BSE shares tumble 19% on regulatory setback; Jefferies downgrades to hold

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BSE shares plummeted 19% on NSE as Sebi demanded a regulatory fee tied to annual turnover, considering notional value in options contract. It was the largest single-day decline since 2017. Jefferies downgraded BSE to Hold.

Shares of tumbled 19% to Rs 2,612 in Monday's trade on NSE after the Securities and Exchange Board of India () asked BSE to pay a regulatory fee to the former based on the annual turnover fee considering "notional value" in the case of the options contract. This is the biggest single-day drop the stock has seen since its listing in 2017.

BSE in its filing to the exchanges on Friday stated that the regulator has also asked the company to pay a differential regulatory fee for the past periods with the applicable interest of 15% per annum on the amount remaining unpaid or belatedly paid or short paid for every month of delay.

BSE has to pay the amount within one month of the receipt of the letter, the filing said.

Sebi board had introduced the regulatory fee on recognised stock exchanges under the Securities and Exchange Board of India (Regulatory Fee on Stock Exchanges) Regulations 2006. Under the regulations, exchanges are required to pay the fee to the board within 30 days of the conclusion of a financial year. The rate of regulatory fees was based on the annual turnover of the stock exchanges.

"Since the introduction of derivatives contracts, BSE including the erstwhile United Stock Exchange (USE) which got merged into BSE in FY 2014-15 has been paying the regulatory fee on annual turnover to the Board considering the premium value of the contracts instead of the notional value", the exchange filing read.

Meanwhile, following the development, brokerage firm Jefferies downgraded BSE to Hold from Buy. It has also cut the target price of the stock to Rs 2,900 from Rs 3000.

In its note, Jefferies highlighted that the higher regulatory fee is likely to constrain near-term upside potential. The brokerage also indicated that the SEBI directive could impact BSE's Earnings Per Share (EPS) by 15% to 18%.

Jefferies further stated, "As derivatives volume growth remains ahead of estimates, price hikes, and improved premium quality can fully offset the EPS impact."

At 10:14 am, shares of BSE were trading 16% lower at Rs 2,696. Despite the drop, the stock has risen over 400% in the last one year.

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Source: Stocks-Markets-Economic Times