BSE shares fall 19% amid regulatory fee structure changes

The Bombay Stock Exchange (BSE) shares nosedived on Monday, with its shares plummeting by as much as 19 per cent. The decline marked what could potentially be its worst day ever, following the announcement by markets regulator regarding changes in the fee structure.

The Securities and Exchange Board of India (SEBI) directed BSE to modify its fee payment methodology, stipulating that the regulatory fee should now be based on the annual turnover derived from the notional value of options contracts. Previously, BSE had been calculating annual turnover based on premium value for options contracts.

This directive from SEBI has sparked concerns among investors and analysts alike, particularly regarding its potential impact on BSE's financial performance. Derivatives constitute a substantial portion of BSE's profit for the fiscal years 2025 and 2026, accounting for approximately 40 per cent. Analysts at Jefferies expressed apprehension that the higher fees resulting from the new fee structure could dent the company's earnings per share by 15 per cent-18 per cent.

Consequently, Jefferies revised its price target for BSE's stock downward and downgraded its rating from "buy" to "hold." Similarly, HDFC Securities highlighted the regulatory setback posed by the shift to a notional value-based fee structure. The brokerage firm estimated that the regulatory fee could potentially constitute 13 per cent-26 per cent of BSE's adjusted profit after tax for the financial years 2024-26.

In response to SEBI's directive, BSE disclosed that the total demand from the regulator amounted to a significant sum, and the exchange operator stated that it was currently assessing the implications of the order.

Analysts at HDFC Securities suggested that BSE might need to adjust its options prices upward to mitigate the adverse effects of the regulatory fee changes.

(With Reuter inputs)