Shares of Angel One slumped 8% on Tuesday morning after market regulator Securities and Exchange Board of India (SEBI) directed market infrastructure institutions (MII) to charge all members uniformly rather than providing discounts based on trading volumes which is done currently.

What Happened: Stock exchanges, clearing corporations and depository institutions are MIIs according to SEBI. Currently, MIIs charge brokers based on trading volumes as the higher the trading volume, the fees charged for the transaction will be lower.

While MIIs charge a discount, brokers charge the entire transaction fee from an investor, thus gaining from this difference in charges. The market regulator in its latest circular has asked MIIs to charge all brokers equally irrespective of trading volumes. The provision will come into effect on October 1, 2024.

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Discount brokerages are expected to see their revenues being affected due to the latest provision. HDFC Securities in its note on Angel One said discount brokerages make excess profit based on the difference in transaction fees labelled as "ancillary transaction income". 

Motilal Oswal said Angel One earned about ₹400 crore from these charges in FY24.

According to HDFC Securities, this ancillary income contributes 8% to Angel One's revenues and 20% to pre-tax profits and will be vulnerable to SEBI's latest order. The brokerage also cut profit before tax estimates by 11% and 23% for FY25 and FY26. The research firm maintained an "add" call for the scrip but slashed the target price to ₹2,750 from ₹3,500. 

Price Action: Shares of Angel One plunged 8.86% to ₹2,350.05 on Tuesday morning.  

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