India's two leading stock exchanges – the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) – that compete with each other in various segments of the capital market have one thing in common – both sit on a huge pile of cash. According to the latest financial numbers, BSE boasts a cash/bank balance of Rs 1,610 crore while NSE has a cash balance of Rs 1,191 crore in the financial year ended March 31, 2016 (FY16).Falling profits
Interestingly, the cash pile dwarfs the profitability of the exchanges by a wide margin. In FY16, BSE and NSE registered net profits of Rs 96.74 crore and Rs 439.33 crore, respectively.
Both the exchanges have seen a fall in net profits when compared to the previous financial year. In FY15, BSE reported a profit of Rs 155.53 crore while NSE’s net profit in FY15 was Rs 779.68 crore. NSE has attributed the fall in the profitability to a transfer of Rs 690.52 crore to the Settlement Guarantee Fund (SGF), which takes care of the settlement of the trades in the event of a default by the counter party.Explanatory notes
BSE has also transferred Rs 51.08 crore to the SGF, as per the explanatory notes with the financial results. The Securities and Exchange Board of India mandates the exchanges to transfer 25 per cent of the profits to the SGF till it reaches a specified limit.
On the cash balance aspect, Asia’s oldest exchange, BSE, has registered a marginal increase as it went up to Rs 1,610.08 crore in FY16 from Rs 1,452.48 crore in FY15.
Exchanges can invest their cash in mutual funds, government debt papers and fixed deposits of banks, among others investment instruments.Dividends declared
Based on the profits and the huge cash pile, both exchanges have declared dividends for their shareholders. The board of NSE has declared a dividend of Rs 73 per equity share for FY16 while the BSE has announced a dividend of Rs 4 per equity share. Earlier, BSE had declared an interim dividend of Rs 3.50 per equity share that was paid in February 2016. Both, BSE and NSE have a history of bitter rivalry while offering trading segments for equity along with equity & currency derivatives and small and medium enterprises (SMEs).
In segments like equity along with equity & currency derivatives, NSE has a clear lead over BSE, which has a strong presence in the SME segment with 137 listings as against NSE’s 13. In the equity derivatives, NSE has more than 95 per cent market share with futures and options contracts on its benchmark Nifty index.