BSE’s initial public offering (IPO) has opened on January 23 with price band fixed at Rs 805-806 per share. The first IPO by a domestic stock exchange is aiming to raise Rs 1,243 crore through its issue, which will close on January 25.
It has raised Rs 373 crore by allotting shares to anchor investors Goldman Sachs Asset Management, ICICI Prudential Mutual Fund, Kotak Mutual Fund, Citigroup, IDFC Mutual Fund, DSP Blackrock, Capital World, Reliance Capital Trustee Company and Kuwait Investment Authority Fund.
Analysts are bullish on the issue and recommend subscribing the issue.AnandRathi suggests strong subscribe to the IPO stating that BSE is available at price to earnings (PE) of 17.6 times its FY17 earnings at the upper end pricing of the issue. It sees significant growth potential for BSE given the government efforts to increase retail and EPFO participation in the capitalmarket; bring in new products and innovations.
Nirmal Bang recommends subscribing to the issue. It says At upper band of Rs 806, BSE is offering at 15.9 times EV/EBITDA and 26.7 times price to equity (PE) of H1FY17 annualised earnings. It says the issue is attractively priced with market cap of Rs 4326 crore at upper end of price band and free cash of Rs 2681 crore and enterprise value of Rs 1646 crore. The brokerage firm says that though BSE was the first stock exchange in Asia, incorporated in 1875 but remained much behind NSE and had market share of 15 percent in cash segment (as on FY16) and negligible presence in derivative segments. “Due to lagging behind in adoption of derivative, BSE lost its dominant position to NSE even in cash segment as well. Now BSE is trying to strike first in many of the newer product like Currency Derivative, MF,debt market, International Exchange,” it says.
Hem Securities says at price band of Rs 805-806 per share price to equity multiple will turn out to be 20 on post issue annualised H1FY17 earnings per share of Rs 39/share of company. “Looking at after strong fundamentals and financial position of company, issue looks reasonably priced at current level. Hence we recommend subscribe on issue,” it says in a note.
With a recommendation of subscribe to the issue for medium-to-long term perspective, BNP says that at upper price band of Rs 806, it is available at 25.6 times FY16 PE, which is reasonably priced when compared to globally listed exchanges like Singapore Exchange, Japan Exchange Group, Deutsche Boerse, trading in the range of 20-25 times FY16 PE. It is upbeat on the stock owing to its diversified revenue mix & continuous focus on introduction of new products & services.
BNP says its revenue mix is diversified and is not wholly dependent on market volumes and can unlock huge value for its stakeholders as most of its subsidiaries are profit making. Overall financial performance remained healthy with revenue registering a CAGR of 7 percent over FY13-16. Since FY14, overall revenues have picked up due to hike in listing fees in two successive years. Interestingly, revenues from listing fees have grown at a stellar CAGR of 65 percent over FY14-16.
According to ICICI Direct, the IPO price band of Rs 805-806, the stock is available at a multiple of 35.2 times FY16 PE at the upper end of the price band. On the whole, right execution and profitable growth of these ventures remains prerequisite for an improvement in overall business performance.
There are around 9,000 shareholders in BSE. At the end of October 2016, the BSE was world's largest exchange by number of listed companies, and India's largest and the world's 11th largest exchange by market capitalisation. It has 5,868 listed companies as on October 2016. Bajaj Holdings Investment, Caldwell India Holdings, Acacia Banyan Partners, Singapore Exchange, Mauritius-based arm of American investor George Soros’ Quantum Fund and foreign fund Atticus are few of its existing shareholders.
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