NSE IPO opens today, and everyone will be looking at the GMP and potential listing gains. The NSE IPO has a price band of ₹1,700–₹1,785 per share. The issue is already 30% subscribed, while the GMP is around 9–10%. But GMP is only one part of the NSE story. There are a few bigger things investors should watch before considering the IPO.
NSE Is Heavily Dependent on Transactions
Around 78% of NSE’s total revenue comes from its transaction business, while equity options alone contribute nearly 60% of total revenue. This is an important number because it shows how heavily NSE depends on trading activity. When trading volumes are strong, NSE benefits from higher transaction activity. But if trading activity declines or regulatory changes affect derivatives trading, a large part of NSE’s revenue could be affected.
Look at Global Exchanges
The revenue mix becomes even more interesting when NSE is compared with global exchanges. Nasdaq gets around 35% of its revenue from software and around 25% from market data and index services. LSEG gets around 40% from market data and index services and around 20% from software solutions. Compared with these global exchanges, NSE’s revenue is much more tilted towards transaction-related business, making trading activity an important part of the NSE story.
Regulation Changed the Entire Game
Regulatory changes have already had a significant impact on NSE’s trading activity. STT on options sale increased from 0.0625% to 0.10%, while STT on futures sale increased from 0.0125% to 0.02%. The minimum lot size has also moved from around ₹5–10 lakh to ₹15–20 lakh. In addition, each exchange can offer only one weekly expiry. Since a large part of NSE’s business depends on derivatives activity, these changes have already affected trading behaviour and volumes.
Trading Activity Has Been Coming Down Since the Regulation
Following these regulatory changes, cash-market ADTV has declined from ₹11.30 lakh crore to ₹10.55 lakh crore. Equity futures turnover has fallen from ₹18.59 lakh crore to ₹15.94 lakh crore, while equity options premium turnover has declined from ₹312 lakh crore to ₹258 lakh crore.
NSE Still Dominates the Indian Market, But Competition Is Coming
NSE currently has 92.99% market share in the cash market, 99.79% in equity futures, and 74.71% in equity options. However, competition is beginning to increase. MSEI and NCDEX have received SEBI approval to launch equity and derivatives segments, while Groww and Zerodha are also backing new players in the space. With NSE currently holding such a significant share of the market, the entry and expansion of new players could put pressure on its market share over time.
Is the ₹1,785 NSE IPO Price Worth Considering?
At the upper end of the IPO price band, NSE is being offered at ₹1,785 per share. Before the IPO, NSE shares in the unlisted market were trading around ₹1,950–₹1,995. At the IPO price of ₹1,785, NSE is coming at around 41x P/E, compared with around 47x P/E for BSE. So, NSE is leaving something on the table for IPO investors. But investors should watch its trading volumes, market share, regulatory changes and competition going forward. In the short term, based on the GMP, IPO investors can get around 8–10% listing gains.