BSE LISTING - A "TO DO" LIST THAT NEVER GETS DONE!
By Ruma Dubey
Expectations have been going on and on for quite a number of years now, since 2006. And looks like it we might only continue hoping….
The listing of BSE seemed like a certainty at the beginning of this year – the BSE itself was talking of hitting the marquee by first half of FY14 but we are already into the second half, will end 2013 soon and there is no sign of any BSE listing, anywhere even remotely on the horizon.
The MCX debacle, in a way, can be blamed for this dilly-dallying, apart from the regulatory authorities putting red tapes throughout. In fact many in the regulatory would be in a self congratulatory mood for the delay as they might be feeling that have averted a crisis by not allowing the BSE listing to go through.
But looks like it might indeed take a while for this historic IPO to hit the capital market. There is a bizarre clause issued by the SEBI’s Stock Exchange and Clearing Corporation Regulations (SECC), which mandates that every shareholder of BSE is fit & proper. How much more bizarre can this get? BSE has obviously, asked for this clause to be exempted. This though is the smallest of the irking clause; there are others which are more sticky.
The clause stipulates that the Chairman and no director can hold a seat on any other listed company. How will this be plausible at all? Today, the Non-Executive Chairman of BSE is Mr.Ramadorai, VC of TCS. Then there is Mr.Sudhakar Rao, Public Interest Director, who is also an independent director on the boards of Indian Oil Corporation and CMC Ltd. Another Director, Dr.Sanjiv Misra is a Director on Board of Akzo Nobel India. And then Mr.Keki Mistry, Vice-Chairman and Chief Executive Officer of HDFC; he is serving as Shareholder Director on BSE. So how does this clause make any sense?
There are many such clauses which the BSE has sought exemption from and SEBI might not relent. The Bimal Jalan Committee on Market Infrastructure Institutions is against allowing listing of stock exchanges. In this scenario then, SEBI can neither amend the rules not can it grant exemption. It’s a Catch 22 situation here and it does not look like SEBI is in any hurry to get this sorted out, especially in the backdrop of the collapse of the National Spot Exchange and the nefarious role played by MCX is this entire fiasco.
For those who have bought into the share of BSE, it has been an agonizing wait. In 2007, BSE completed the process of demutualization wherein the BSE diluted 51% of brokers' stake in favour of public shareholders, bringing in strategic partners like Deutsche Borse and Singapore Exchange, which held 5% each at Rs.5200 per share. Later, a 12:1 bonus put the share price at Rs.400 (face value Re.1).
In August 2011, George Soros paid a price of Rs 375-380 for a 4% stake. In Dec 2011, the share price is said to have gone abegging at Rs.135 per share, finding no buyers. But once MCX announced its plans to list, there has been an uptick the share price of BSE. Further, the price received a boost in May 2012 when SEBI spelled out listing norms for the BSE, headed by Bimal Jalan. In May 2012, a few transactions were made at Rs.210-215 per share. This values the BSE at around Rs.2200 crore.
BSE did not post a very good performance for H1FY14 wherein total income, YoY dropped 4.5% at Rs.235 crore. Lower interest outgo and lower exceptional expense and taxes, helped it ended the first half with a net profit at Rs.63 crore, up 80%. It had ended FY13 with a net profit at Rs.108 crore. An exchange of such legacy and history to have such small earnings is discouraging. The BSE can blame this performance on the poor market conditions but it is undeniable that with these finances, one cannot expect too high a valuation.
Those holding the stocks might be cribbing about the delay in its listing but they have also been earning well on the dividend front. Each of the over 600 broker shareholders, for FY12 received a dividend cheque of about Rs 4 lakh when the BSE gave out a generous 600% dividend compared to 400% it had given out in the previous three years. In FY13 also it gave out a 400% dividend.
The BSE listing will give the much needed exit route to many brokers but if one removes the haze of it being the oldest bourse in Asia, and one looks at it purely from a financial perspective, it does not paint a very attractive picture. The brand equity of BSE is what will probably create some fancy. If only it had acted fast and got itself listed, it might have got better valuations than what it will get now. A complete waste of an opportunity; from being a tiger, to now a domesticated cat!”