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….

Arun Jaitley, our FM has just returned from a 10-day trip to USA; his objective – to garner more FDI for the country. While he has been waxing eloquent about how one can make investments in India; he urged US investors to look at India as a destination where investments can now be committed without delay. Really? Well, that reality apart, what must have really come as totally unexpected and unexpected would have been the question on BSE listing.

While telling investors that things in India now move very fast, he was probably put in a tight corner over the almost decade long delay in getting the premier stock exchange of India, Bombay Stock Exchange (BSE) listed.

Argonaut Private Equity Fund has bought around a 4.5% stake in BSE in 2009 and Toronto-based Caldwell Securities bought a 4.5% stake in BSE in 2007 for around $45 million. Now both are extremely perturbed with the dilly-dallying while on the other hand, the FM makes a speech saying that red tape is almost gone and things move fast in India now. But these two rightly questioned the FM whether it was really so.

The listing of BSE seemed like a certainty at the beginning of 2013 – the BSE itself was then talking of hitting the marquee by first half of FY14; obviously nothing happened. We are into 2015 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 had 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 and L&T Infrastructure. Another Director, Dr.Sanjiv Misra is a Director on Board of Akzo Nobel India. Earlier the Board had Mr.Keki Mistry, Vice-Chairman and Chief Executive Officer of HDFC as Shareholder Director on BSE. But he along with two other shareholder directors are no longer on the Board; meaning that the post of shareholder director is itself removed. And coming to the moot question - how does this clause of SEBI make any sense? Should the BSE have only retired leaders on the Board?

There are many such clauses which the BSE has sought exemption from and SEBI does not seem to be in any mood to 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 was a brief uptick in 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.

As at 31^st March 2015, the BSE had posted a consolidated net profit of Rs.155 crore. Equity is pretty small at Rs.11 crore but its reserves is pretty healthy at Rs.2561 crore and is sitting on a fat cash balance of Rs.1452 crore. 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 declared a generous 600% dividend, in FY13 got a 400% dividend, this was at 400% in FY14 and 500% in FY15.

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!”