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National Stock Exchange of India LimitedTwenty-fifth Annual Report 2016-17
Committed to improve the financial well-being of people.
Contents
Chairmans overview 002
NSE and the Indian capital markets 018
Milestones 010
Management discussion and analysis 028
Competitive advantage 004
NSEs strengths 024
Auditors report on consolidated financial statements 122
Auditors report on standalone financial statements 228
Notes to consolidated financial statements 136
Consolidated statement of profit and loss 130
Standalone statement of profit and loss 236
Notes to standalone financial statements 241
Financial highlights 012
CSR activities 2016-17 032
Awards and accreditations 009
Board of Directors 026
Consolidated balance sheet 128
Standalone balance sheet 234
Form AOC-1 227
Consolidated cash flow statement 134
Standalone cash flow statement 239
NSE and the India story 015
Report on corporate governance 102
Corporate information 034
Boards report 036
National Stock Exchange is more than an exchange.
NSE is a story of the success of a home-grown Indian brand that stands for entrepreneurship and professionalism.
It portrays how articulated vision coupled with technological competence has enabled to create a global icon in a challenging environment.
The result is over the last two decades, NSE has demonstrated its commitment to improve the financial wellbeing of people.
Twenty-fifth Annual Report 2016-17 | 1
Chairmansoverview
It gives me pleasure to share with you
some of the key highlights of National
Stock Exchange of India Limited (NSE) for
the fiscal 2017. I am particularly delighted
that, over the years, NSE has emerged as
a prominent market infrastructure in the
rapidly changing global marketplace. As
you are aware, in fiscal 2017, the global
financial markets were volatile with
lurking uncertainties on both political and
economic fronts.
At home, India continued to remain a
bright spot, led by strong macroeconomic
fundamentals in terms of GDP growth,
sharp focus on inflation, efficient
management of the current account
and fiscal deficit etc. This contributed
significantly to boost investors sentiment
for Indian markets.
While most of the developed markets
witnessed a slowdown or modest single
digit growth in fiscal 2017, Indian markets
exhibited an impressive double digit
growth. The Cash Market (CM) grew by
around 20% y-o-y; the equity derivatives
market grew by 24% y-o-y.
It is heartening that during fiscal 2017
NSE continued to maintain its market
leadership, both domestically and globally.
In terms of the domestic market, NSE had
It is heartening that during the fiscal 2017, NSE continued to maintain its market leadership, both domestically and globally. In terms of the domestic market share NSE witnessed a market share of around 84% in the CM segment with near 100% market share in the Equity Derivatives segment.
2 | National Stock Exchange of India Limited
a market share of around 84% in the CM
segment with near 100% market share in the
Equity Derivatives segment. Equally, in the
Currency Derivatives market it continued to
enjoy a market leadership share of around
55%+.
In terms of global ranking, NSE ranked
1st in the world in terms of the number
of contracts traded in Index Options and
Currency Options, 2nd in the world in terms
of number of contracts traded in Stock
Futures and Currency Futures and 4th in
the number of trades in the CM segment. I
believe this is something that should make
India proud!!
NIFTY50, the flagship index of NSE, is one
of the most liquid and diversified index
and is traded across the world. Patronised
by various fund houses and other market
intermediaries, NIFTY50 is listed in more
than 15 countries with total AUM of approx.
USD 6 Bn. This makes NSE and NIFTY50 both
truly Global. Additionally, during the year,
India Index Services Limited (IISL), a 100%
subsidiary arm of NSE, also launched 13
new indices in the equity and fixed income
space. Singapore Stock Exchange (SGX)
launched futures linked to NIFTY Bank and
NIFTY Midcap 50 and are well received by
the market participants. Taiwan Futures
Exchange (TAIFEX) launched NIFTY based
futures contracts whereas few of the fund
houses in Korea and Hong Kong launched
NIFTY based ETFs.
Akin to its fundamental role of Capital
formation on the one hand and Savings
mobilisation on the other, NSE continued
to be the preferred venue for capital raising.
With 1800+ companies listed on it and
having a combined market capitalization
of nearly INR 120 trillion, NSE continues to
enjoy the status of the premier exchange of
the country. During fiscal 2017, fresh capital
raised through IPO and OFS was around INR
32653.17 crores.
NSE is there to serve not just big institutions
and investors, but also small organisations
and retail investors. Small and medium
enterprises (SME) are crucial not only for
economic growth, but also for inclusion. In
this direction, NSE has developed a platform
EMERGE for SME of India. There are 44
companies listed on this platform, of which
31 were listed during the year raising more
than INR 363.23 crores.
While the traditional lines of businesses
continue to propel the growth of the
Company, there are few significant steps,
which though at a nascent stage, have the
potential to grow in the near future. Two
new subsidiaries have been formed, namely
NSE IFSC Limited and NSE IFSC Clearing
Corporation Limited. These companies
have launched an international exchange
and a clearing corporation at International
Financial Service Centre at GIFT City, Gujarat.
This is one more step forward towards
making India a global financial destination.
On the financial front, the Consolidated
revenue of NSE Group stood at INR 2681
crs (y-o-y increase of 14%). Of this, approx.
78% of the revenue was contributed by core
operations. The Profit before tax stood at
INR 1775 crs; the Profit after Tax was at INR
1219 crs. After adjusting for the impact of
Core SGF, the Profit before Tax for the year
2016-17 stood at INR 1909 crs and the Profit
after Tax was at INR 1307 crs (y-o-y increase
of 16%)
It is noteworthy that for the year 2016-17
while the EBIDTA margin for the Group
stood at 76%, the ratio of Profit after Tax to
Revenue was 49%. The Return on capital
employed (ROCE) was 21%. This puts NSE
in the Top Decile amongst the leading
exchanges globally in terms of the financial
performance.
The Company believes in creating long
term value for its shareholders. Yet it is
conscious of expectations and strives to
reward them appropriately. Consistent with
its Dividend Policy, during the year 2016-17
the Company has distributed an interim
dividend of 795% (i.e. INR 7.95 per share of
Re1 each) and has recommended a final
dividend of 1225% (i.e. INR12.25 per share
of Re1 each). With this, the total Dividend
Pay Out stands at INR 20.20 per share with
a Pay-out ratio of 77% of the Consolidated
Net Profit available for distribution. On a
standalone basis, the Dividend Pay Out ratio
works out to 97% of the profits available for
distribution.
During the year the Company also issued
Bonus share in the ratio of 1:10. To facilitate
wider ownership the Company has also
undertaken capital restructuring exercise by
carrying out share split in the ratio of 10:1.
We propose to list the National Stock
Exchange. The Company has, accordingly,
filed the Draft Red Herring Prospectus
(DRHP) with SEBI for public issue of shares in
the form of OFS.
I would like to express my sincere gratitude
to my fellow Board members for their
commitment and valuable inputs. I would
also like to take this opportunity to thank
all our Shareholders and other stakeholders
for their continued support and confidence
in NSE. Last but not the least, I would like
to place on record appreciation for the
employees for their dedication and hard
work.
Ashok Chawla Chairman
National Stock Exchange of India Ltd.
Twenty-fifth Annual Report 2016-17 | 3
Competitive
advantage
NSE India is not only the Indias leading stock exchange but also worlds fourth largest exchange by number of trades done on any exchange.
BackgroundNational Stock Exchange of India (NSE)
was established on recommendations
of the Pherwani Committee in 1992 and
recognised as a Stock Exchange in 1993. It
was conceived to provide a modern, fully-
automated screen-based trading system
across India. In the process, NSE emerged
as the first de-mutualised stock exchange
in India, set up as a public limited company,
owned by leading financial institutions,
banks, insurance companies and other
financial intermediaries while b