In a post on X, formerly Twitter, Kamath described NSE as a “cash generation and distribution machine”, noting that the exchange earned more than Rs 10,300 crore in profit in FY26 and distributed about Rs 8,660 crore as dividends, translating into a payout ratio of 84%.
According to Kamath, such generous shareholder payouts are likely to continue even after NSE’s listing because the exchange has limited avenues to deploy its surplus cash. He argued that regulatory restrictions prevent exchanges from investing in other businesses, whether listed or private, leaving dividend distribution as one of the few meaningful uses of excess profits.
Also read: NSE IPO: 10 key things investors need to know about India’s largest IPO in history
The NSE example, he said, raises a broader question: why are there so few businesses that consistently generate large profits and return most of them to shareholders? Kamath’s answer lies in what he calls a tax arbitrage between dividends and capital gains.
He explained that when a company earns Rs 100 in profit, it first pays corporate tax, leaving roughly Rs 75. If that amount is distributed as dividends, shareholders pay tax again at their marginal income-tax rate. For investors in the highest tax bracket, this can significantly reduce the final amount received.By contrast, if a company retains those earnings and reinvests them into growth, shareholders can potentially benefit through appreciation in the stock price. In such a case, investors pay capital gains tax only when they sell their shares, and at a substantially lower rate than dividend income, Kamath noted.This disparity, he argued, creates a strong incentive for companies to retain earnings and pursue growth rather than distribute profits to shareholders. In his view, that may be one reason why many modern businesses prioritise expansion and reinvestment over profitability and cash returns.
Read more: NSE IPO: BSE hosts double the listed companies but numbers tell a different story
While acknowledging that reinvestment benefits the economy by funding growth, Kamath cautioned that businesses that do not generate meaningful profits can become more vulnerable during downturns. “One bad cycle can kneecap them severely,” he wrote, arguing that long-term resilience often comes from sustainable profitability.
Using NSE as a case study, Kamath also revived the debate around the double taxation of corporate profits — first at the company level and then at the shareholder level through dividend taxation. He pointed to examples of countries that have attempted to reduce this burden and argued that there should not be such a wide gap between the taxation of dividend income and capital gains.
“I think there should not be such a big differential in taxes, on dividend income as compared to capital gain,” Kamath added.
The NSE IPO is entirely an offer-for-sale (OFS) of up to 14.89 crore equity shares with a face value of Re 1 each, representing nearly 6% of NSE’s paid-up equity capital. The issue size has been fixed at 6% of the exchange’s paid-up capital.
NSE’s shares will be listed on BSE, mirroring the arrangement under which BSE’s own shares are listed on NSE. With NSE’s valuation in the unlisted market hovering around Rs 5 lakh crore, market estimates suggest the IPO could be sized at roughly Rs 30,000 crore.
The filing marks the culmination of a listing process first initiated in December 2016, when NSE filed its first DRHP for a Rs 10,000-crore issue. The process was subsequently stalled due to the co-location controversy.
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