a scarcity premium – investors weren’t just buying earnings, they were buying the only listed gateway to India’s exchange business.

That dynamic is now facing a reset. NSE filed its listing papers with market regulator Sebi on June 17 and is aiming for a listing before January 30 next year. Based on NSE’s unlisted valuation of ₹ 5 lakh crore, preliminary estimates put the issue size at close to ₹ 30,000 crore. BSE’s market capitalization at the close on Thursday was ₹1.58 lakh crore.

NSE stocks will be listed only on the BSE, as an exchange cannot list on its own platform under Indian securities laws — a regulatory asymmetry that would give the BSE one of its most consequential listings.

Exchange vs Exchange

ET Bureau

On its part, BSE has framed its own valuation as a positive move rather than a risk. “The listing of any eligible entity is a positive development for India’s capital markets,” said Sundararaman Ramamurthy, managing director. “Valuations and share prices are the results of a company’s growth prospects and execution, and are best left to the market.”

NSE has 88% cash-market turnover, 91% equity futures and options and 89% interest rate futures. Among currency derivatives, its share is 74% in futures and effectively 100% in options. Globally, NSE ranks first in equity derivatives contracts—with a 51% share—and third in the number of cash-equity trades.

Yet the listing papers also reveal a rare stumbling block. Total operational income fell 3% year-on-year to ₹16,601 crore in FY26 from ₹17,141 crore in FY25. Profit fell 16% to ₹10,302 crore from ₹12,188 crore in FY25. The exchanges attributed the decline to transaction charges, soft trading activity and the impact of Sebi’s tightening in the futures and options segment – the very rules that have reshaped the derivatives landscape at both the exchanges.

That creates an unusual evaluation setup. NSE is quoted at 38x to 43x FY26 price-to-earnings on IPO price band assumptions of ₹1,600 to ₹1,800 per share, compared with BSE trading at 69x FY26 earnings. In other words, the dominant exchange may come to market at a significant discount to its smaller rival—at least on near-term multiples—partly because it is bearing the brunt of the same regulatory changes that BSE has so far navigated better.

two sides

Investors are divided on the new balance. As investor Vijay Kedia says, “Once the NSE is listed the scarcity premium may come down as investors will also get an opportunity to own a larger exchange, but the BSE does not lose its importance.”

Pankaj Murarka, CIO of Renaissance Investment Managers takes a long view. Exchanges generally command rich valuations due to their oligopolistic structure and high entry barriers, he argues, and both NSE and BSE can maintain strong multiples – though NSE is likely to command a premium given its dominant market share. BSE’s trajectory will depend on whether it can meaningfully tap into options, futures and cash equities and expand into new product segments, he said.

NSE-valued at ₹5 lakh crore-exclusively listing on BSE can be self-evident. “This could result in increased liquidity, business and participation by institutional investors at BSE,” said former Sebi official Parmod Kumar Bindlish.

Revival of BSE

The debate comes at a moment of change for BSE. When Ramamurthy took over as MD in January 2023, the exchange reported FY22 revenue of ₹928 crore, profit of ₹254 crore and market cap of ₹5,742 crore. By FY26, revenue grew to ₹5,226 crore—41% CAGR—and profit to ₹2,497 crore, a growth of 58% CAGR.

Markets have taken note, with valuations rising more than 20 times since he took charge.

Ramamurthy attributed this to “innovation, product development and execution” – reviving the equity derivatives business, acquiring a 50% stake in the S&P Dow Jones Indices in Index Ventures, upgrading the mutual fund platform to handle growing volumes and increasing investments in technology and member connectivity.

“When we started, both the system and the culture were somewhat archaic and lacked vibrancy,” he said. BSE filled long-standing vacancies, brought in a new set of C-suite leaders and recruited young professionals. Some of the changes were basic but necessary, he said, adding that employee facilities like a proper cafeteria also needed attention.