India's largest exchange NSE debuts with $46 billion valuation

After nearly a decade of regulatory delays, the National Stock Exchange of India (NSE) was listed on the BSE on September 24. The exchange giant, which commands over 93% of India's cash equity market and is one of the world's largest derivatives exchanges, completed India's second-largest IPO with a valuation of approximately $46 billion, drawing significant global investor attention.

NSE's listing journey began in 2016, when it first filed for an IPO with the Securities and Exchange Board of India (SEBI). However, the plan was搁置 for years due to regulatory issues, including the "co-location" controversy. The process only regained momentum in January 2026, when SEBI issued a "no-objection certificate" (NOC) to NSE. On September 4, SEBI formally approved the IPO.

IPO Pricing Below Expectations Still Sees 5.71x Subscription

NSE set its IPO price range at ₹1,700 to ₹1,785 per share, aiming to raise approximately ₹225.6 billion (about $2.3 billion) at the upper end, corresponding to a valuation of roughly ₹4.42 trillion (about $46 billion). The offering consisted entirely of an offer for sale (OFS) by existing shareholders, meaning NSE itself will not receive any proceeds from the IPO. The issue size was reduced by about 15% from earlier plans, with several existing shareholders—including State Bank of India (SBI), Bank of Baroda, and MS Strategic—lowering their selling quantities.

Despite the final pricing falling below earlier market expectations, the IPO saw strong demand. Open for subscription from September 17 to 21, the issue was oversubscribed 5.71 times, with investors bidding for a total of approximately 5.06 billion shares, representing a demand of about ₹903.2 billion. Among investor categories:

• Qualified Institutional Buyers (QIBs): Oversubscribed 12.68 times
• Non-Institutional Investors: Oversubscribed 6.55 times
• Retail Investors: Oversubscribed 1.39 times

Institutional investors were the primary source of demand. Cornerstone investors, including the Monetary Authority of Singapore, Abu Dhabi Investment Authority, and Life Insurance Corporation of India, collectively subscribed to about ₹67.46 billion worth of shares.

Notably, while the overall subscription multiple was high, it was significantly lower than the average for Indian IPOs this year. Citing market data, the Financial Times reported that the average IPO subscription multiple in India this year is around 39 times, making NSE's 5.7 times relatively modest. This partly reflects market divergence over NSE's valuation and its heavy reliance on derivatives trading.

For investors, however, NSE's appeal remains clear. With over 90% market share in India's cash equity market and 75% in the options market, the exchange benefits from strong network effects and economies of scale.

Completing India's Market Infrastructure "Troika"

NSE's listing is notable not only for its size but also because it completes the public listing of India's three key market infrastructure institutions: NSE, BSE, and the Multi Commodity Exchange of India (MCX). The listing also provides investors with a direct comparison of valuation and profitability between NSE and BSE, India's other major exchange.

Jefferies noted in a report that NSE's listing will bring greater valuation transparency and governance improvements, potentially attracting billions of dollars in foreign portfolio investment inflows.

Trading Fees Contribute Nearly 80% of Revenue

NSE's business model is essentially a lightweight "trading toll booth"—charging small fees per transaction and leveraging its dominant market share to achieve scale. For fiscal year 2026 (April 1, 2025 – March 31, 2026), NSE reported operating revenue of approximately ₹166 billion, of which trading fees accounted for ₹130.57 billion, or about 78.65%. Stock options alone contributed roughly 60% of operating revenue.

This model generates high profitability. Between fiscal years 2024 and 2026, NSE's normalized EBITDA margin remained stable at 76%–77%. Unlike traditional financial institutions, NSE does not bear significant capital costs; its core assets are its trading systems, brand, liquidity, and vast investor network.

At the same time, NSE is seeking to reduce its dependence on trading commissions, particularly from derivatives. Data services, index licensing, clearing, and technology services are emerging as new growth drivers. In the first quarter of fiscal 2027, data subscription revenue grew 40.6% year-on-year, indicating continued strong growth in non-trading businesses.

Structural Risks Behind High Profits

However, high profitability masks structural risks. The biggest variable for NSE is its most important revenue source: derivatives trading. In recent years, a surge of Indian retail investors into index options has raised regulatory concerns about investor protection. A SEBI study found that about 91% of individual derivatives traders incurred net losses in fiscal 2025.

In response, Indian regulators have tightened derivatives trading rules since 2024, including reducing weekly expiry events, increasing contract sizes, and strengthening margin requirements near expiry. These policies have already impacted market trading structure.

Fiscal 2026 was NSE's first full year under the revised regulatory framework. Operating revenue fell about 3% year-on-year, while adjusted net profit after tax declined 17% to approximately ₹91 billion. NSE's market share in stock options also dropped from 97% in fiscal 2024 to 75% in fiscal 2026.

Analysts point out that a core question facing NSE at listing is whether the exchange can sustain high profit growth through its market position and data/index businesses, given ongoing regulatory constraints on high-frequency, short-duration derivatives trading. This is a key reason why the market remains cautious despite assigning a high valuation to NSE.

A Milestone and a Cautionary Tale for India's IPO Market

NSE's listing is both a microcosm of India's booming capital markets and a reflection of the structural shift toward "securitization" of household savings.

According to SEBI's annual report, Indian companies raised approximately ₹2.3 trillion through IPOs, FPOs, and rights issues in fiscal 2025–26, up 11.7% year-on-year. By number of issues, India remained the global leader; by amount raised, it ranked third globally. Pranav Haldea, Managing Director of Prime Database, called NSE's listing a "landmark event for India's primary capital market," noting that domestic investors have increasingly entered the stock market through mutual fund SIPs, helping to offset foreign outflows.

Data shows that in fiscal 2026, foreign portfolio investors (FPIs) net sold about ₹1.8 trillion in Indian stocks, while domestic institutional investors (DIIs) made record net purchases of ₹8.5 trillion, with mutual funds contributing about ₹6.4 trillion. Meanwhile, DII holdings in NSE-listed stocks rose to a record 17%, while FPI holdings fell to 15.8%, a 15-year low.

Sundararaman Ramamurthy, MD and CEO of BSE, said domestic funds are partially offsetting the impact of foreign outflows and enhancing market stability.

This shift reflects ongoing changes in household asset allocation. India's Economic Survey 2025–26 shows that the share of stocks and mutual funds in annual household financial savings rose from about 2% in fiscal 2012 to over 15.2% in fiscal 2025. SIPs have become a key channel for retail participation, with average monthly SIP inflows rising from less than ₹400 billion in fiscal 2017 to over ₹2.8 trillion in the April–November period of fiscal 2026.

Kush Gupta, Director of SKG Investments and Advisory, believes that NSE's valuation discount relative to BSE does not automatically imply upside potential.

Raj Gaikar, Equity Research Analyst at SAMCO Securities, said regulation has "reset the business but not ended it," predicting that NSE's market share is likely to stabilize in the near term.

Analysts note that over the longer term, NSE's listing is significant beyond adding a large financial stock. Previously, NSE shares were traded primarily in the unlisted market. Its listing means the market can now form a more transparent price through public trading, offering a new benchmark for valuing India's financial market infrastructure.

At the same time, direct valuation comparisons between NSE and BSE will become clearer. For India's capital markets, this means not only that the two major exchanges will compete for trading share and capital market valuation, but also that their operational efficiency, profitability, and growth prospects will be more directly scrutinized by investors.

Reported by Li Xizi, Intern Luo Zehui Text Editor: Wang Zhexi Layout Editor: Bi Dandan