Shares of BSE fell as much as 19% on April 29 and are set for its worst day ever after India's markets regulator asked the exchange operator to pay the regulatory fee on the annual turnover based on the notional value of the options contract.
BSE was the top loser on the Nifty mid-cap 100 index, which was mostly unchanged. The exchange operator's shares are still up 27.4% this year, including the day's fall, outperforming the 9.6% gain in the mid-cap index.
On April 26, the Securities and Exchange Board of India (SEBI) directed BSE to pay the regulatory fee on the annual turnover based on the notional value of the options contract, along with differential payment for past years with interest. The company has been calculating annual turnover based on premium value for options contracts.
Derivatives make up for about 40% of BSE's FY2025 and FY2026 profit, and higher fees could hit the overall earnings per share by 15%-18%, Jefferies analysts said in a note. The brokerage lowered its price target on the stock to ₹2,900 from ₹3,000 and downgraded the stock to "hold" from "buy".
BSE said the total demand from SEBI stood at ₹1.65 billion and was evaluating the order.
The shift to notional is a "regulatory setback" and BSE will have to pay a regulatory fee, which could account for 13%-26% of adjusted profit after tax for the financial years 2024-26, HDFC Securities said in a note. BSE should now hike its options prices to offset the impact, HDFC analysts said.
