NSE Revenue Growth May Hit 15% Annually Through FY29: Jefferies
Jefferies predicts a 15% revenue CAGR for the National Stock Exchange (NSE) through FY29, driven by tech services and new business ventures.
The National Stock Exchange (NSE) of India is poised for a significant financial surge, with its operating revenue expected to grow at a compound annual growth rate (CAGR) of 15 per cent between FY27 and FY29. This optimistic outlook comes from a recent report by brokerage firm Jefferies, which suggests that the exchange is ready to move past the regulatory hurdles and tax burdens that have impacted its equity derivatives business over the last two years.
The Numbers: Projecting a Massive Climb
Jefferies has provided a detailed roadmap for the NSE's operating revenue, forecasting a steady climb over the next few years. According to the brokerage's estimates, the revenue is expected to move as follows:
- FY26: Rs 166,013 crore
- FY27: Rs 173,929 crore
- FY28: Rs 198,442 crore
- FY29: Rs 230,294 crore
This growth isn't just limited to top-line revenue; the brokerage also expects a boost in earnings per share (EPS), projecting an increase from Rs 42.57 in FY26 to Rs 62.08 by FY29.
Diversification: Moving Beyond Equity Options
A key highlight of the report is the NSE's strategy to reduce its reliance on equity options. Currently, equity options account for 60 per cent of transaction revenue, but Jefferies expects this share to drop to 50 per cent over the next five years as the exchange diversifies its portfolio.
Interestingly, the report notes that the NSE's dependence on weekly index options is lower than many believe, contributing roughly 40 per cent of operating revenue.
New Frontiers for Growth
To fuel this expansion, the NSE is looking toward several new business opportunities that could add an additional 15 per cent to its revenue and profit after tax by FY30. These include:
- Commodity derivatives
- Electronic Gold Receipts (EGRs)
- A dedicated mutual fund order platform
It is important to note that while these opportunities are promising, Jefferies has not included them in its base-case projections.
Tech Power: The Co-location Advantage
Technology remains a cornerstone of the NSE's growth strategy. The brokerage anticipates that data and technology revenue will grow by 20–23 per cent annually until FY29. This will be driven by the addition of 600 co-location racks over two years, allowing trading participants to place their servers closer to the exchange's systems for faster execution.
As a result of this technology push and investments in human capital, operating margins are expected to expand by 200 basis points, potentially reaching 78 per cent by FY29.
Risks and Market Valuation
Despite the bullish outlook, Jefferies warns of certain risks that could derail these projections. These include the possibility of further regulatory tightening regarding equity options, the threat of cyberattacks, and potential disruptions to market benchmarks.
Nonetheless, the brokerage has assigned a ‘Buy’ rating to the NSE. With a price target of Rs 2,085 against a cited market price of Rs 1,777, Jefferies sees a potential upside of approximately 17 per cent.