Business
SEBI directives cause 17% drop in BSE share prices, biggest single day decrease since listing
Stock Market Today: BSE shares faced a steep decline exceeding 17% in morning trades this Monday, marking the largest single-day drop in share prices since the company’s listing.
The sudden fall in BSE’s share price is attributed to a directive from the market regulator SEBI (Securities and Exchange Board of India) requiring the exchange to pay a higher regulatory fee for derivatives. The regulatory fee is now based on notional turnover rather than premiums as it was previously.
Analysts from Jefferies India noted in their report that derivatives comprise approximately 40% of BSE’s estimated net profits for FY25 and FY26. The increased regulatory fees could potentially reduce the earnings per share by 15-18%.
BSE revealed that the market regulator SEBI has asked the exchange to pay a higher regulatory fee, calculated using the yearly turnover computed from the ‘notional value’ of its options contracts.
As per BSE’s statement to the exchanges, the total regulatory fees, along with 15% interest, will need to be remitted to SEBI based on annual turnover considering the ‘notional value’ in the case of Option Contracts.
The due date for SEBI regulatory fee payment for FY 2023-24 is 30th April 2024, and the amount payable as per premium turnover is approximately Rs 1.66 crore plus GST, which the company has already paid. Additionally, BSE acknowledged that the differential SEBI regulatory fees for the year might total around Rs 96.30 crore plus GST.
Furthermore, Jefferies analysts estimated that the one-time impact of the legacy arrears (since 2006-07) could be about Rs 165 crore plus taxes (18%), leading to a 15% cut in Earnings per Share for FY24. They suggested a possible 15-18% impact on overall Earnings per Share for FY25 and FY26 due to the increased regulatory fees in the options business.
After considering potential price increases and higher premium quality, Jefferies stated that the impact on EPS could be mitigated. However, they have reduced their FY25 and FY26 estimates by 6-9% and now have a Hold rating for BSE’s stock.
