BSE Limited (BSE) reported robust operating revenue growth of 22 % y-o-y to Rs 110 crore given growth of 30% in transaction charges and 24% in listing fees. While growth in transaction charge was driven by the higher differential charging in the exclusive group of securities, revenue from listing fees increased due to increased capital market activities and hike in listing fees charged. Income from investments and deposits declined 12 % y-o-y. Overall, total revenues grew 9.6% y-o-y to Rs 160 crore. BSE controlled its expenses, with both employee and technology expenses down 300bps y-o-y as a percentage of operating income. EBITDA margin improved 162 bps y-o-y to 45.9 % and EBITDA grew 13.6% to Rs 72 crore. Tax expense increased this quarter as SGF contribution expense led to a relatively lower tax in Q2FY17. Reported PAT from continuing operations increased 30 % y-o-y to Rs 66.8 crore. While Sebi earlier mandated a certain contribution to SGF from profit, it was discontinued from Q2FY17. Adjusting for post-tax SGF expense in Q2FY17, adjusted PAT grew 16 % y-o-y. BSE has introduced liquidity enhancement scheme starting November 17 to give an impetus to the volumes at India INX. While we marginally revise earnings estimate for FY18 (up 1.4%), we maintain our estimates for FY19 and FY20. We maintain ‘BUY’ on BSE with a target price of Rs 1,170 at 28x Sep’19E earnings.
Revenue from transaction charges increased 30 % y-o-y to R351 million in Q2FY18. This was primarily driven by higher differential charging in the exclusive group of securities (at 0.1% of value traded). In August 2017, BSE also increased transaction charges on remaining securities charged on per-trade basis (from Rs 1 to Rs 1.5 for the highest slab). While total cash ADTV was up 14 % y-o-y to Rs 4,000 crore, exclusive segment ADTV remained flat y-o-y in Q2FY18. Transaction charges from currency derivatives grew on the back of fee increases in both futures and options. ADTV in currency derivatives increased by 37 % y-o-y to Rs 16,300 crore in Q2FY18, driven by 59 % growth in ADTV of options.