By Matein Khalid
India was the jewel in the crown for the British Empire and the jewel in my emerging market portfolio in a year when the Sensex alone is up a stellar 27%. Yet my passage to India is guided by two of my best friends in life, my adorable Asas Capital colleagues Harry Khandelwal and Meg Agarwal, my jungle guides to Dalal Street under the ages of their firm Marwaris R Us Inc.
Harry and Meg have just gifted me one of the best pre-IPO deals in Asian finance – India’s colossal National Stock Exchange. The NSE’s pre-IPO shares are now available via Asas Capital at INR 2,200 or a market cap of $14.5 billion for India’s largest stock exchange. The NSE is easily the most exciting financial exchange I have analysed ever since the IPO of Singapore’s SGX or Chicago’s CME decades ago in the Stone Age.
I can easily envisage the NSE as a double bagger in the next two years with minimal downside risk. Why?
One, this puppy has a 20 year track record of product excellence and innovation in the Indian capital markets. True, it is no spring chicken exchange like my obsession de jour Coinbase (COIN) – up 40% in the past month alone.
Two, NSE is the owner of Nifty 50, India’s benchmark stock index. More significantly, its product menu encompasses cash equities, IPOs, mutual funds, ETFs, an SME platform, infrastructure trusts, debt issues, institutional placement programs, derivatives, FX, commodities etc. If Zeenat Aman and Madhuri Jaan were the Goddesses of my youth, the NSE is the God of my middle age twilight. A mission critical catalyst for the $3 trillion Indian economic miracle.
Three, revenue will grow in the next two years from the current $806 million to a projected $1.2 billion. EBITDA in 2021 is $610 million and will be circa $805 million in 2023. The EBITDA margin is a stellar 77%, a testament to the NSE’s quasi monopoly status in the Indian capital markets. This is the reason why I believe NSE more than merits its current valuation at 31 times earnings, making it a better risk/reward calculus for me than most public Silicon Valley software shares I own.
The Bombay Stock Exchange trades at a current earnings multiple of 39.3X. So the rationale for a pre-IPO valuation rerating for the NSE is irrefutable. True, Bombay Stock Exchange was established in 1875 when the Honourable Tom Baring (aka Lord Northbrook) was viceroy of our Great White Queen Empress Victoria. Does it not make sense to own NSE shares as a family heirloom or a perpetual money making machine for the sake of my unborn grandchildren, so they can cash out in the year 2097. I think so and so does Manju.
In any case, experience has taught me that when Harry and Meg tell me to jump in Indian equities, my only possible response is – how high? I cannot possibly alert all my friends worldwide about this deal hence this post. (IPA Service)