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National Stock Exchange of India Ltd (NSE) offer-for-sale issue pricing comes as a rude shock to investors buying the shares in the unlisted market. The price band of ₹1,700-1,785 is nearly 10% lower than the price before the announcement. Given the bearish tone in leading equity benchmarks and a large issue of ₹22,560 crore, NSE’s management may have thought of making pricing attractive. The stock’s price-to-earnings multiple, based on FY26 earnings is 43—a steep 23% discount to BSE’s 56. This may seem tempting for investors, but looking at valuation based on FY26 earnings may not give a true picture, given NSE’s far slower year-on-year net profit growth of 11% for the June quarter (Q1FY27), versus 65% for BSE. The trend is likely to continue in FY27, based on trading volume data in Q2FY27 so far. Though NSE remains the leader across cash and derivatives trading volumes, the bigger size alone may not justify valuation premium. Moreover, unlike NSE, BSE has several levers to boost its financial performance. BSE’s option transaction charges are lower at ₹3,250 per crore versus ₹3,550 per crore for NSE. So, if BSE decides to hike charges, its revenue could rise. Moreover, falling futures volumes hurt NSE’s income from futures transaction charges, whereas BSE is immune. This is because NSE charges ₹183 per crore of index futures and stock futures transaction, but BSE has kept it free to attract volumes. So, if BSE decides to levy transaction charges on futures, it will add to its net profit. There is ample room for BSE to gain share in the cash market, where NSE still commands a dominant 93% share as per Q1FY27 data. The opportunity mirrors BSE’s success in derivatives, where its market share rose from virtually nil in FY23 to 28% in FY26. For now, transaction charges remain the single largest revenue stream for NSE and BSE, contributing nearly 84% and 78%, respectively, of their Q1FY27 operating revenues. Thus, it helps to look at trends mainly in equity derivatives trading volumes to assess the growth trajectory. BSE’s option premium turnover in Q1FY27 almost doubled year-on-year to ₹18 trillion, while NSE’s grew by just 14% to ₹39 trillion. Q2FY27 trends are also in favour of BSE. Cumulative figures for July and August show 61% year-on-year growth in option premium turnover for BSE, versus a mere 7% for NSE. What can turn the tide in favour of NSE? Besides regaining the growth momentum in equity derivatives, it can make efforts to diversifying its revenue stream. Though income from data services contributed around 11% of Q1FY27 revenue, the dependence on transaction charges is still higher than global peers. Global peers such as Nasdaq, London Stock Exchange, Japan Exchange Group, Hong Kong Exchange and Intercontinental Exchange derive only 20-60% of revenue from transaction charges, as per a PL Capital report. A much larger share of their income comes from relatively stable, annuity-like businesses such as market data, technology services and information products. Despite this, most of them trade at 17-22 price-to-earnings multiple, based on Bloomberg consensus estimates for CY26 (almost equivalent to FY27)—a large discount to NSE’s valuation. Given this, further expansion in the already-premium multiples of the NSE can be tough. So, investors looking to participate in the offer-for-sale should note that the stock price gains will hinge more on future earnings growth.
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