Why BSE Shares Are Up 8% Despite Net Profit Nosediving 40%

Shares of BSE were trading up 8% on Thursday after the stock exchange declared its Q1 results on Wednesday.

What Happened: BSE's net profit declined 40.12% year on year to ₹265.05 crore in the June quarter. Its revenue rose 181% to ₹607.7 crore.

EBITDA rose to ₹350.4 crore from ₹125.7 crore in the previous year.

The stock exchange's transaction charges increased to ₹366.3 crore in the quarter from ₹66 crore in the previous year. While its clearing and settlement expenses jumped to ₹80.55 crore from ₹4.93 crore in the previous year and SEBI regulatory fees shot up to ₹82.41 crore from ₹5.59 crore.

Brokerage Reactions: HDFC Securities gave the stock a "reduce" call with a target price of ₹2,350 based on regulatory uncertainties and expected growth moderation in FY26.

The transactional revenue, which makes up 60% of the total revenue, was up 45% on a sequential basis, powered by a scale-up in derivatives volume and star mutual fund platform performance, the brokerage said. 

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The margins dropped 770 basis points on a sequential basis due to higher clearing costs and the implementation of regulatory costs based on notional turnover, the research firm added. SEBI has proposed limiting weekly expiry index options to one per one stock exchange in the consultation paper to reduce speculation in options trading.

According to the brokerage firm, BSE will likely retain the Sensex contract and convert the Bankex contract to monthly expiry. The brokerage said that though the change will have a 20% impact on notional volume, the impact on premium volume will be lower. 

The higher volumes on expiry day will lead to better premium realisation and higher margins, the research firm said. BSE's market share in notional and premium is expected to reach 26% and 12% in FY26 from 25.7% and 9.4% in July 2024, respectively. 

Price Action: Shares of BSE were up 8.51% at ₹2,602.75 on Thursday morning. 

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