NSE Q2 Results Impacted by ₹13,000 Cr Provision; FY26 Seen as 'Reset Year' Ahead of IPO

National Stock Exchange of India (NSE) has announced its financial results for the second quarter of fiscal year 2026 (Q2FY26). The company's net profit saw a substantial year-on-year decrease of 23%, falling to ₹2,095 crore. This decline was primarily attributed to a one-time provision of ₹13,000 crore made towards the settlement of the co-location and dark fibre case with the Securities and Exchange Board of India (Sebi).

Excluding this extraordinary expense, analysts estimate that NSE's profit would have been in the range of ₹3,000–3,400 crore. The exchange's operating revenue also experienced an 18% year-on-year drop, settling at ₹3,768 crore. This was largely due to reduced trading volumes in equity cash, futures, and options segments, with transaction charges, a key revenue source, falling by 22%. Sebi's recent tighter regulations on Futures & Options (F&O) trading have contributed to this moderation.

However, NSE's non-trading income streams, including data services, listing fees, and data centre operations, showed healthy growth between 6% and 11%, helping to offset the overall revenue dip. The exchange also booked an investment gain of ₹1,200 crore from the partial sale of its stake in National Securities Depository Ltd (NSDL).

Operationally, while costs surged due to the Sebi provision, employee and regulatory expenses saw decreases. Excluding the one-off charge, NSE's Ebitda margin remained strong at 76–78%, highlighting its efficient, asset-light business model. Analysts forecast total income to grow at a 10% CAGR and net profit at a 9% CAGR between FY25 and FY28, anticipating a strong earnings rebound from FY27.

NSE continues to dominate market share, maintaining over 92% in the cash segment and a near-monopoly in equity futures, although its share in equity options slightly decreased. The exchange reported over 120 million registered investors. New product launches like electricity futures and zero-day options have been well-received, enhancing its innovation profile. The much-awaited NSE IPO is expected in the first half of 2026, pending approvals.

Impact This news has a significant impact on the Indian stock market as it provides crucial insights into the financial health and future prospects of the country's primary stock exchange, especially in the lead-up to its IPO. The regulatory provision and its effect on current earnings, alongside the positive outlook for future growth and product innovation, will influence investor sentiment towards NSE and the broader capital markets. Rating: 8/10.

Difficult Terms Explained: Co-location Case: Refers to a regulatory issue involving NSE providing unfair speed advantages to certain trading members through its co-location facilities. Dark Fibre: Refers to unused optical fibre cables, which were part of the co-location facility issue. Sebi: Securities and Exchange Board of India, the market regulator for securities markets in India. Ebitda: Earnings Before Interest, Taxes, Depreciation, and Amortization, a measure of a company's operating performance. CAGR: Compound Annual Growth Rate, the average annual growth rate of an investment over a specified period longer than one year.