BSE Limited — Q4 FY26 earnings call

First of all, thank you for your kind patience and attending this call, and thanks for all the good words. As far as ICCL, ICCL has been adding members, both big and small. As you would recall, in the earlier earnings call also I have stated that ICCL has significantly increased its technological capability to handle around 29,000 trades per second per broker, and a peak of 69,000 with some small latency of one second, which is a big number. And therefore, it has attracted some significantly large market participants and also smaller participants as well. So this journey continues. The addition of members alone does not directly contribute to the growth or requirement of SGF. SGF is a function of a stress test conducted with the largest market participants and based on multiple factors it evolves. So simple addition of members does not directly correlate with the increase in the SGF requirements. ... There is an outstanding of Rs. 80 crore, which is an old outstanding from NSE. So, we have taken some ECL provision that is in line with our ECL policy and accounting standard requirement, which has led to this increase in the current quarter.

Clarified the drivers behind ICCL's growth, the complex nature of SGF calculation, and the reason for higher 'other expenses' in the quarter.

Asked by Swarnabh Mukherjee

Contributions to IPF and other statutory things are governed by SEBI rules, so there will be no intention to reduce any of them, and we will continue to be supporting all those noble causes stipulated by the regulators in the normal fashion as what we have been doing all along. As far as the cost is concerned, as I have been clarifying in my previous calls, we always believe in charging appropriate amounts at appropriate points of time, considering multiple factors, including the volumes that we are making and the cost of trading and the affordability and what will be easy for the members, etc. So, at this point of time, we have priced, based on our studies, whatever cost we should charge for the options. These are subject to revisions and review, and as and when we feel the appropriate time has come for either an upward or downward revision, we will consider doing it. It will be totally driven by our own estimate and not by any other external factors.

Provided insight into BSE's independent pricing philosophy for options and its commitment to regulatory contributions, indicating no immediate plans to reduce costs or aggressively raise prices based on competition.

Asked by Supratim Datta

First is on monthly contracts. As you rightly observed, Amitji, the percentage of monthly contracts for us is going up, but that is not the destination where we would like to be. We would like to further proceed. ... As far as clearing expenses are concerned, as you would know, the SEBI turnover fee is based on the notional trading, the clearing expense is based on the number of contracts, and we earn revenue based on premium. In times of volatility, when the premium is higher, naturally, because volatility being one of the factors for pricing an option and, therefore, the premium, you get more premium, but the contract is only one, so the clearing expense comes down and the premium and, therefore, the revenue goes up.

Explained the strategy for deepening monthly contracts and clarified the mechanics of clearing expenses in relation to premium-based revenue, especially during volatile periods.

Asked by Amit Chandra

Indeed, BSE's stipulated strategy is to explore commodity derivatives as early as possible. As you would recall, BSE was not able to have any opening in equity derivatives with a very poor volume in equities for a very long time. ... We do not want to have the sense of being left out and therefore me too type of a syndrome where we also start something because others are starting it. We want to create a value proposition for the market by thinking of some unique selling proposition, just not the expiry day alone as a differentiator. ... our sincere wish is that very soon we should be able to come out with consolidated views, taking up with the regulators and taking the commodity agenda forward.

Indicated BSE's intention to enter commodity derivatives with a unique value proposition, signaling a potential new growth avenue in the near future.

Asked by Deepak Ajmera

As far as any specific exchange which you are naming as a competitor, our stand has always been we should be the competitor with ourselves. All the other participants are trying to help in the capital market expansion of the country. ... Market share in equities has been hovering around 7% to 8% compared to 5% to 6% when I joined. This is far away from what we wanted it to be. We wanted it to be at least double digit. ... what we are understanding is the applications of SOR (Smart Order Routing) which people send to both the exchanges while we have cleared are still pending for more than six months at the other exchange because of which smart order routing has not taken off and because of which the clients are not able to be exchange agnostic and take the best prices available at BSE. This has probably impeded.

Revealed that BSE's cash segment market share is 7-8% and highlighted that issues with Smart Order Routing at the competing exchange are hindering BSE's ability to gain further market share.

Asked by Satyam Chaurasiya

At this point of time, we have around 587 brokers of India who are with us and who are trading SENSEX options. ... our stated goal for this year is we should go at least 600, 700.600 appears to have been achieved by now already. So, at least 700 is what is the goal. ... Our FPA count has grown from 100 to 520, which is commendable. But we have put for ourselves a target of around 800 FPAs. ... Some of them are slowly walking in because, till very recently, the liquidity for us in monthly contracts were lesser. Today, with a lot of efforts, we are finding that it is meaningfully liquid. So, more and more people are coming in. So, we feel that the runway is more there in that place.

Provided specific targets for broker and FPI participation, indicating continued efforts to deepen market liquidity and expand the participant base, especially for longer-term option products.

Asked by Madhukar Ladha

The premium to notional ratio of Sensex vis-a-vis comparable indices in the market, the ratio at Sensex is lower. This is mainly because still the monthly contracts are yet to develop and grow in a big way at BSE. ... What I would like to emphasize, which is of course very well known to you, is Sensex is just a three-year-old product, whereas the other comparable products are 26-year-old in the market. So, it is just that Sensex has been fortunate with the support of all the market participants and people like you, has grown so big in three years. Typically, product growth takes a lot of time. While the time has been crunched a lot for Sensex, still there will be some more time required for the longer-term contracts should develop and sustain.

Explained that the lower premium to notional ratio for Sensex is due to the nascent stage of its monthly contracts and the product's relatively young age compared to established indices.

Asked by Devesh Agarwal

A 100% dividend payout or a significantly large payout may indicate a situation where the company is not having any growth idea at all. ... The things are different now. If you look at the share price growth, that is also one way of returning money to the shareholders. ... As far as the share price is concerned, which is also one way of improving the wealth of the shareholders, please note that the market capitalization of BSE was 5,000 crores when I joined. And today we are talking about a market capitalization of around 1.56 lakh crores. ... In the last two years, we have built around Rs. 500 crores as gross block, which has gone for capacity increase. ... The current year's technology budget already appears to be underpriced. We put around Rs. 300 crores, but with the global situation today, for the memory increase, the price of the memory increasing, the price of hardware increasing, this is almost going to be doubling as an investment requirement... And also, there are already efforts on to see whether we should acquire a plot of land in the heart of Mumbai, whereby the ambitious dreams of expanding BSE further can materialize.

Addressed concerns about the lower dividend payout ratio by explaining the company's significant growth and strategic investments in technology, capacity, and potential land acquisition, justifying the retention of cash for future expansion.

Asked by Rushabh Doshi