MSEI's Comeback: What The Radhakishan Damani, Nemish Shah-Backed Exchange Needs To Make A Dent
To make a mark in the cash market, MSEI needs companies to list and brokers to trade on its platform.
India’s third stock exchange, the Metropolitan Stock Exchange of India, continues to struggle in the face of intense competition from the NSE and BSE.
MSEI’s attempt to enter the derivatives market hit a roadblock when the Securities and Exchange Board of India did not approve its proposal for a Friday expiry. Instead, it now competes with NSE on a Tuesday expiry—an unhelpful move for an exchange that lacks both trading interest and a liquidity pool. In contrast, BSE shifted its expiry to Thursday to retain its liquidity and prevent migration.
A liquidity pool is essential for generating trading volumes. Without it, an exchange is bound to languish. Currently, both the cash and equity derivatives markets are heavily concentrated between NSE and BSE. For MSEI to gain a foothold, it would need to pull off something extraordinary.
To make a mark in the cash market, MSEI needs companies to list and brokers to trade on its platform. However, companies are hesitant to list, and brokers are reluctant to incur additional compliance costs. Most new IPOs continue to list on NSE and BSE. While MSEI allows trading in stocks under the "permitted" category, it has around 260 listed companies—none of which contribute significantly to trading volumes.
MSEI also lacks presence in the SME, mutual fund, and ETF segments—areas that have seen significant growth recently.
Despite these challenges, MSEI has seen multiple rounds of equity infusion in recent years. It recently raised Rs 238 crore through a private placement, selling 119 crore shares at Rs 2 apiece (face value Rs 1). Investors in this round included Billionbrains Garage Ventures Pvt., Rainmatter Investments, Securocrop Securities India Pvt., and Share India Securities Pvt., each acquiring a 4.96% stake on a fully diluted basis.
Notably, market veterans Nemish Shah and Radhakishan Damani held 1.62% and 0.23% stakes, respectively, as of March 2025, though their holdings have been diluted post the latest fundraise. MCX, one of the original backers, currently holds around 5.53% stake.
Trading member banks collectively hold 10.49% stake, but have not participated in recent fundraising rounds.
In FY25, MSEI reported total revenue of Rs 17.38 crore, of which Rs 13.07 crore came from other income—primarily interest earnings. Losses narrowed to Rs 34.22 crore, thanks to reduced operating, advertising, marketing, and administrative expenses.
To revive its fortunes, MSEI could take inspiration from BSE’s revival strategy in the cash market. Exploring new segments like block deal platforms might offer a more viable path forward than waiting for success in the derivatives space.
