Financial services firm PL Capital has begun its coverage of the National Stock Exchange of India (NSE) with an 'accumulate' rating, setting a target price of Rs 1,950. This valuation is based on an estimated 35 times its FY29 earnings.
The NSE's shares, which debuted on the market at Rs 1,800, quickly climbed to Rs 1,878 per share in the initial trading minutes. This surge represented a 5% increase above its IPO price of Rs 1,785, pushing its market capitalization to Rs 4.65 lakh crore and positioning it as India's 10th most valuable company, surpassing Hindustan Unilever Ltd (HUL).
Market Dominance and Future Projections
PL Capital's report highlights NSE's continued dominance in the Indian exchange landscape. The exchange holds over 93% of the cash market share and nearly 100% of the market for stock and index futures as of year-to-date FY27. This strong position is attributed to its robust liquidity, advanced technology, and a comprehensive product suite.
However, the report also notes a decline in NSE's share of index options, which fell to approximately 65% in YTDFY27. This is a significant drop from around 97% in FY24 and 72% in FY26. The brokerage firm attributes this reduction to several regulatory changes, including restrictions on weekly expiries, the introduction of the closing auction session (CAS), and new proprietary trading rules, which have collectively impacted overall industry volumes.
Financial Outlook and Margin Recovery
Between FY21 and FY26, NSE's revenue experienced a robust 25% compound annual growth rate (CAGR). However, PL Capital anticipates a moderation, projecting an 11% CAGR for revenue over the FY26-29E period, primarily due to the shrinking share in index options.
- Transaction Income: This segment constituted 79% of operating revenue in FY26 and is expected to grow at a 9% CAGR over FY26-29E.
- Other Segments: Listing services, colocation, data feed, and index licensing are forecasted to grow at a higher 14% CAGR during the same period.
The firm expects the overall operating revenue to grow at an 11% CAGR. Furthermore, PL Capital predicts a recovery in NSE's EBITDA margin. After falling to 71.3% in FY26 from 77.8% in FY25 due to one-off settlement payments related to legal cases, the margin is expected to rebound to 76% by FY29E as these exceptional costs subside. Profit after tax (PAT) is also projected to grow at an 11% CAGR over FY26-29E, with a return on equity (ROE) of 35% by FY29E.
Other Analyst Views
PL Capital is not the only brokerage to initiate coverage on NSE. Overseas firm Macquarie has issued an 'outperform' rating with a target price of Rs 1,965. Emkay Global Financial Services set a target of Rs 2,050, while Asian Markets Securities provided the highest target at Rs 2,170 in its initial report.