BSE Ltd : We Maintain ADD with a revised target price of Rs 2,750

BSE Ltd reported a strong quarter, with both revenue and PAT coming higher vs our estimate. The consolidated revenue grew 11.5% QoQ due to growth in transaction, listing, book building, and colocation revenue. The market share gain in options continued post the change in expiry. The option premium market share increased to 24.4% in Q2FY26 vs 21.4% in Q1. The premium ADTV (Average Daily Turnover Volume) stood at INR 150bn in Q2 (flat QoQ) but witnessed sharp jump in October 2025 and market share increase to 27%.

The regulatory overhang related to existence of weekly index option is receding gradually, but the regulator will keep a close check. The EBITDA margin has contracted by 65bps QoQ to 64.7%, led by high SEBI regulatory fees due to a ~25% QoQ rise in notional volume.

BSE introduced a policy in September 2025 to voluntary contribute ~5% of transaction revenue to the core SGF (Settlement Guarantee Fund). The Q2 contribution was ~INR 0.11 bn, representing one month under the new policy. The revenue from colocation increased to INR 0.46bn in Q2 vs INR 0.27bn in Q1 led by revision in throttle charges.

BSE expects to add another 70-90 racks by the end of year which will boost the colocation revenue. We increase our EPS estimate by 6-9% for FY26/27E EPS led by market share gain. The revenue/EPS CAGRs of ~24/31% over FY25-28E are robust. We maintain ADD with a revised target price of INR 2,750, which is based on 42x core Sep-27E (Estimated) PAT + CDSL stake + net cash ex SGF. The stock is trading at a P/E of 47/42x FY26/27E EPS.

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Source: HDFC Securities Institutional Equities

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