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  • Update Report
  • 4-Aug-2017

BSE announced its result for first quarter of FY18 (Q1FY18). This was the first quarterly result after the divestment of partial stake of 26% in CDSL. BSE now has 24% stake in CDSL and therefore CDSL will be treated as an associate company in the books of BSE instead of subsidiary.

Our first report on BSE can be found below:

BSE Quarterly Results Highlights (Q1FY18):
1. Operating Income: BSE's revenue grew in most of its segments.

  • Listing Fees Income: Listing fees for the quarter stood at Rs.39.4 crores, an increase by 11% on YoY basis mainly due to hike in listing fee effective from 1Apr17. Listing fee income is fixed by nature and provides a strong longevity. BSE recognizes annual listing fees proportionally in each quarter.
  • Transaction Charge Income: BSE changed the charging mechanism for transaction charges on equity transactions from value based to number of trade based charges in stocks in A & B group effective from 3Apr17. In spite of this change from value to volume based charges, transaction charges income from equity segment has increased from Rs. 20.2 crores to Rs. 29.5 crores registering a growth of 46% on YoY basis. Similarly, income from currency futures is another major segment where the transaction charges collected increase to Rs. 2.1 crore, an increase of 75%. This is likely to improve further due to hike in transaction charge in this segment as well with effective from 1July2017.
  • Book Building and Other Services Charges: The revenue from book building and other services has increased from Rs. 2.9 crores to Rs. 8.3 crores, an increase of 186% YoY. We expect the revenue from this segment will continue to increase due to large number of IPOs, OFS, Buyback and Open Offer mainly due to buoyant capital market environment.

2. Investment Income: During the quarter, Investment income increased from Rs. 58.2 crores in Q1FY17 to Rs. 65.4 crores in Q1FY18 at standalone level. However, the it decreased at consolidated level from Rs. 45 crores in Q1FY17 to Rs. 41 crores in Q1FY18.

3. Profit After Tax: BSE has reported quarterly operating profit after tax of Rs. 68.4 crores at standalone level and Rs. 49.7 crores at consolidated level. This translated into EPS of Rs. 12.5 in Q1FY18 against Rs. 9.96 in Q1FY17, indicating a growth of 25%. Though the consolidated profits are lower than standalone profits due to investment phase in various new initiatives, the consolidated EPS stood at Rs. 9.1 in Q1FY18 against Rs. 7.9 in Q1FY17, an increase of 15% YoY.

What lies ahead?
1. Growing Transaction Charge Income: In equity segment, BSE has reported an average daily turnover of Rs. 4133 crores in Q1FY18 as compared to Rs. 2732 crores in Q1FY17, a growth of 51% YoY. Increasing interest of participants, new listings in normal and SME segment will help increase transaction charges income of the company. In a similar fashion, the currency segment has reported an average daily turnover of Rs. 18148 crores in Q1FY18 compared to Rs. 15757 crores in Q1FY17, growth of 15% YoY. A similar trend in this segment will also help BSE to further increase its transaction charges incomes.

2. BSE Star Mutual Fund: BSE Star Mutual Fund is a platform that can be used by investors to purchase mutual funds online. During Q1FY18, BSE star mutual fund reported transactions worth Rs. 25645 crores against Rs. 19414 crores in Q1FY17. In spite of enjoying 80% market share in online participation in Mutual funds, BSE is not charging any fees yet. BSE is likely to start charging fees from this platform once the volume increases to more sustainable levels. Any revenue from this activity will be additional and sustainable source of income to its existing revenue base.

3. INX (100% Subsidiary): INX is International exchange situated at gift city. Being a new venture and in investments phase, INX is currently loosing money and not contributing positively to the bottomline. This is the main reason for consolidated profits to be lower than standalone. On the strategy front, a lot of activity is happening in INX. Recently, new contracts have been launched in INX for trading and over next few months INX should be able to reduce the losses. It is possible that INX will achieve operating breakeven within few quarters. Currently, single stock futures (Indian + International), Index futures and commodity futures are available for trading on INX platform. The Indian government wants to attract and route foreign investments through India in gift city. This is where INX, an international exchange of BSE, is trying to achieve grounds on.

4. Increase in Investment income: Owning to the monetisation of 26% stake in CDSL in the form of IPO, BSE has received large cash on its balance sheet. Some of this will be used to fund its expansion in new areas like INX; however, it will strongly increase its investment income in coming quarters.

5. Share of Profits of Associate: From second quarter of FY18 (Q2FY18), BSE will recognize its share of profit in CDSL at consolidated level in the form of profit from share in associate.

Dhruvesh Sanghvi is a Research Analyst registered with SEBI having registration No: INH000000875.

Definitions of Rating system:
1. Explanation of Type of Report
  • Fresh Recommendation Reports: These reports are first-time initiation reports on the concerned stock. Usually these reports are followed by updates on the same.
  • Update Reports: These reports include result update, event updates, annual report analysis and/or any other information that may be useful for the investor in relation to the concerned stock. Most of these update reports will have our current view on the same.
2. Explanation of Time Horizon: All the Fresh Recommendation reports in the investing section have a view of 3-5 years.
3. Explanation of Views: Views can be any one among these - Buy, Buy on Dips, Hold, Sell Partial, Exit
  • Buy: This means buying the concerned stock at current market price.
  • Buy on Dips: This means buying the concerned stock on the explained fall in price.
  • Hold: This means holding the concerned stock until further update.
  • Sell Partial: This means selling half of the existing position in the concerned stock.
  • Exit: This means completely exiting the concerned stock.


4. Explanation of Indicative Target Price: Achievement of Target Price does not imply Exit / Sell Partial. We will explicitly release Exit/ Sell Partial Report at an appropriate time. If required, Indicative Target Price could be revised based upon business performance, market environment or any other important event.
Introduction: Prospero Tree Financial Services is an independent equity research proprietorship firm of Mr Dhruvesh Sanghvi.
Business Activity: Prospero Tree Financial Services is committed in providing honest views, opinions and recommendations on financial markets opportunities.
Report Written by: Dhruvesh Sanghvi
Disciplinary History: None
Terms & Conditions:
Details of Associates: Not Applicable
Disclosure with regards to ownership and Material Conflicts of Interest:
1. Neither Dhruvesh Sanghvi, Prospero Tree Financial Services, its associates, its Research analysts hold any position in the subject company.
2. Neither Dhruvesh Sanghvi, Prospero Tree Financial Services, its associates, Research Analysts, nor its relatives, have more than 1% ownership of the subject company at the end of the month immediately preceding the date of publication of this report.
3. Neither Dhruvesh Sanghvi, Prospero Tree Financial Services, its associates, Research Analyst nor its relatives, has any other material conflict of interest at the time of publication of the research report or at the time of public appearance.
Disclosure with regards to Receipt of Compensation:
1. Neither Dhruvesh Sanghvi, Prospero Tree Financial Services or its associates, or Research Analyst has received any compensation or other benefits from the subject company or the third party in connection with the research report in past twelve months.
2. Neither Dhruvesh Sanghvi, Prospero Tree Financial Services or its associates, or Research Analyst have managed or co-managed public offering or securities for the subject company in past twelve months.
Other Disclosures:
1. The Research Analyst has not served as an officer, director, or employee of the subject company.
2. The Research Analyst is not engaged in market making activity for the subject company.


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