 "Fee outgo wipes out BSE market capitalisation by nearly Rs 6,000 crore")
Shares of BSE logged their biggest-ever intraday decline on Monday following a directive from the market regulator, requiring the exchange to pay a regulatory fee on the annual turnover, calculated on the notional value of the options contract.
After sliding by as much as 19 per cent, BSE shares closed over 13 per cent lower at Rs 2,783 apiece, wiping out over Rs 6,000 crore in market capitalisation.
The exchange said that it is currently assessing the validity of the claims in accordance with the communication received from the Securities and Exchange Board of India (Sebi) on April 26.
Sebi’s regulatory charges for the cash and futures segments are straightforward since there is only one turnover. However, in the options segment, there is both notional turnover and premium turnover. As the premium turnover is lower than the notional turnover, BSE will face a higher outgo in the future.
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Analysts expect an impact on BSE’s profits for the next two financial years, leading to an overall decline in earnings per share.
“BSE’s profit after tax estimates for 2024-25/2025-26 could decrease by around 20 per cent basis this cost rise, but it could be managed by a 30 per cent price hike on an aggregate level. However, this sensitivity is subject to estimates and has many levers of options volume growth, options cost growth, and also development in premium to notional turnover,” said ICICI Securities.
“The BSE options price hike was an optionality to earnings but has now become a necessity,” remarked HDFC Securities.
Nevertheless, the brokerage has maintained a ‘buy’ recommendation on the stock with a target price of Rs 3,100.
“The regulatory fee impact for BSE is amplified because it collects a one-third premium for the same notional volume and pricing is 25 per cent lower versus NSE,” added HDFC Securities.
For 2023–24, the exchange will be required to pay Rs 96.3 crore as the differential Sebi regulatory fee. The exchange had already paid Rs 1.66 crore as a regulatory fee based on premium turnover.
Additionally, the total differential Sebi regulatory fee to be paid by BSE for the period from 2006–07 to 2022-23 amounts to nearly Rs 68.64 crore, along with goods and services tax charges. These charges are to be settled by April 30.
The shares of Multi Commodity Exchange (MCX) also declined by 2.5 per cent to Rs 4,066 as Sebi’s clarification will also affect the exchange’s regulatory fee outgo. However, the impact on MCX is comparatively lower than on BSE.