BSE Ltd IPO – Should You Invest?
Now here’s a company that survives and thrives on the stock markets and could turn out to be a good investment opportunity. Bombay Stock Exchange (BSE), India’s second largest stock exchange, is coming out with its IPO.
BSE IPO – Investment Arguments
- The Inevitable Shift from Physical Savings to Financial Savings:
Very few people in India invest in stocks, leave apart profiting from it. To give you a rough idea, only 5% of the total wealth of an average Indian is in stocks. Comparable number for China and US is 14% and 45% respectively. Indians still have a mammoth proportion of their wealth in real estate, gold and bank fixed deposits. With the slowdown in real estate, stagnancy in gold prices and declining interest rates on bank FD’s, people will be forced to look at stock markets as a source of higher returns. We just saw a trailer of this phenomenon over the past two months – the mutual funds received their highest ever monthly inflow of Rs. 16,000 crores in December (post demonetization, smart investors are shying away from gold & real estate).
- The Duopoly Structure Guarantees Future Growth:
Stock exchange is a highly regulated business and the very nature of it allows only two or three large players to survive (liquidity is a big draw for the exchange and all investors will want to trade on an exchange which has good liquidity). There are only two national level stock exchanges in India – BSE and NSE. Although BSE is the oldest stock exchange, it has lost a lot of market share to NSE and now commands only 15% market share in the equity segment. Nonetheless, it will benefit from the general increase in retail / institutional participation in the financial markets.
GreenEdge Wealth Services View
At the upper price band of Rs. 806 per share, BSE will trade at ~27x on TTM earnings. Given the uniqueness of the business, the IPO looks reasonably priced. There could be 10% to 15% listing gains on this one. However, given the huge demand for the IPO, there is only 25% probability of you getting an allotment. However, one may subscribe to the IPO for listing gains of 10% to 15%.
Issue Details
| Issue Open Date | 23rd Jan, Mon |
| Issue Close Date | 25th Jan, Wed |
| Issue Price (Rs.) | 805 to 806 |
| Market Lot | 18 (Retail investors should apply for 1 lot i.e. 18 shares only) |
| Minimum Application Size for Retail (Rs.) | 14,508 |