Regulatory setback
As per the letter dated 26th April 2024, SEBI has asked BSE to pay the regulatory fee on the annual turnover considering “notional value” in the case of options contracts. BSE was paying the regulatory fee based on annual turnover considering the premium turnover of options for the last many years. The definition of ‘annual turnover’ is not very clear as per the ‘exchanges and clearing corporations regulations 2018’ but in the ‘SEBI stockbroker regulation 1992’, it clearly states that the ‘turnover’ is calculated based on the premium of options and notional for options contracts that are exercised. The shift from premium to notional is a regulatory setback and BSE will have to pay a regulatory fee of ~INR 1/2.5/3.1bn, which is ~13/21/22% of FY24/25/26E APAT. Another way to offset the impact of higher regulatory fees is to increase the transaction charges by ~25% and reduce clearing charges by ~10%, which will reduce the impact to only -5/-2% for FY25/26E. The exchanges earn revenue on the premium, which is only 6/19bps of the notional value, and the payment of the regulatory fees will be on the notional turnover. NSE has been paying the regulatory fees based on the notional turnover. We have not changed our estimates and will wait for more clarity. We expect a revenue/EPS CAGR of ~34/42% over FY24-26E, led by a revival in transaction revenue. We maintain our BUY rating and assign a SoTP-based target price of INR 3,100, based on 40x core FY26E PAT + CDSL stake + net cash ex SGF.
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