The National Stock Exchange of India (NSE), the country’s largest and most influential exchange, announced its Q2 FY26 results, and at first glance, the numbers look alarming. A sharp decline in profits, a steep drop in operating margins, and weaker trading volumes across segments have raised questions among investors and market observers.
But a closer look reveals a very different story. The headline numbers mask the true strength of NSE’s core business, which remains strong once you adjust for a one-time regulatory provision.
This blog breaks down the results, explains what is really happening behind the numbers, and evaluates whether NSE remains a strong investment opportunity.
Reported Financial Results: A Weak Quarter on Paper
Particulars | Q2 FY26 | Q1 FY26 | Q2 FY25 | Growth QoQ % | H1 FY26 | H1 FY25 | Growth YoY % |
|---|---|---|---|---|---|---|---|
Total Income | 4,160 | 4,798 | 5,023 | -13% | 8,959 | 9,974 | -10% |
Revenue from Operations | 3,677 | 4,032 | 4,510 | -9% | 7,709 | 9,020 | -15% |
Operating EBITDA (Reported) | 1,484 | 3,130 | 3,344 | -53% | 4,614 | 6,450 | -28% |
Operating EBITDA Margin % (Reported) | 40% | 78% | 74% | 60% | 72% | ||
PAT (Reported) | 2,098 | 2,924 | 3,137 | -28% | 5,022 | 5,704 | -12% |
EPS (Reported) | 8.48* | 11.81* | 12.67* | 20.29* | 23.05* |
*EPS is non-annualised and adjusted for the 4:1 bonus issue in Q3 FY25.
The narrative from the reported numbers:
• Profit fell 28 % quarter on quarter
• Margins collapsed from 78 % to 40 % quarter on quarter
• Revenue contracted 13% quarter on quarter
If these were the only numbers we saw, it would appear that NSE’s profitability is deteriorating rapidly.
However, the real picture is more complex than it looks in reported numbers
Adjusted Performance (Excluding Settlement Fees): A Strong Core Business
NSE booked a one-time provision of Rs 1,297 crore in Q2 towards settlement applications filed with SEBI related to the Colocation and Dark Fibre matter. This is not a recurring operating cost, so it is important to view the numbers without this adjustment.
Here is the performance excluding the settlement provision:
Particulars | Q2 FY26 (Excl) | Q1 FY26 | Q2 FY25 | Growth QoQ % | H1 FY26 (Excl) | H1 FY25 | Growth YoY % |
|---|---|---|---|---|---|---|---|
Total Income | 4,160 | 4,798 | 5,023 | -13% | 8,959 | 9,974 | -10% |
Revenue from Operations | 3,677 | 4,032 | 4,510 | -9% | 7,709 | 9,020 | -15% |
Operating EBITDA (Excl settlement fees) | 2,782 | 3,130 | 3,344 | -11% | 5,912 | 6,450 | -8% |
Operating EBITDA Margin % (Excl) | 76% | 78% | 74% | 77% | 72% | ||
PAT (Excl settlement fees) | 3,396 | 2,924 | 3,137 | 16% | 6,320 | 5,704 | 11% |
EPS | 13.72* | 11.81* | 12.68* | 25.53* | 23.05* |
*EPS is non-annualised and adjusted for the 4:1 bonus issue in Q3 FY25.
The real picture after adjustment:
• PAT actually grew 16 % quarter on quarter and 11 % year on year
• Margins remain best in class at above 75 %.
• EPS improves significantly when excluding one-time charges.
What Changed? The Difference Between Actual and Adjusted Metrics
Metric | Reported View | Adjusted View | Reality Check |
|---|---|---|---|
Profit Growth | 28 % decline quarter on quarter | 16 % growth quarter on quarter | Cleaning up the past, not a business weakness |
EBITDA Margin | 40 % | 76 % | Business remains highly profitable |
Investor Sentiment | Appears weak | Actually improving | Market likely overreacting |
In simple words, NSE took a balance sheet clean-up in Q2 to settle old regulatory issues, allowing for cleaner future reporting.
Should You Bet on NSE?
NSE is not a typical stock market investment. It is a monopoly-driven, cash-rich platform business. Having analysed global exchanges like NYSE, NASDAQ, SGX and the London Stock Exchange, I see three clear long-term signals:
1. A Near Unshakeable Monopoly
Market share remains extremely high across segments. Cash at 92%, futures at 99.8%, currency at 100 %.
Even with volume fluctuations, India has no parallel exchange with NSE’s liquidity and depth.
2. High Quality Earnings and Cash Flow
Even after the provision, PAT margin stands at 39%. Without it, 63 %.
Exchanges earn like a toll-booth business. Every trade pays them. As Indian markets expand, NSE benefits automatically.
3. One-Time Regulatory Cleanup Leads to Future Clarity
As an analyst, I prefer companies that take one-time pain to clear historical issues. NSE took a hit to draw a line and close the SEBI chapter. This is a long-term positive.
Is NSE Still a Strong Investment?
The reported numbers look weak, but the underlying story signals strength, not softness.
If NSE lists, the business has the characteristics of a compounding wealth creator:
• High return on equity
• Monopoly-level moat
• Strong cash flows
• Growing participation in Indian capital markets
For long-term investors, Q2 was not a bad quarter. It was a reset quarter that strengthens the base for cleaner earnings ahead.
NSE Unlisted Shares remains one of India’s most profitable financial investments, and its long-term growth story stays intact.
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