Synopsis: BSE's share price plummeted by over 17% in Monday's trading session, the largest single-day drop since its listing. This sharp decline was triggered by a directive from SEBI requiring the exchange to pay higher regulatory fees for derivatives, based on notional turnover rather than premiums. Analysts estimate that this could significantly impact BSE's earnings per share, particularly as derivatives account for a significant portion of its projected net profits.
The share price of BSE (Bombay Stock Exchange) witnessed a significant decline of over 17% during Monday morning trading, marking the largest single-day drop since its listing.
This plunge in BSE's share price is linked to a directive from SEBI (Securities and Exchange Board of India), instructing the exchange to pay a higher regulatory fee for derivatives, based on notional turnover rather than premiums.
According to analysts at Jefferies India, derivatives constitute approximately 40% of BSE's projected net profits for FY25 and FY26. The imposition of increased fees could potentially impact the exchange's earnings per share by 15-18%.
The scrutiny intensified after BSE was found to have calculated its annual turnover based on the premium value for options contracts. As a result, it now faces the obligation to pay the differential regulatory fee, totaling ₹165 crore, along with interest. Of this amount, ₹69 crore pertains to the period from FY2007 to FY2023, while ₹96 crore is for FY2024.
Jefferies analysts further note that the one-time impact of the legacy arrears, combined with taxes, amounts to a 15% reduction in earnings per share for FY24. With derivatives contributing an increasing share of revenues, estimated to reach 45% by FY27, the heightened regulatory fees in the options segment could potentially affect earnings per share by 15-18% in FY25 and FY26.
However, they also suggest that price hikes and enhancements in premium quality might offset the EPS impact. Jefferies has adjusted its estimates for FY25 and FY26 downward by 6-9% and now maintains a Hold rating on the stock.
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