The Securities and Exchanges Board of India's directive to BSE Ltd on regulatory fees will cost the stock exchange Rs 96 crore for the FY07-23 period.
Brokerage HDFC Securities, however, said the exchange can reduce the impact of higher regulatory fees by increasing transaction charges by around 25 percent and reducing clearing charges by 10 percent. These changes can reduce the impact of the SEBI's directive to only 5-2 percent of BSE’s earnings for FY25 and FY26, the brokerage said.
The market regulator asked the exchange to pay the regulatory fee based on the notional value of its options contracts and not on the premium value.
The Sebi's directive saw investors dump the stock in the cash market, triggering an over 18 percent crash, its steepest single-day crash, in the counter. Later in the day, however, the stock did manage to recoup some losses but at 12.49 pm, was still down around 13 percent at Rs 2,800 on the NSE.
The order will lead to a significant increase in the BSE's regulatory fee payment to Sebi. The increase stems from the fact that the notional value, calculated by multiplying the contract size with the underlying price, is considerably higher than the premium value.
The BSE also informed the exchanges that the due date for SEBI regulatory fee payment for FY23-24 is April 30.
HDFC Securities sees the shift from premium to notional as a regulatory setback for the BSE and estimates it will have to pay a regulatory fee of Rs 100 crore, Rs 250 crore, and Rs 310 crore, which is around 13 percent, 21 percent and 22 percent of the company's estimated net profit of FY24, FY25, and FY26, respectively.
The brokerage also said the price hikes on BSE options, which was earlier a route that the exchange could have considered to push its earnings, have now become a necessity after the change in regulatory fee calculations.
HDFC Securities said that BSE can hike the price to offset the impact of the higher regulatory fees.
Awaiting more clarity on the development, HDFC Securities has not changed its estimates for BSE yet. The brokerage still expects revenue and EPS CAGR of around 34 percent and 42 percent, respectively, over FY24-26, driven by a revival in its transaction revenue.
HDFC also retained its “buy” call on the stock with a price target of Rs 3,100.
At 12.46 pm, the stock was trading at Rs 2,810.45, down 12.46 percent from the previous close.
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