NSE IPO – Nithin Kamath Calls NSE a ‘Cash Generation Machine’ Ahead of Listing

Expert Analysis:

• Ahead of NSE's IPO, Zerodha co-founder Nithin Kamath described the exchange as a "cash generation and distribution machine," highlighting its exceptional profitability and ability to consistently generate surplus cash.

• Kamath noted that in FY26, NSE reported a net profit of over ₹10,300 crore and distributed approximately ₹8,660 crore as dividends, resulting in an 84% dividend payout ratio—one of the highest among large Indian companies.

• According to Kamath, this high payout is likely to continue even after the IPO because SEBI regulations restrict stock exchanges from investing surplus capital in unrelated businesses, limiting opportunities to redeploy excess cash for expansion.

• He contrasted NSE's business model with most Indian companies, arguing that profitable businesses usually prefer reinvesting earnings because capital gains are taxed more efficiently than dividend income, whereas NSE has limited reinvestment avenues due to regulatory constraints.

• Kamath explained that dividend distributions are effectively taxed twice—first through corporate tax and then at the shareholder level—making high dividend payouts less attractive for most companies despite strong cash generation.

• The comments came shortly after NSE filed its DRHP for a ₹30,000 crore IPO, structured entirely as an Offer for Sale (OFS), with no fresh capital being raised by the exchange itself.

• NSE continues to operate one of the world's most profitable exchange businesses, driven by its dominant position in India's equity and derivatives markets, strong operating margins, and capital-light business model.

• While Kamath praised NSE's ability to generate cash, he also noted that the exchange's unique regulatory framework makes it an exception rather than the norm, distinguishing it from high-growth companies that typically prioritize reinvestment over dividends.