NSE is a cash generation and distribution machine. In FY26 alone, NSE earned a profit of over ₹10,300 crore and paid out roughly ₹8,660 crore in dividends— a payout ratio of 84%. This will likely continue even after listing because NSE can’t do much with the excess profits. SEBI doesn’t allow exchanges to invest in other businesses, listed or private.

So why aren’t there more businesses like this?

It comes down to a tax arbitrage. Assume a business earns ₹100. It pays ~25% corporate tax, leaving ₹75. If that ₹75 is distributed as dividends, the shareholder pays tax again at their marginal rate. Can be another ~36% for someone in the highest bracket. The investor ends up with ₹48 out of the original ₹100.

Now contrast that with a company that reinvests the entire ₹100 into growth. If that growth reflects in the stock price, the investor pays capital gains tax only when they sell and at a much lower rate of 14.5% (the highest rate). Adding to this, there is no tax on this ₹100 because nothing is booked as profit.

A differential of 14.5 % vs 51% creates a strong incentive for profitable companies to reinvest aggressively rather than distribute. Which is why you don’t see many new-age businesses choosing to be profitable in the first place.

I hope something changes here. Reinvestment is good for the economy in the short run, but businesses that aren’t profitable are also far more vulnerable. One bad cycle can kneecap them severely. In the long run, that isn’t smart.

This is part of a much larger global debate: the double taxation of corporate profits. Many countries have tried to address it. The US taxes dividends from most listed companies at lower rates than regular income through “qualified dividends.” Australia gives investors credit for tax already paid by the company on its profits.

I have a conflict of interest on this topic. At Zerodha, almost all the cash we generate is retained and reinvested in startups through Rainmatter, the social sector through our Rainmatter Foundation, or listed companies/Gold/Bonds. Even otherwise, it doesn’t make sense to pay another tax and take out dividends, one of the few negatives of not being listed.

I think there should not be such a big differential in taxes, on dividend income as compared to capital gain. 😀

We did a detailed breakdown of NSE DRHP on The Daily Brief.

Read: https://thedailybrief.zerodha.com/p/the-company-behind-every-trade-in

Watch: https://youtube.com/watch?v=KJUOeXLoPFo&feature=youtu.be

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