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Nithin Kamath calls NSE a rare cash distribution machine
Livemint··21 Jun
Zerodha founder Nithin Kamath described NSE as a cash generation and distribution machine, noting FY26 profits exceeded Rs 10,300 crore with Rs 8,660 crore distributed as dividends. The exchange filed a Rs 30,000 crore offer-for-sale IPO, India's second-largest after Jio Platforms. SEBI rules prevent exchanges from investing surplus cash in other businesses, making dividends a primary outlet.
Prism
What It Means For You
- If you invest in Indian markets, NSE's IPO is an offer-for-sale of up to 14.89 crore shares, roughly 6 percent of paid-up capital, not a fresh fund raise.
- NSE's high dividend payout ratio means existing shareholders have already received most profits. New IPO buyers should weigh valuation against derivatives-dependent revenue.
- Kamath's tax argument matters if you hold dividend-paying stocks: India's dividend taxation can reduce net returns compared with capital gains for high-income investors.
What's Happening
- NSE filed its draft red herring prospectus for a Rs 30,000 crore entirely offer-for-sale IPO in June 2026.
- Kamath posted on X that NSE distributed Rs 8,660 crore in dividends on over Rs 10,300 crore FY26 profit, an 84 percent payout ratio.
- Zerodha analysis found equity options generated Rs 10,000 crore, about 60 percent of NSE's total FY26 revenue.
The Exchange Business Model
- SEBI restricts stock exchanges from investing surplus cash in other businesses, unlike typical corporations that reinvest profits for growth.
- SEBI's October 2024 derivatives reforms reduced weekly expiries and increased lot sizes, cutting trading volumes and NSE revenue year-on-year.
- Kamath revived debate on double taxation of corporate profits, noting dividends are taxed at company level and again at shareholder marginal rates.
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