22-Feb-2022

BSE LIMITED
CASE STUDY
 ABOUT
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THE COMPANY
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Established
DHD in 1875, Bombay Stock Exchange is Asia's first Stock Exchange and it is now into providing a marketplace for trading in
equity, currencies, debt instruments, derivatives and mutual funds. It has 9.54 cr registered investors as on 31st January 2022 and
4,792 total equity companies.

BSE STAR MF is India’s largest online mutual fund platform which processes over 27 lakh transactions per month and adds almost 2
lakh new SIPs every month. BSE SME is India’s largest SME platform which has listed over 250 companies and continues to grow at a
steady pace. BSE Bond, the transparent and efficient electronic book mechanism process for private placement of debt securities, is
the market leader with more than ₹2.09 lakh crore of fund raising from 530 issuances.

Keeping in line with the vision of Honorable Prime Minister of India, BSE has launched India INX, India's 1st international exchange,
located at GIFT CITY IFSC in Ahmedabad. Indian Clearing Corporation Limited, a wholly owned subsidiary of BSE, acts as the central
counterparty to all trades executed on the BSE trading platform.

BSE Institute Ltd, another fully owned subsidiary of BSE runs a capital market educational institute in the country. BSE has also
launched BSE Sammaan, the CSR exchange which is a first of its kind initiative which aims to connect corporates with verified NGOs.
BSE's popular equity index - the S&P BSE SENSEX - is India's most widely tracked stock market benchmark index. It is traded
internationally on the EUREX as well as leading exchanges of the BRCS nations (Brazil, Russia, China and South Africa).

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 ABOUT
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DHD INCOME BREAK-UP (FY21)

TOTAL INCOME FROM SECURITIES INCOME FROM SERVICE TO
SERVICES CORPORATES
Total : ₹655 cr
4% 1%
10% 2%
3% 15%
20%
34%
10%

1%
2%
5% 14%
63%

82%
34%

Securities Services Services to Corporate Transaction Charges Listing Fees

Data Dissemination Fees Training Institute Treasury Income From Clearing And Settlement Funds Book Building Software Charges
IT Services Investment Income Clearing And Settlement Charges Company Reinstatement Fees
Other Income Annual Subscription & Admission Fees Other Fees
Other Charges

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 GROWTH
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DHD SALES GROWTH

In FY21, the company reported a growth in net sales
of 11.3% to ₹501 cr v/s ₹451 cr in FY20.
This is mainly due to an increase in average daily
turnover of equity cash segment to ₹4,197 cr in
FY21 as compared to ₹2,676 cr in FY20 majorly
leading to an increase in transaction charges from
₹113 cr to ₹139 cr.
For 9M FY22, revenue grew by 54.2% to ₹538 cr.
For Q3 FY22, revenue grew by 35.1% to ₹213 cr.
Transaction charges revenue increased by 98.7% to
₹63 crore for Q3 FY22 from ₹31.7 crore in Q3 FY21.
Increase in volume of transactions in the equity
cash segment and increase in its market share
might augur well for its revenues going forward.

5 Year CAGR: 3.4%

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 GROWTH
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DHD EBITDA GROWTH

In FY21, EBITDA increased by 178.8% YoY to ₹39 cr.
This was aided by an increase in revenue and a
decrease in computer technology related expenses
and administrative expenses in FY21 when
compared to FY20. BSE’s main costs are employee
benefits, computer technology related expenses and
administrative expenses which are largely fixed in
nature.
EBITDA for 9M FY22, grew from ₹1.6 cr in 9M FY21 to
₹152.1 cr.
EBITDA for Q3 FY22, grew from ₹2.2 cr to ₹57.6 cr.

5 Year CAGR: -10.4%

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DHD PAT GROWTH

In FY21, PAT was at ₹99 cr, i.e. an increase of 4.9%
compared to FY20.
The company faced a drop in other income from
₹180 cr in FY20 to ₹153 cr in FY21. Other income is
earned on investments made in its associates,
subsidiaries, mutual fund units (including investment
in fixed maturity plan securities) and quoted and
unquoted debt securities (including investment in
bonds, non-convertible debentures and government
securities). There was a fall in investment in growth
oriented debt schemes of mutual funds in FY21.
PAT grew by 57.7% YoY to ₹173 cr in 9M FY22.
However, there was a decline in other income over
the nine month period.
PAT grew by 86.3% YoY to ₹58.6 cr in Q3 FY22.

5 Year CAGR: -10.9%

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 GROWTH EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 PROFITABILITY
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DHD EBITDA MARGIN

The EBITDA margin for FY21 grew due to higher
revenue.
EBITDA margin for 9M FY22 stood at 45%.
The company continues to enjoy a healthy EBITDA
margin due to high degree of operating leverage.

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 PROFITABILITY
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DHD PAT MARGIN

In FY21, PAT margin remained flat.

During FY20, the company had further divested its

4% stake in its associate company CDSL. The profit on
divestment amounting to ₹32 cr is reflected as an
exceptional item.

PAT margin for 9M FY22 stood at 32.2%.

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 PROFITABILITY
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DHD ROCE
The company has been generating an average ROCE
of 9.6% over the last five years.
The company had investments worth ₹1,422 cr as on
31st March 2021. These investments were made in
tax free bonds and mutual funds.

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 PROFITABILITY
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DHD ROE
For FY21, the return on equity rose on account of
increase in profits.

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 PROFITABILITY EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 EFFICIENCY
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DHD CASH FLOWS

In FY21, the company had an outflow of ₹68 cr from
its cash from operations. This was mainly due to
working capital adjustments.
The company’s cash from investing activities saw a
net outflow of ₹189 cr. This was majorly towards
fixed deposits.
The company’s cash from financing activities was
negative at ₹55 cr, on account of dividend outflow.

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 EFFICIENCY
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WORKING
DHD CAPITAL CYCLE
The company had a negative working capital cycle.

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 EFFICIENCY
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DHD FREE CASH FLOW

The free cash flow per share in FY21 stood at
negative ₹16.65.

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 EFFICIENCY
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ASSET
DHD TURNOVER RATIO
Asset turnover ratio has been almost flat for the past
five years.
Current financial assets such as investments, cash
and bank balance form a major part of the total
assets held by the company amounting to ₹2,973.7
cr for FY21.

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 EFFICIENCY EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 SOLVENCY
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DHD DEBT TO EQUITY

The company is debt free.

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 SOLVENCY
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INTEREST
DHD COVERAGE RATIO
The company has no borrowings and hence does not
have any material interest charge.

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 SOLVENCY
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DHD CURRENT RATIO

The company has enough resources to meet its
short term obligations.
As on 30th September 2021, the company held
current investments worth ₹1,333 cr and cash &
bank balance worth ₹2,820 cr.

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 SOLVENCY EDGE METER: 5
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 VALUATION
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DHD PE RATIO
BSE is currently trading at a TTM PE multiple of
43.75x.
The stock has seen a PE re-rating in the post
pandemic era on account of increased participation
in the capital markets due to lockdowns and
favourable market conditions.

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 VALUATION
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DHD DIVIDEND YIELD

The final dividend for FY21 was ₹21 per share as
against the previous year’s dividend of ₹17 per share.
The average dividend pay-out ratio for the last five
years has been at ~60%.

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 VALUATION
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DHD KEY LEVELS

BSE got listed in the year 2017 after which it
witnessed some cooling off. The stock made a low of
₹275 in the crash of March 2020, following which it
saw significant bullish momentum making a lifetime
high of ₹2374 in Dec 2021.
The zone of ₹1550-₹1650 would act as a strong
support zone and can be used by long term investors
for accumulation.

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 VALUATION EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 QUALITY
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DHD MANAGEMENT
According to the management, the major factors to
impact Indian capital markets in the coming years
include growth led by policy reforms, move towards
digitization and monetary stance of central banks of
major economies, and economic and trade policies.
Coupled with strong demographic dividend and
economic growth, consumer demand conditions in
the country will remain strong for a long period.
Additionally, stable fiscal situation, moderate
inflation rate, exports growth, rising FDI inflows point
towards fundamental stability in the economy, which
augurs well for the capital markets.

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 QUALITY
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SHAREHOLDING
DHD PATTERN
FII stake has increased from 7.59% in Q2 FY22 to
9.06% in Q3 FY22.
DII have decreased their stake in the company from
4.11% in Q2 FY22 to 3.35% in Q3 FY22.
Non Institution decreased stake to 60.57% in Q3
FY22 from 61.18% in Q2 FY22.
Top Shareholding:
Corporate Trading Member 11.9%
Associate Trading Member 6.0%
Life Insurance Corporation Of India (LIC) 5.6%
Zerodha Broking 3.7%
Associate Trading Member- Individual 3.7%
Siddharth Balachandran 3.0%
Individual Trading Member 2.8%

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 QUALITY
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DHD SECTOR POTENTIAL

• The Indian equity market has witnessed a strong growth over the last two decades, resulting in the growth of demat
accounts and extending demat facility from equity shares to instruments such as commercial papers and bonds.
• In accordance with a notification issued by the ministry of corporate affairs (MCA), all unlisted public companies shall
issue the securities only in dematerialised form and facilitate dematerialisation of all its existing securities, thereby
increasing the number of issuer companies.
• The stock exchange industry is duopolistic in nature. This means that there is an entry barrier for any other company to
enter the sector.
• Key government initiatives such as measures to enhance liquidity , credit availability and financial stability during the
Covid times have helped boost the capital markets and are expected to further aid the same.
• There is also an increasing awareness of the stock market in tier-2, tier-3 and tier-4 towns, which provides a lot of
potential for the two depositories in India.
• Augmented stock market participation among the investors in terms of opening up of demat accounts provides greater
opportunity.

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 QUALITY
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COMPETITIVE
DHD LANDSCAPE
Due to the duopolistic nature of the industry BSE
only competes with NSE, which is not listed.

The total turnover of NSE in the cash market

segment stands at ₹1,53,97,908 cr for FY21 v/s
₹10,45,090 cr for BSE.

NSE reported an EBITDA margin of 77% and PAT

margin of 55% in FY21 with a revenue of ₹6,202 cr.
v
NSE has been a market leader over the years but any
adverse developments in the company can lead to a
significant gain for BSE as the market is a duopoly.

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 QUALITY
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DHD FUTURE OUTLOOK

• BSE is a leading player in exchange platform in India. It has a low capital expenditure (capex) requirement and an asset light
business model.
• The company has various products that are of a digital nature and can be used to penetrate the market.
• BSE’s market share in the equity segment increased to 8% during September 2021 quarter. This is further expected to increase in
the subsequent quarters.
• The company has taken approval for a stake sale in BSE Star MF and is open to considering any good offers regarding it.
• Notwithstanding a temporary roadblock caused by the pandemic, India’s economic fundamentals remain strong, with robust
medium-term growth prospects, low current account deficit and adequate forex reserves. As such, India continues to be an
attractive destination for investments. The private investment climate is also expected to revive in the medium-term, supported by
low interest rates, improvement in domestic as well as external demand, strengthening corporate balance sheets and increase in
capacity utilisation.

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 QUALITY EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 FINAL
ABOUTEDGE
THE MATRIX
COMPANY Case
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DHD
Edge Meter Aspects Grade
Growth 3
Profitability 3
Efficiency 3
Solvency 5
Valuation 3
Quality 3
TOTAL 20

The maximum grade for a company could be 30. Any company above grade 20
is worth considering. A grade below 15 is considered to be poor.
 ABOUT THE COMPANY Case
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DHD

THANK YOU
This document and the process of identifying the potential of a company has been produced only for learning purposes. Since
equity involves individual judgements, this analysis should be used for only learning enhancements and cannot be considered to
be a recommendation on any stock or sector. Our knowledge team has limited understanding and we all are learning the art and
science behind this.

www.stockedge.com

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 ABOUT THE COMPANY Case
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DISCLOSURES
DHD
Neither Kredent Infoedge P Ltd. nor any of its associates have any financial interest in the subject company.
Neither Kredent Infoedge P Ltd. nor any of its associates have actual/beneficial ownership of one percent or more securities of the subject company, at the end of
the month immediately preceding the date of publication of the research report or date of the public appearance.
Neither Kredent Infoedge P Ltd. nor any of its associates has, any other material conflict of interest at the time of publication of the research report or at the time
of public appearance.
Neither Kredent Infoedge P Ltd. nor any of its associates have received any compensation from the subject company in the past twelve months.
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months.
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the subject company in the past twelve months.
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banking or brokerage services from the subject company in the past twelve months.
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with the research report.
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