SEBI’s Fee Structure Impact: Top Brokers Await Revenue Decline in FY25

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The recent directive from Sebi to implement a true-to-label fee structure has sent ripples across the top discount brokers in India, with expectations of a 10-20% reduction in revenues for the current financial year, potentially impacting their bottom line even further. One of the largest brokers in the country, Zerodha, estimated to have earned around Rs 1,000-1,100 crore in FY24 from passbacks or rebates offered by exchanges like NSE and BSE. The company’s founder, Nithin Kamath, revealed on social media that they make around 10% of the topline in FY25.

With the tiered structure implemented by NSE, brokers handling over Rs 2,000 crore in trading volume per month are charged Rs 30 per lakh worth of trade. Brokers then charge customers Rs 50 per lakh, reflecting the true-to-label fees or the rate they would have paid without high volumes. The top 10 brokers are expected to qualify for the top-tier bracket, earning a margin of Rs 20 per lakh due to rebates.

The new fee structure is expected to impact business models significantly. Venture-funded firms like Groww, Upstox, and Dhan are likely to cut back on marketing and other expenses to navigate the change. This new directive poses a challenge for brokerages relying on competitive fee structures to attract and retain clients, forcing a reconsideration of pricing strategies and revenue models.

Smaller and mid-sized brokerages will be the most affected, with some potentially facing up to a 30% revenue loss due to the new structure. While brokering firms adapt to these changes, the industry is abuzz with discussions about the impact on profitability and overall competitiveness in the market. Investors and traders, particularly in the F&O segment, are bracing themselves for potential cost increases as a result of these regulatory changes.

Overall, the Sebi’s uniform fee structure is expected to usher in a new era for the broking industry, leveling the playing field between small and large brokers and encouraging a shift towards innovative revenue diversification strategies. While challenges lie ahead, many in the industry see this as an opportunity for growth and evolution, signaling a significant transformation in the way the brokerage sector operates in India.