My liking for this stock goes back to 2018, when I picked some of it at 735! It is now inching back to where it was but why do I ask everyone around me to lap it up, even when it’s up 2.5x from its March 2020 low! Let’s try and see where I believe this one’s headed
My thesis is simple-
1600 crore of cash on balance sheet is ~350rs per share. That leaves another 350 rupees to pay for it, net of cash available. Also, the building it owns is one of the most iconic heritage building in Mumbai, whose valuation can be anything between 1000-3000crore, depending on what you think it may sell for. PS- ADAG headquarters in Santacruz recently was sold for 1200crores. And this building is much bigger and located in plumest of the plum location in Mumbai. So, take your call. Also, CDSL is now valued at 8000crores market capitalisation,of which BSE owns 20%. Even after allowing for holding company discount, you get close to 1000 crores value left. Add all this, and the company’s liquidation value is not less than 5000crores, which is close to Rs. 1100/share. Also, the iconic brand which BSE owns can be atleast worth a 100crores.
Now you come to the present business of the firm. It does close to 100-150crores profit every year, and even at 15 times earning, it is atleast worth 1500 crores( on the conservative side). The peer NSE trades at 10 times book in gray market, while BSE is still 1.1 time book. Further, it gives back 95% of standalone profits back as dividends and needs zero money for capex- thus it has no threat of a potential dilution of equity and the per share value will only rise in the years to come.
So the base case is that it should be valued at close to 7000 crores, or close to Rs. 1500 per share. Let’s place some more facts here:
Zerodha has been raising stake in BSE steadily over the past three quarters and now owns 2.16% as on end of March 2021 quarter. It’s StarMF platform is being valued at close to 2000 crores, as the firm looks to divest it’s stake partially. And most importantly, for any of you who has been bamboozled by IEX’s dream run, BSE has also got approval for its own power exchange-Pranurja.
The reason why I believe BSE can be valued north of a Billion$ is that if NSE is ten times BSE, and if NSE is being valued at close to $11 billion, BSE can’t be less than a billion.
However, the real juice is hidden,in GIFT City- the India INX, owned by BSE has 78% market share in there. Also, it is not yet being monetised and is making operational losses. This is a startup clamoring for attention, right before our eyes. If all these startups, burning cash left and right are being termed as unicorns by Private Equity guys, I see no reason that a real market leader, almost a monopoly can be valued as low as $40million- yes, ICICI Bank bought 10% in INX at 300crore valuation. If at any point we get lucky, and we must hold it like a long shot, and INX gets its true calling, this can go up 10 times in 5-6 years. I know this sounds crazy, but big bucks are made by crazy longshots, not staple Levers and HDFCs.
We all only took notice of Bitcoin when it was north of $5000-when the guys who bought it for a dollar were already billionaires- read this fantastic book “The Bitcoin Billionaires by Ben Mezrich”.
So here’s my two cents- the downside in BSE is next to nil and upside is atleast a double. But, and it’s a big But, if the hunch is right, you can make big bucks. Tell me what do you think!
ps: today it’s trading at 865 and feels very sweet to know that I have even bought it at 283! Anyways, this is still the beginning. Who knows, five years down the line, this might be up 5-10x from here and we’ll all look at it and say, waah modiji waah!
Life is all about Compounding! 