BSE Shares Plunge: Assessing SEBI Directive's Impact On Financials
According to IIFL Securities, the one-time cost and recurring expense would lead to a 30-40% cut in FY25/26 earnings per share estimates.
The Securities and Exchange Board of India has directed BSE Ltd. to pay higher regulatory fees based on the notional turnover, as opposed to the current practice of basing the fee on the premium turnover.
The higher fees payable stand to impact the bourse's profitability.
BSE Ltd. would be liable to pay approximately Rs 165 crore to the market regulator, according to NDTV Profit's estimates. This Rs 165 crore value would include differential SEBI regulatory fees of approximately Rs 68.64 crore for periods between FY07–23 and Rs 96.3 crore plus GST for FY24.
Financial Impact
Derivatives make up about 40% of BSE's FY25/26 net profit estimates, according to Jefferies. The one-time impact of the directive would lead to a 15% cut in the company's earnings per share for FY24, according to the brokerage.
Given the rising share of the derivatives segment in overall revenues— estimated to be 45% by FY27—the increased regulatory fees in the options business could affect BSE's overall EPS by 15–18% in FY25–26, the brokerage said.
The one-time cost and recurring expenses would lead to a 30–40% cut in FY25–26 earnings per share estimates, according to IIFL Securities Ltd.
Potential Price Hike?
Brokerages expect that BSE could increase the options tariffs, which are the total transaction costs a trader pays to the exchange while trading options contracts.
According to IIFL Securities, BSE could raise its option tariff by 44%, or Rs 930 per crore of premium turnover, to counteract the impact of higher regulatory fees. It is to be noted that a premium is the upfront cost an option buyer pays to an option seller to acquire an options contract.
The price hikes are most likely to increase the equity option tariffs, the brokerage said.
Pricing On Par With NSE?
BSE's Sensex options are priced at an 18% discount to the National Stock Exchange, according to Jefferies. The exchange charges Rs 260 for every million worth of total option premiums being traded, compared to the Rs 320 rate, the brokerage said.
BSE bringing its prices on par with those of the NSE would offset two-thirds of the incremental hit for the exchange immediately, Jefferies said.
