Updated Valuation of BSE Ltd

I blog yet again after reviewing it’s latest financials

Performance of BSE

BSE has posted it’s half yearly performance at September 30,2009 on it’s site

The results are dated December 5,2009 and signed by the MD & CEO ( no name !)

Here’s the long and short of the audited numbers for the Half Year Performance at September 30,2009

• It has earned a lower net of Rs 113 crs in the first half of FY 2010 against Rs 117 crs in a similar period last year…For Full year 2009 it had earned Rs 213 crs
• The Total Income was higher at Rs 256 crs against Rs 214 crs…Full Year 2009 Income was Rs 421 crs
• The Exchange depends significantly on Income from Trading Members and from Investments and Deposits…these are 30% and 54% of Total Income respectively…an aggregate of Rs 84%
• The bonus enhanced (12:1) Equity is now Rs 10.29 crs from just 0.79 crs last year…Face Value is Rs 1
• The adjusted EPS is Rs 9.86 against Rs 10.34…Full Year 2009 EPS was Rs 18.67
• Reserves were Rs 1718 crs at March 31,2009 and would have moved up past Rs 1830 crs with this half year profits in the current year
• The Book Value would thus compute to Rs 169 at March 31,2009 and currently moves up to Rs 179

Valuation of BSE

The long awaited Listing of BSE is ,well,yet awaited !…BSE even issued a 12:1 Bonus to bring the Equity Capital to above Rs 10 crs as this was the minimum required for a Listing on the NSE

BSE had wished to list it’s shares on it’s own Exchange without an IPO, while SEBI is insisting on an IPO 

So what should be the Value of the BSE’s Share ?

On an Earnings Multiple basis an EPS of Rs 20 for FY 10 and a 20 Multiple would indicate a Value of Rs 400….On an Assets Basis and a Book Value of close to Rs 190 and a Multiple of 2,the Value would be Rs 380 

For all those who Bought BSE Share at Rs 5200

A few years ago,when Mr Rajnikant Patel was the MD of BSE,Member Brokers were invited to tender any part of 10000 shares allotted to them when the Exchange became a Company.The Price fixed was Rs 5200.These shares were then placed with overseas Bourses and Institutions.

Many Share Brokers tendered 4000 to 5000 shares and received upward of Rs 2 crs for the sale and many got out of financial troubles they were experiencing.

Adjusted for the Bonus of 12:1,the buyers of these shares at Rs 5200 now have a holding cost of Rs 400

The Current Performance indicates such a Value as opined above…so they would be happy to have atleast recovered their cost price,albeit even notionally in value

For those who did not sell any shares,the original 10000 shares allotted to them have now gone upto 130000 shares because of the bonus…At the Value of Rs 400,these are now worth Rs 5.2 crs…and the hypothetical Market Cap of BSE’s Equity of Rs 10.29 crs (FV Rs 1) would be Rs over Rs 4100 crs

Peer Valuation:Comparing with London Stock Exchange 

If we have a look at the Share Price of the Listed, London Stock Exchange on it’s own Exchange we find it is just over 710 p ,at a P/E of just under 10

If we use this Comparative 10 Multiple for BSE,then the Value of the BSE Share would be halved at Rs 200 only…that’s a hypothetical Market Cap of just over Rs 2000 crs an would mean that those who acquired the Share at Rs 5200 and have an adjusted holding cost of Rs 400 would be losing half their monies

Methinks,that BSE is in Emerging India with great potential and desrves a better Earnings Multiple than the 10 that LSE gets…I have taken 20 above…seems fair…optimists would argue for a yet higher multiple…I would have some reservations on this optimism….as the competition is heating up and MCX is ready to launch it’s own Stock Exchange…and more than BSE,it has been MCX that has emerged as a serious competitor to the leader,NSE…Derivatives Trading has been a Non starter at the BSE,despite several attempts to revive it

So if someone is offering the BSE Share to you at Rs 200-Rs 250,it’s interesting…not at Rs 400 though…the wait for Listing could be late into 2010 at that too at the earliest !

BSE was born in 1875…135 years ago….it’s tough and will survive….hope the new top team …Indians imported from USA…..delivers on all fronts…particularly on Corporate Governance