BSE shares fall 3% as provision for SEBI regulatory fees mars Q4 profitability

Shares of BSE experienced a 3.3% drop to a day's low of ₹2,726 on the NSE following the release of its Q4 earnings, which were adversely affected by a provision for SEBI's regulatory fee. The BSE reported a consolidated net profit of ₹106.9 crore for the quarter ended March 31, marking a modest increase of 0.56% from the previous quarter. This slight profit increase was largely impacted by a substantial provision of ₹170 crore for SEBI’s regulatory fees. 

Excluding the provision for SEBI fees, BSE's profit before tax was ₹300 crore, which is 26% higher than the estimates provided by domestic brokerage firm Motilal Oswal. The operational expenses (opex) were reported at ₹390 crore, 22% higher than anticipated, primarily due to the inclusion of the regulatory fee provision. 

The brokerage firm's report highlighted that after their re-launch, derivative contracts (Sensex and Bankex) on the BSE are seeing significant engagement from market participants. With an increase in derivatives transaction charges set to take effect from May 13, 2024, the derivatives segment is expected to experience robust revenue growth. 

Recently, SEBI directed BSE to pay a regulatory fee based on the annual turnover fee, which includes the "notional value" of options contracts. Additionally, BSE is required to pay the differential regulatory fee for past periods, along with an interest of 15% per annum on any amount unpaid, belatedly paid, or short paid, calculated for every month of delay. 

BSE reported a substantial 70% increase in its revenue for FY24, reaching ₹1,618 crore, up from ₹954 crore in FY23. Alongside announcing its best-ever financial performance, BSE declared a final dividend of ₹15 per equity share for the fiscal year 2023-2024, according to their filing. The exchange's net profit for FY24 surged by 97%, amounting to ₹404 crore compared to the previous fiscal year. Following its relaunch on May 15, 2023, BSE has successfully processed transactions for 11.3 billion contracts in the equity derivatives category during FY24, contributing to a total income of ₹176 crores. 

Sundararaman Ramamurthy, MD and CEO of BSE, expressed contentment with the progress made in achieving their goal of creating a vibrant trading platform. He highlighted the establishment of a robust range of enterprises, rapid innovation, and a clearly defined strategic approach. Ramamurthy stated that it is now an opportune time for the exchange to expand and enhance its current product offerings, affirming his belief that they are moving in the right direction. 

Rajesh Bhosale, an Equity Technical and Derivative Analyst at Angel One, noted that while BSE shares initially started positively, they subsequently relinquished their morning gains. Currently, the stock is oscillating between ₹2,720 and ₹2,800. Bhosale pointed out that a move beyond this range is necessary to trigger further momentum. However, he also emphasized that the primary trend for BSE shares remains positive. 

Motilal Oswal has updated its EPS forecasts for BSE, increasing estimates by 6% for FY25 and 10% for FY26. These adjustments reflect higher-than-expected trading volumes, increased profitability in CDSL (Central Depository Services Limited), and lower-than-anticipated clearing and settlement costs. Despite these positive adjustments, Motilal Oswal has maintained a 'neutral' stance on the stock. However, they have raised the one-year target price to ₹3,000.