Media365
The proposed initial public offering (IPO) of the National Stock Exchange (NSE) is expected to mark a significant milestone for India’s capital markets, with global brokerage Jefferies stating that the listing will complete the country’s trio of publicly listed market infrastructure institutions.
In a report released on Tuesday, Jefferies said the NSE enters the public market from a position of strength, supported by its dominant market share, diversified business model and industry-leading profitability. The brokerage noted that the exchange commands more than 90 per cent market share across most trading segments, giving it a clear competitive advantage over domestic peers.
Beyond its core trading business, Jefferies highlighted NSE’s expanding technology products business, which now contributes around 13 per cent of its overall revenue. The exchange is also strengthening its presence in the commodities segment, reducing its dependence on equity trading and creating multiple revenue streams.
The report said India’s capital markets have become increasingly derivatives-driven, with the equity options market recording a compound annual growth rate (CAGR) of 56 per cent between FY20 and FY26, significantly outpacing the 19 per cent CAGR in cash market turnover. Derivatives now account for nearly 70 per cent of operating revenues for Indian exchanges, underscoring the structural shift in trading activity.
Jefferies added that NSE continues to dominate key segments including equity cash, equity futures, single-stock options, bonds and currency derivatives, while also building a growing technology and data business.
Although regulatory settlements related to SEBI’s co-location and dark fibre cases weighed on reported earnings during FY25 and FY26, the brokerage said the underlying business remains fundamentally strong.
According to the report, NSE’s normalised operating EBITDA margin has remained stable at around 76-77 per cent over FY24-FY26 after excluding one-off regulatory expenses, making it one of the most profitable stock exchanges globally.
Jefferies also pointed to the exchange’s healthy balance sheet and strong cash generation. With capital expenditure limited to around 3-3.5 per cent of revenue, NSE has maintained robust operating cash flows, enabling it to distribute 74 per cent of earnings as dividends in FY25 and 85 per cent in FY26.
The brokerage cautioned that regulatory proceedings and litigation remain key risks for the exchange. However, it said the one-time nature of recent settlement costs indicates that NSE’s core operating performance remains intact.
Jefferies further noted that the proposed offer for sale by public sector general insurance companies could help improve their solvency by unlocking value from their holdings in the exchange.
