Indian Stock Analysis: BSE Ltd [NSE: BSE]

   1. Company & Business Strength: 8/10

Bombay Stock Exchange was started in 1875. While BSE Limited is now synonymous with Dalal Street. With a rapid increase in the number of brokers, they had to shift places repeatedly. At last, in 1874, the brokers found a permanent location.

The broker's group became an official organization known as "The Native Share & Stock Brokers Association" in 1875. The street on which the site is located is called Dalal Street in Hindi (meaning "Broker Street") due to the location of the exchange. 

BSE is Asia's first and the Fastest Stock Exchange in the world with a speed of 6 microseconds and one of India's leading exchange groups. In 2013, BSE upgraded its technology platform to Bolt Plus, which is based on the business architecture of global giant Deutsche Börse.

BSE has also planned to enter the electricity exchange partnering with PTC India, and Icici bank and has started mock trading like Future trading in electricity, etc.

Business Segment:

Transaction Charges: 

BSE earns transaction charges on every transaction that takes place on their platform.

Treasury Income on Clearing and Settlement Funds:

BSE also has a small revenue from clearing and settlement funds.

Other Security Services & Operating income: 

Revenue from other miscellaneous services. They also provide training facilities and technical courses which also aid in their revenue.

Services to Corporate:

Also, revenue comes from various services provided to corporates. They charge fees for the data provided like live charts we get for different scripts. Also, charges on new accounts opened.

Income from investments and deposits:

They are also investors in various instruments. They invest in both equity and debt. 

Electricity Trading:

Planned in future.

2. Competitive Strength: 9/10

BSE Ltd has been an Indian company in Diversified Finance, it almost enjoys a monopoly in the listed sector as NSE is not yet listed which is a direct competitor. 

Other competitors from diversified finance include MCX, IEX, CAMS, CDSL, Max finance, IIFL, and others.

Note: NSE is planning to list soon which may remove the monopoly in the sector.

3. Stock Analysis Return & PE Ratio: 7/10

BSE Ltd Stock is listed both on only NSE and currently trading around 2000 (Jan 2022), with 52 highs of the 2300s and a low of 530s.

It has a market cap of 8900+ which is a Small cap, Stock has been consolidating for a long time before 2020 with a negative return, but has given a good return recently after good profit and new Demat opening, and many transactions.

The stock has given a 3-year CAGR of 49.9% which is exceptional. 

The face value is 2, so expect split, bonus, and buybacks.

PE Ratio: BSE Ltd has a PE of 65 currently which is expensive although it has almost a monopoly in the sector.

4. Dividend: 8/10

The stock has been giving a good dividend of 1.06%. Generally, we expect a growing company to give at least a 1% dividend which is a good gesture and sign unless high Capex is planned.

Financial Ratios:

5. Sales Growth/Revenue: 4/10

The Sales growth indicates that the company can capture the market, which may increase profitability. 

BSE Ltd has a 3-year median Sales growth of -5.08%  which is poor. Current year (2021) growth stands at 3.72%. For Small caps, we consider the growth of at least 20%+ as healthy sales. 

6. Profit Growth: 1/10

Sales growth indicates a good income, but unless profit is not made it's terrible. Profit growth indicates how expenses are managed or also how the company has pushed the raw material prices to end customers.

BSE Ltd's Profit growth stands at a 3-year median of -44.34% which is poor, Current year stands at -44%. For a Small cap, at least 20% is considered healthy growth in Profitability.

7. [ROE] & [ROCE] %: 5/10

Return on Equity:

ROE indicates the ability to generate profits from shareholders/Equity Investments. BSE Ltd's ROE has a 3-year median of 6.39%.  The current year stands at 4.47%. 

We consider a healthy ROE to be at least 20% for growth companies.

Return on Capital Employed:

ROCE indicates the ability to use its capital employed for business. BSE Ltd ROCE has a 3-year median of 6.92%.  The current year stands at 5.35%. 

We consider a healthy ROCE to be at least 20% for growth companies.

8. Debt/Equity or ROA (Considered ROA for financial business): 5/10

D/E is a measure of which a company is running through debts vs owned funds. Ideally, D/E should be less than 1, which indicates stability. 

Since this is a financial company Debt is not considered here, instead, we will consider Return on Assets [ROA].

BSE has a ROA of 3.48% which is fair.

9. Shareholding %: 6/10

The company has a high Promotor holding of 0%. The FII and DII of 9.06% and 3.35% indicate Institutions have decent holding, Remaining are Public but includes big holding like LIC, Zerodha Broking, Financial Institution, etc.

Note: The Promoter Pledging % is 0% which is good, generally no pledging indicates a good sign.

Another indicator like interest coverage ratio, Return on Assets[ROA], and others also seems fine.

10. Future Prospects: 7/10

Pros:

Monopoly in the listed sector with NSE being the only direct competitor which is currently unlisted but once NSE is listed it may be a good bet comparatively.

Future growth in the Equity sector in India can benefit BSE.

New plans to enter into Future trading in Electricity partnering with PTC India & ICICI bank.

The company is debt free.

The company has been giving good dividends.

Cons:

Slow business growth historically but may improve in the future due to growth in equity in India.

Poor financial growth like Revenue, Profit, ROE, ROCE, etc.

Investment Hacks Score Card: 

The average score of BSE Ltd based on all factors comes to be 6/10.

Conclusion:

Overall BSE Ltd is the oldest exchange in Asia and has good Revenue diversification, it has almost Monopoly business facilities with few competitors. The stock has overall not given good returns to shareholders but due to recent and future growth and entering into the new segment, this may do well. Since this is Small cap stock, Investors can see volatility in the future and should carefully watch future plans and growth.

Disclaimer:

Since this is an educated opinion, Please research thoroughly or consult your financial advisor before Investment.

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Team Investment Hacks