Leading brokerage Angel One has issued a 'subscribe' recommendation for the upcoming National Stock Exchange (NSE) Initial Public Offering (IPO), highlighting the exchange's attractive valuation relative to its listed peer, BSE. The firm believes the offering presents a favourable entry point for investors, despite some immediate regulatory challenges impacting derivative volumes.
NSE's Valuation Edge and Market Dominance
Angel One's analysis indicates that at the upper price band of Rs 1,785, NSE is valued at a post-issue Price-to-Earnings (PE) ratio of 35.4 times. This stands in stark contrast to BSE's 54.2 times, positioning NSE's IPO as significantly more appealing from a valuation perspective. The brokerage firm underscores NSE's formidable market position, notably higher revenue and profitability figures, and a commanding share in equity derivatives as key factors contributing to its attractiveness.
Furthermore, the long-term structural growth trajectory of India's capital markets provides additional comfort for investors. Angel One stated, "NSE’s dominant market position, significantly higher revenue and profitability, strong market share in equity derivatives, and long-term structural growth in Indian capital markets provide further comfort."
Structural Tailwinds and Growth Projections
The Indian capital market ecosystem is benefiting from robust structural tailwinds. These include sustained GDP growth, an increasing trend of household savings being channelled into financial instruments like mutual funds and Systematic Investment Plans (SIPs), expanding digital infrastructure, and a rapidly growing retail investor base. These factors collectively create a strong foundation for continued market expansion.
Angel One projects substantial growth across various asset classes. Cash market turnover is expected to grow at a Compound Annual Growth Rate (CAGR) of 14–16 per cent, reaching Rs 473–507 lakh crore by FY30P. Corporate bond turnover is also anticipated to see a CAGR of 13–18 per cent over the same period, indicating significant headroom for expansion.
Regulatory Headwinds and Financial Performance
Despite the optimistic long-term outlook, the brokerage acknowledges near-term pressures. Derivatives volumes may face headwinds due to revised Securities Transaction Tax (STT) rates and risk-mitigation measures implemented by SEBI (Securities and Exchange Board of India). These regulatory adjustments have impacted equity options notional average daily turnover, which declined from Rs 312.84 lakh crore to Rs 258.28 lakh crore.
In terms of recent financial performance, NSE's revenue grew at a 5.99 per cent compounded annually between FY24 and FY26, reaching Rs 16,601.31 crore. However, FY26 revenue saw a 3.15 per cent year-on-year decline from FY25. Operating Ebitda fell by 12.25 per cent to Rs 11,097.90 crore, and Profit After Tax (PAT) decreased by 15.47 per cent to Rs 10,302.06 crore. Return on Equity (RoE) moderated to 32.98 per cent, and Return on Capital Employed (RoCE) to 42.80 per cent, largely attributable to the aforementioned SEBI derivatives measures and STT increases.
Signs of Recovery in Q1FY27
Encouragingly, Q1FY27 data indicates a recovery trend. Revenue from operations for this quarter rose 13.10 per cent year-on-year to Rs 4,560.41 crore. Operating Ebitda increased by 14.84 per cent to Rs 3,594.25 crore, maintaining a healthy 78.81 per cent margin, and PAT saw a 6.71 per cent rise to Rs 3,120.08 crore. This rebound suggests the exchange is navigating the regulatory landscape effectively and resuming its growth trajectory.
"Despite near-term regulatory headwinds to derivatives volumes, we believe the valuation offers a favourable entry point given the company’s strong competitive position and earnings potential," Angel One concluded in its note.