BackBourses’ profits rally on increased market activity
NSE reports a net profit of Rs169.50 crore on a 21% increase in income; BSE sees profit increase 14% to Rs36.88 crore
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Mumbai: Increased market activity in the last few months helped India’s stock exchanges earn more from their core operations, leading to strong profit figures in the three months ended December.
The National Stock Exchange of India Ltd (NSE), which leads both equity and derivatives segments, reported a net profit of ₹ 169.50 crore in the third quarter of fiscal year 2015, lower than ₹ 277.69 crore a year ago.
While the exchange reported a 21% year-on-year increase in income, profit was lower, since the year-ago quarter had recorded a one-time gain of ₹ 122.92 crore from the sale of equity in two subsidiaries and an associate company.
The average trading turnover in the cash and derivatives segment in the quarter was ₹ 16,496 crore and ₹ 2.34 trillion, respectively, much higher than the corresponding quarter a year ago.
An NSE spokesperson declined to comment.
BSE Ltd, which released quarterly earnings last week, saw its third quarter net profit rise nearly 14% to ₹ 36.88 crore, compared with ₹ 32.38 crore in the quarter a year earlier. The total income of the bourse rose 17% to ₹ 136.30 crore in the third quarter of fiscal 2015 from ₹ 116.48 crore in the corresponding quarter of the previous fiscal year.
The segmental revenue of the bourse shows that it has earned more from both stock exchange operations and treasury income, along with the gains in depository activities. BSE owns 54.20% in Central Depository Services (India) Ltd (CDSL), as per the latter’s website.
The third quarter of fiscal year 2015 saw the average trading turnover on BSE cash segment rise to ₹ 3,221 crore from ₹ 2,022 crore in the quarter a year ago. The equity derivatives segment also saw a significant jump with an average notional turnover at ₹ 1.31 trillion.
The benchmark indices S&P BSE Sensex and CNX Nifty gained 3.26% and 3.99%, respectively in the quarter ended 31 December 2014.
The quarter also saw BSE registering record volumes in its currency derivatives segment on which nominal transaction charges were also introduced from 1 December 2014. The charges will be increased in a phased manner from ₹ 2 per crore from 1 December to ₹ 10 per crore from 1 October 2015.
The exchange did not respond to an email query seeking comments on the quarterly performance.
The quarterly numbers of both exchanges show that the income has increased in a higher proportion compared with profit. Sudip Bandyopadhyay, managing director, Destimoney Securities Pvt. Ltd attributed the trend to the significant competition in the exchange business wherein margins are shrinking as bourses invest heavily in technology and marketing to build their brand value.
MCX-SX has managed to cut down on its losses after reducing its spend on advertising along with lower operating expenses. In the December quarter, MCX-SX reported a loss of ₹ 25.26 crore, compared with a loss of ₹ 51.70 crore in the corresponding quarter a year ago.
While the income dropped to ₹ 6.61 crore in the third quarter of fiscal 2015 from ₹ 17.52 crore, a year earlier, the expenses saw a nearly 70% drop from ₹ 73.18 crore to ₹ 23.10 crore in the quarter ended 31 December 2014.
Only the currency derivatives segment of MCX-SX is functional and the bourse has lost significant market share due to regulatory orders.
Last September, the Securities and Exchange Board of India (Sebi) renewed the licence of the exchange with conditions related to its net worth and long-term business sustainability plan.
A spokesperson for MCX-SX said the last year was difficult for the bourse, but since the uncertainty about its future is over, the priority is to shift the focus entirely towards business. The exchange is in talks with some investors to raise capital and the immediate priority is to get one investor who can hold up to 15% stake, he said in an emailed response.
MCX-SX was forced to suspending trading in currency options early this year, which further dented its deteriorating market share. While options trading has resumed, the total turnover is less than ₹ 2,000 crore on most days.
In sharp contrast, the approximate daily currency derivatives turnover on NSE and BSE is ₹ 15,000 crore and ₹ 13,000 crore, respectively.
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