Sebi revenues may remain flat in FY19

Expected drop in IPO, buyback activity can make a dent in collection

The Securities and Exchange Board of India (Sebi) is estimating that revenues in 2018-19 will remain largely the same as in the previous financial year.

According to sources, the market regulator estimates total income at ~6.25 billion, 2.3 per cent more than ~6.11 billion in 2017-18. The reason for flattish growth is an expected moderation in initial public offerings (IPOs) and share buybacks.

The year 2017-18 witnessed the highest-ever fundraising by way of public share sales. The fundraising from the primary market this year is expected to see a drop due to market volatility and political uncertainty.

The regulator, however, is expecting the fee income to get a boost from stock trading and mutual funds. It is also expecting an increase in fees due to the rollout of universal exchanges.

Sebi’s revenue comes from levying fees on intermediaries. It also pockets 0.0001 per cent of trading turnover. It also collects fees from companies tapping the market to raise capital.

The overall fee income is expected to rise 20 per cent to ~5 billion in 2018-19. The income on investment is said to be revised downward to ~900 million from ~1,910 million in the corresponding period last year.

Sebi has increased its overall revenue expenditure to ~4.5 billion from ~3.91 billion in the last financial year.

The increase would be attributed to the maintenance of the new office space at Mumbai’s Bandra-Kurla Complex (BKC). Recently, Sebi purchased IDBI Bank’s building at BKC for a reported ~10 billion.

The new office was purchased to accommodate its growing staff. In the absence of office space, the regulator has stationed its market intermediaries’ regulation and supervision department at Nariman Point in South Mumbai, while its enquiry and adjudication officers worked out of its headquarters in BKC.

Sebi could also see an increase in expenditure external hiring this fiscal year. Further, a revision in FY18 Total income FY19 Income from fees (Figures in ~ billion) Intereston income Total expenditure allowances like annual increments and promotion of officers across various grades is also on the radar.

Overall surplus in revenue is estimated to be at ~500 million. This is in addition to a surplus fund of ~16.72 billion lying with the regulator, according to the Comptroller and Auditor General (CAG) report of 2017.

The regulator and the government are in talks to transfer the former’s surplus fund to the government. The Centre has been eyeing these resources, which would enable it to lower the fiscal deficit.

Sebi is also expected to deploy funds in its ‘Investor Protection and Education Fund’. The fund is being used for investor education activities of Sebi. It is expected that due to decentralisation of empanelment of resource persons, head office and regional offices may empanel more resource persons. Further, considering the new resource persons will do more financial education workshops.