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Business News/ Markets / Stock Markets/  BSE, MCX Q4 results: BSE enjoys multiple growth levers; MCX banks on option volume surge
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BSE, MCX Q4 results: BSE enjoys multiple growth levers; MCX banks on option volume surge

While BSE showed multiple levers for growth in revenue and earnings over the medium term, MCX seemed poised to leverage its growth in options volumes for future revenue growth.

BSE’s net profit in Q4FY23 rose 24% YoY to ₹88.61 crore.Premium
BSE’s net profit in Q4FY23 rose 24% YoY to 88.61 crore.

BSE and the Multi Commodity Exchange of India (MCX), the only listed exchanges in the country, have released their earnings for the fourth quarter of FY23. While BSE showed multiple levers for growth in revenue and earnings over the medium term, MCX remains well poised to leverage its growth in options volumes for future revenue growth, say analysts.

BSE’s net profit in Q4FY23 rose 24% YoY to 88.61 crore. The exchange’s revenue from operations grew 11% to 227.01 crore from 204.59 crore in the year-ago period.

PAT growth was driven by higher-than-estimated revenue in non-transaction securities services and strength in income from the tech subsidiary and clearing corporation, brokerage firm Motilal Oswal Financial Services said in a note.

Read here: BSE net profit rises 24% in March quarter

BSE’s operating revenue registered 14% YoY growth beating analysts’ estimates. Transaction charges declined 13% YoY on account of cash volumes, which was offset by the currency segment, book building fees and a higher contribution from mutual funds.

“BSE has multiple levers for growth in revenue and earnings over the medium term, such as continued momentum in the Star MF business, levy of charges on equity derivatives, levy of charges on the INX platform, possibility of levying a fee for listing of debt securities, start of operations at its Power Exchange, and commencement of revenue from its Gold Spot exchange," the domestic brokerage said.

Motilal Oswal has increased its FY24/FY25 revenue estimates for BSE by 14%/12%, factoring in strong growth in the securities services segment (excluding transaction charges). It reiterated Neutral rating with a SoTP-based one-year target price of 550 per share on BSE.

On May 15, BSE also relaunched Sensex and Bankex derivative contracts in its bid to boost derivative trading. It relaunched the derivative contracts with a reduced lot size of futures and options and a new expiry cycle of Friday as against the expiry cycle of Thursday earlier.

Read here: What’s behind BSE’s decision to relaunch derivatives?

On the other hand, MCX, the largest commodity trading exchange in the country, recorded consolidated revenue from operations of 133.75 crore up by 25.63% YoY from 106.46 crore in Q4FY22. Its consolidated net income stood at 153.83 crore as compared to 121.04 crore, YoY.

The company’s profit after tax (PAT) was at 5 crore for the March quarter while operating profit was at 2 crore dragged by higher software expenses that were at 87 crore.

Analysts believe higher software costs may continue in Q1FY24 based on the existing agreement with former software vendor.

Read here: MCX Q4 net profit tumbles 85% to 5.45 Cr on higher software support charges, Board declares 19.09 dividend

MCX’s futures ADTV dipped around 15% QoQ which was offset by strong options ADTV growth of 16%, resulting in 4% growth in overall turnover.

“Increasing options volumes have been the key investment thesis for the company and Q4FY23 saw this trend continuing as options ADTV (notional) touched an all-time high of 55,000 crore in March 2023," ICICI Securities said.

It believes continued traction in options volumes along with new lower size contracts could aid revenue growth going forward. However, impact of lower software cost could potentially lift EBITDA, which will likely be partially offset by increased amortisation expense. 

Going ahead, uncertainty in final transition to new software platform and possible lower other operating income post the implementation of blocked funds regulation even for secondary markets would be key overhang for the stock.

ICICI Securities maintains Hold rating on MCX with a target price of 1,412 per share.

While BSE declared a final dividend of Rs12 per equity share for the FY23, MCX announced a dividend of 19.09 per equity share.

BSE shares command a market capitalisation of 7,152.44 crore and trade at a trailing twelve-month P/E of 32.34x. Whereas, MCX boasts a market cap of 6,750.90 crore and trades at a P/E of 37.39x.

On Monday, shares of BSE ended 0.73 % higher at 528.00 apiece, while MCX shares fell 2.05% to end at 1,323.75 apiece on the NSE. 

 

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Published: 22 May 2023, 04:11 PM IST
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