Whalesbook
### The Valuation Tightrope: IPO Progress vs. YoY Decline
The National Stock Exchange of India (NSE) has taken a critical step toward its long-awaited public offering, securing a no-objection certificate (NOC) from the Securities and Exchange Board of India (SEBI) for its initial public offering (IPO). This approval signals the potential end to a decade-long journey fraught with regulatory hurdles. Following this development, the NSE board is scheduled to meet on February 6, 2026, to formally initiate the IPO process, including the formation of a dedicated IPO committee. This committee will oversee the crucial steps in preparing for the listing, which could be one of the largest domestic offerings. The unlisted NSE was trading around ₹2,075 in early February 2026, reflecting an estimated market capitalization of over ₹5.13 lakh crore.
Despite this IPO momentum, the exchange's third-quarter fiscal year 2026 (Q3 FY26) financial results present a bifurcated picture. Consolidated total income rose 6% quarter-on-quarter (QoQ) to ₹4,395 crore, primarily fueled by a 9% sequential increase in transaction charge revenue to ₹3,033 crore, driven by higher trading volumes in equity cash and derivatives segments. Consolidated profit after tax (PAT) mirrored this trend, climbing 15% QoQ to ₹2,408 crore. However, this sequential strength starkly contrasts with a 9% year-on-year (YoY) decline in consolidated income from ₹4,807 crore in Q3 FY25 and a significant 37% YoY drop in PAT from ₹3,834 crore in the prior-year period. [cite: original text]
### Navigating Derivative Shifts and Competitor Landscape
The sequential revenue surge was propelled by increased trading activity, with average daily traded volumes (ADTV) in the cash market up 3% QoQ, equity futures ADTV up 8% QoQ, and equity options ADTV up 15% QoQ. The exchange also managed costs effectively, with consolidated total expenditure falling 48% QoQ to ₹1,234 crore, though this included a one-time gratuity provision of ₹126 crore due to new labor code implementations. On a standalone basis, NSE reported a robust PAT margin of 59%. For the nine months ended FY26, consolidated PAT stood at ₹7,431 crore. [cite: original text]
However, concerns loom regarding potential regulatory shifts impacting the derivatives segment, which forms a substantial portion of NSE's revenue. Management commentary suggests a potential decrease in derivatives volume, which could affect future revenue streams. This comes at a time when the broader Indian economy is projected for robust growth, with the RBI estimating 7.4% GDP expansion in Q3 FY26. Market sentiment remains broadly positive, with analysts like Morgan Stanley expecting supportive conditions for equities due to economic data and monetary policy.
In comparison, its peer, BSE Ltd, reported Q3 FY26 revenue of ₹831.74 crore and a net income of ₹219.67 crore. BSE had a market capitalization of approximately ₹1.18 lakh crore in early February 2026 and traded at a P/E ratio of around 65.6x, while NSE's unlisted P/E was noted around 63.47x based on FY25 data.
### The Long Road to Listing
The path to NSE's IPO has been protracted, with initial plans filed in 2016. Delays stemmed from regulatory scrutiny, including the co-location controversy and governance issues. Settlements of regulatory matters, involving payments totaling ₹643 crore in October 2024 and a reported ₹1,388 crore more recently, paved the way for SEBI's clearance. The exchange is targeting to file its Draft Red Herring Prospectus (DRHP) by March or early April 2026. For the nine months of FY26, NSE's total contribution to the government exchequer aggregated ₹41,842 crore, including ₹34,835 crore in securities transaction taxes. [cite: original text]