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