India’s oldest exchange posted a 61 percent revenue surge in Q3 as its options business continues to eat into NSE’s dominance. Brokerages raise their targets.
There was a time not too long ago when BSE’s derivatives business was an afterthought. That time is over.
The exchange formerly known as the Bombay Stock Exchange reported revenues of approximately Rs 1,240 crore for the third quarter of FY26, up 16 percent sequentially and a striking 61 percent from a year ago. Transaction revenue, which now accounts for 77 percent of the top line, surged 26 percent quarter on quarter on the back of continued gains in the options market. Adjusted profit after tax came in at Rs 650 crore, ahead of most estimates.
The numbers that matter most, however, are the market share figures. BSE’s options premium market share climbed to 26.8 percent in Q3 from 24.4 percent in the previous quarter, with premium average daily turnover rising 30 percent sequentially to Rs 19,500 crore. And the momentum has only accelerated since — in January 2026, that share crossed 30 percent.
For an exchange that spent years playing second fiddle to NSE in the derivatives space, that’s considerable improvement.
The Earnings Picture
HDFC Securities, which maintains an add rating on the stock, noted that the quarter was driven by broad-based strength. “Revenue grew 16.4 percent sequentially and 60.8 percent year on year to approximately Rs 1,240 crore, led by a 20 percent quarter-on-quarter increase in transaction income and a 78 percent jump in book building income, supported by an increase in all other revenue segments other than cash segment income,” the brokerage observed.
Adjusted EBITDA margin expanded roughly 100 basis points sequentially to 65.6 percent after stripping out one-off items like a labour laws provision and additional settlement guarantee fund contributions. The reported margin of 62.5 percent was slightly lower than the previous quarter’s 64.7 percent, weighed down by a 32 percent rise in employee costs, a 28 percent increase in SEBI regulatory fees, and an 18 percent jump in other expenses. But the underlying trend remains firmly positive — EBITDA margins have expanded over 440 basis points on a year-on-year basis.
Reported profit after tax stood at Rs 602 crore. The slight miss versus some estimates was largely a function of higher costs rather than any softness in the core business.
The Market Share Story
The real story at BSE continues to be its steady encroachment into NSE’s options territory. The derivatives segment drove a 26 percent sequential jump in transaction revenue, and the exchange now has 9.5 million unique client codes registered for derivatives trading, up from 8.7 million in September 2025, with 567 registered members.
Nuvama, which has a buy rating and the highest target price among the brokerages covering BSE, highlighted the momentum. “Despite the expiry swap in September 2025, BSE delivered Q3FY26 index options premium market share of 29.4 percent, up 227 basis points quarter on quarter, driving revenue up 60.8 percent year on year,” the brokerage noted, adding that January saw a further surge with market share crossing 30 percent.
The share of longer-dated options contracts has also been inching up, reaching 5 percent of volumes. Management is targeting further growth in this segment by encouraging greater institutional participation — a shift that, if successful, would add both depth and stickiness to BSE’s derivatives franchise.
UBS, which raised its target price and maintains a buy, noted that “management remains optimistic that the rise in STT rates will have minimal impact on options volumes, consistent with past trends, though some effect on futures volumes is expected.” The brokerage also pointed to ongoing efforts to improve liquidity in longer-dated contracts and the eventual benefits of smart order routing for better price discovery.
Infrastructure for Growth
BSE is not just riding volume tailwinds, it is investing to sustain them. Colocation revenue held steady at Rs 48 crore, up marginally from Rs 46 crore in Q2, and the exchange plans to add 20 racks by Q4, taking the total to 500. For a technology-driven business where proximity to the matching engine matters, colocation capacity is a leading indicator of future participation.
The settlement guarantee fund contribution for the quarter was Rs 46 crore, roughly 5 percent of transaction revenue and above the mandated threshold — a sign that BSE is building its risk buffers in line with its growing volumes.
What the Brokerages Are Saying
The consensus has shifted meaningfully in BSE’s favour, with four brokerages raising their target prices after the Q3 results.
HDFC Securities raised its earnings estimates by 8 to 10 percent and maintained its add rating with a revised target of Rs 3,310. “We project robust FY25 to FY28 revenue and EPS CAGRs of approximately 30 and 36 percent respectively,” the brokerage said, valuing BSE at 42 times core FY28 estimated profit plus the value of its CDSL stake and net cash excluding the settlement guarantee fund.
On the flipside, the derivatives story needs to be watched to see how it builds over the next few quarters. Jefferies struck on this note. While raising its target to Rs 3,050 and increasing FY26 to FY28 EPS estimates by 4 to 7 percent, the brokerage maintained a hold rating. “While market share gains remain a key short-term growth driver, lack of clarity on new products could become a growth challenge post FY29,” noted Jefferies.
The Valuation Question
At its current price, BSE trades at roughly 43 times FY27 estimated earnings and 37 times FY28 estimated earnings. That is not cheap by any conventional measure, but the growth profile — revenue compounding at 30 percent and earnings at 36 percent over three years — offers some justification.
The range of target prices from Rs 3,050 to Rs 3,760 reflects the spectrum of opinion on how far the market share story can run. Bulls see BSE steadily capturing a third or more of India’s options market and building new revenue streams around longer-dated contracts and institutional participation. Bears worry that the growth engine is too narrowly concentrated in derivatives and that the runway narrows once the easy share gains are behind.
