BSE surges 55% in a month. What's cooking?

ET INTELLIGENCE GROUP: The stock of BSE, Asia’s oldest stock exchange, has gained 55% in a month and 27% since its March quarter results declared on May 13. The rising investor interest follows the company’s strong performance in the core exchange business as well as other products. Amongst the non-exchange businesses, the Star Mutual Fund platform launched a few years ago has been showing a greater traction. It allows investors to buy and sell various mutual fund schemes similar to stock transactions. BSE uses the existing network of 59,000 brokers to expand the platform business, which has grown 91% annually in the past four years to an average daily turnover of Rs 3,607 crore.The platform’s FY21 revenue was Rs 34 crore or nearly 7% of the consolidated revenue of Rs 501 crore. BSE has given a mandate to ICICI Securities to find a buyer to offload a partial stake in the platform, which should unlock value for investors.BSE has also set up a joint venture with PTC India, which controls majority of the power traded in the country. PTC currently uses IEX India for trading. Analyst expect at least half of this business to flow to the joint venture with BSE in the future. IEX’s stock has doubled over the past 12 months and its market capitalization is 2.5 times that of BSE.83162646BSE’s commodity exchange also reported a sharp jump in trading volume — up 13 times in FY21. The introduction of mini gold and silver contracts in the rising commodity prices environment helped.The core exchange operations also showed a strong performance in FY21. The income through transaction charges grew by 48% to Rs 100.6 crore in FY21. On a consolidated basis, profit rose by 17.5% to Rs 226 crore on 11% growth in revenue.With improving performance, the institutional interest in BSE is rising. Zerodha, the country’s largest broker, increased its stake in the exchange to 2.2% in the March 2021 quarter from 1.6% in the September 2020 quarter. Life Insurance Corporation of India, the country’s largest insurer, owns 5.6% stake in the exchange.At Tuesday’s closing price of Rs 935 on the NSE, BSE’s market capitalization is Rs 4,201 crore implying a trailing price-earnings multiple of 18.6. It owns 23% stake in CDSL worth Rs 2,300 crore and has Rs 1,920 crore of cash and bank balance.

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