Global brokerage Jefferies has initiated coverage on the National Stock Exchange (NSE) with a target price of ₹2,085 per share. Analysts cite expected revenue growth driven by new product lines like commodity derivatives and electronic gold receipts, aiming to reduce dependence on equity options. The report suggests that recent regulatory changes from SEBI will have a limited impact on the exchange's overall financial performance.
Jefferies has begun covering the National Stock Exchange of India, setting a target price of ₹2,085 for the unlisted shares. The brokerage firm maintains a positive outlook on the exchange, projecting that revenue will grow by 15 percent between fiscal years 2027 and 2029. This growth is expected to come from the company's efforts to diversify its income sources beyond the traditional equity options market.
Diversifying Revenue Beyond Equity Options
Currently, equity options account for about 60 percent of the exchange's revenue. Jefferies expects this dependency to drop to 50 percent over the next five years. To achieve this, the exchange is scaling its newer offerings, such as commodity futures and options, its mutual fund ordering platform, and Electronic Gold Receipts. These initiatives are forecast to contribute an additional 14 percent to both revenue and profit after tax by fiscal year 2030, reducing the risk associated with any single segment.
Impact of SEBI Regulations
Investors have been concerned about recent interventions by the Securities and Exchange Board of India (SEBI) aimed at reducing retail losses in the index options market. Jefferies analysts noted that these regulations are likely to have a manageable impact. The firm estimates that low-turnover participants, who are most affected by these rules, contribute only 2 to 3 percent of equity options revenue. As the market adjusts to these changes, the firm expects the exchange to return to a stronger growth trajectory in the coming years.
Margin Expansion and Tech Growth
Beyond product diversification, the exchange is benefiting from its investments in technology. Revenue from tech-related services is projected to grow at a compound annual rate of 23 percent. This growth, combined with disciplined spending on human capital and infrastructure, is expected to improve EBITDA margins to 78 percent by fiscal year 2029. When evaluating the business, Jefferies has applied a 15 percent valuation premium to the NSE compared to its listed rival, the Bombay Stock Exchange, citing superior margins and a higher dividend yield potential.
As the NSE is an unlisted entity, investors should track the execution of these new product lines and the long-term impact of regulatory measures on trading volumes. Future financial results and management commentary regarding the scaling of commodity derivatives and gold receipts will be important indicators of whether the company can meet these growth projections.