BSE restarts talks to go public

Mumbai: BSE, the oldest stock exchange in Asia, has set the ball rolling on an initial public offering (IPO) and started discussions with intermediaries to begin work on its listing, two people aware of the development said.

The move comes after the Securities and Exchange Board of India (Sebi) issued a notification regarding the amendments to the Stock Exchanges and Clearing Corporations, or SECC, regulations on 1 January. The amendments were aimed at making it easier for exchanges to list.

“Earlier this month, the exchange invited three-four investment banks to initiate discussions on the IPO,” said one of the two persons mentioned above, requesting anonymity.

“We are in the process of hiring one of them as the lead banker; they have been asked to pitch for the lead bank’s position,” the person added.

The banks that were invited to make pitches were part of a large group of investment banks the bourse had hired back in 2012, when it first started preparing for a listing.

In 2012, BSE hired 14 banks to manage an IPO, which included Bank of America Merrill Lynch, JPMorgan Chase and Co., Barclays Plc, UBS AG, Kotak Mahindra Capital Co. Ltd, ICICI Securities Ltd, Edelweiss Financial Services Ltd, Axis Capital Ltd and IIFL Holdings Ltd, according to a 6 December PTI report that quoted BSE chief executive and managing director Ashishkumar Chauhan.

The exchange will go ahead with the same set of bankers, the person cited above said, adding that it has also started reaching out to other intermediaries such as legal advisers to begin work on the listing.

BSE had sought Sebi’s in-principle approval for its IPO in 2013 and is awaiting the regulator’s approval.

“We believe the new regulations announced recently by Sebi will enable listing of exchanges. BSE plans to apply to Sebi again for in-principle approval soon,” the exchange said in an emailed response.

BSE has set up a committee that is reviewing the various milestones that need to be achieved ahead of a listing and intermediaries to work with, the exchange added.

“The IPO will be an offer for sale for existing investors to sell their stake, as they have been invested for over five years now. The exchange per se does not need too much cash to invest in its businesses. However, these are very early days of discussions and decisions are yet to be taken on how much stake is to be diluted, the timelines for the issuance, which investors would want to sell their stake in the IPO, etc.,” said the second person cited above. He also requested anonymity.

BSE counts foreign stock exchanges such as Deutsche Boerse AG and Singapore Exchange Ltd among its shareholders. Other investors in the exchange include Life Insurance Corporation of India, State Bank of India, Bajaj Holdings and Investment Ltd. Foreign investors such as US billionaire George Soros’s hedge fund Quantum’s Mauritius investment arm Quantum (M) Ltd, Canada-based investor Thomas Caldwell’s Caldwell India Holdings Inc. and US fund Argonaut Private Equity are also investors in the exchange.

In 2010, when Soros bought a 3.9% stake in BSE for about Rs.160 crore from Dubai Financial Group, the exchange was valued at around Rs.4,000 crore.

For the fiscal year ended 31 March 2015, BSE reported revenue of Rs.624.75 crore, up 18% from the Rs.529.82 crore it earned in the previous year. In 2014-15, its profit stood at Rs.155.53 crore, up from Rs.135.19 crore in the previous year.

Although Sebi allowed exchanges that are more than three years old to sell shares in June 2012, many clauses such as the “fit and proper” criteria for investors, rules related to associate companies of the stock exchange and norms related to limits of shareholding by individuals after listing of the exchange in the SECC regulations made it unviable for the bourses to get listed. The latest amendments to the regulations have eased the path to a listing, prompting BSE to restart work on an IPO.

Currently, Multi Commodity Exchange of India Ltd is the only listed exchange in the country.

“Listed exchanges will have easier access to capital. In order to expand their product segments, they will need to tap capital markets,” said Deven Choksey, group MD and CEO of KR Choksey Shares and Securities Pvt. Ltd.

Also, being a listed exchange would add to credibility and comfort level of global investors, especially, once exchanges start offering global products, he added.