SEBI’s move against the BSE will affect the company by Rs 120 crore, claims Investec

The venture reevaluated their target price and “buy” rating because of the stock’s high valuation following a recent surge in price and the uncertainty surrounding its impact on earnings.

Money

By Sneha Sengupta On Apr 29, 2024

Investec stated that the market regulator SEBI’s directive to the BSE to pay regulatory fees based on notional turnover rather than premium would result in a cash outflow of Rs 120 crore for outstanding debts on the exchange.

It stated that, depending on the overall derivative volumes in FY24, BSE will need to pay out Rs 96.3 crore as opposed to Rs 6 lakh. While the cumulative effect of past volumes from FY07–24 will be around 120 crore, “assuming past derivative volumes are options for BSE,” BSE may make a one-time provision of Rs 96.3 crore for FY24 payment.

According to the report, BSE might raise the transaction charge by 35% to almost match NSE’s rates in order to maintain profitability.

Based on conservative estimates of BSE’s market share, Investec estimated that the regulatory action would affect “FY25/26e PBT by around 17–18%.” The study also said that, in accordance with BSE’s disclosures from March 2024, the actual impact will be greater due to a bigger market share increase.

Investec believes that the notional turnover cost of Rs 12 million would become Rs 180 million of premium turnover because the BSE now charges a premium on notional value of 0.066 percent. According to the research, this will cause the profit per rupee million of premium traded to drop from Rs 280 to Rs 100, resulting in a 64 percent fall in the profit pool.