6 hours ago
Monsoon Pabrai, Managing Partner at Drew Investment Management, believes the unlisted Stock Exchange (NSE) is a compelling investment opportunity, especially when compared to the listed Bombay Stock Exchange (BSE).
While the BSE currently trades at over 75 times earnings, NSE is valued at around 30 times. “Should the gap be this wide? I don’t think so,” Pabrai told CNBC-TV18. “At 30 times earnings, I think that gives us good downside protection for the NSE to take its time to list.”
Pabrai is raising a Special Purpose Vehicle (SPV) to invest in the unlisted NSE, a fund targeted specifically at foreign investors who are bullish on India but face challenges accessing domestic opportunities. The SPV is not open to Indian investors and is designed for those who want a focused, high-conviction bet on India’s market infrastructure.
Globally, exchanges tend to trade between 20 to 30 times earnings, but Pabrai pointed out that NSE is growing much faster than its global peers. “Last year, NASDAQ raised $23 billion in IPOs with fewer than 200 IPOs, and the NSE raised $19.9 billion through over 300 IPOs,” she said. According to her, very few exchanges anywhere in the world command the kind of dominance that NSE has in India.
On return expectations, Pabrai sees a base case of under 20% annual returns with an additional 5% dividend yield. In a bull case, she said, returns could look like the post-COVID years, where the exchange delivered over 40% growth. “We have an incredible compounder here,” she added.
Addressing concerns over recent regulatory tightening in the derivatives market, Pabrai said SEBI’s moves are constructive. “I believe this is beneficial for the Indian retail investor, and I think the regulator is taking the right steps here,” she said. While this could bring near-term headwinds, she expects earnings growth to continue as retail participation rises.
India has been adding nearly 25 million new brokerage accounts annually since 2022—a trend Pabrai believes will more than offset the impact of any slowdown in per-customer trading activity.
Even if NSE’s listing takes time, Pabrai is comfortable holding the stock unlisted. “If it grows at 20% to 25% a year, at 30 times earnings, that’s perfectly acceptable,” she said.
Pabrai is aggressively positioned on India. Indian equities make up 30% of her overall portfolio, with an additional 10% allocated to NSE through the unlisted route. “I’m very bullish on the Indian markets,” she said. “Many high-quality Indian investments are long-term compounders that sometimes trade below intrinsic value.”
Watch accompanying video for entire conversation.
