E-Paper
Foreign bourses line up for pie in BSE
The Bombay Stock Exchange says it may double the size of its planned public issue if it fails to find a suitable partner by this year end.
Overseas and domestic suitors may be falling over each other for a strategic stake in Bombay Stock Exchange, but India's largest bourse might end up more than doubling the size of its planned public issue if it fails to find a suitable partner by this year end.
The prestigious bourse has short-listed some potential strategic partners for offloading a 26 per cent stake, including five to six overseas stock exchanges as well as some other domestic and global investors, merchant banking sources close to the development said.
However, BSE might simply club the 26 per cent it intends to sell to a partner with the proposed public issue of 25 per cent of its shares in the unlikely event of not finding a suitor who is good enough by the end of this year, they added.
BSE's intention is to pick a partner having global aspirations. The shortlisted potential partners include the New York Stock Exchange and Nasdaq Stock Market from the US, Singapore Stock Exchange from Asia and London Stock Exchange, Deutsche Boerse and Luxembourg Stock Exchange from Europe, the sources said.
Meanwhile, a BSE spokesperson declined to comment on the recent media reports that NYSE was in advanced talks with it to acquire a 26 per cent stake in the exchange.
As per the BSE Corporatisation and Demutalisation Scheme 2005, notified by the market regulator SEBI, the exchange has to bring down brokers' stake to 49 per cent in the next one year from 100 per cent.
The merchant banking sources said that BSE could finalise its strategic partner before December, while it aims to launch its IPO by May 2007.
The guidelines were yet to come from the regulators for the IPO and equity dilution and nothing could be said until that comes, he added.
The Corporatisation and Demutualisation Scheme aims at reducing the stake of brokers to 49 per cent, which would convert the exchange from a member-owned, self-regulatory, not-for-profit organisation into a corporate entity with the objective of making profits and safeguarding investors interest.
BSE plans to dilute the member brokers' stake by selling 26 per cent to a strategic partner, while another 25 per cent stake could be offloaded to the public through an IPO.
BSE CEO and MD Rajnikant Patel had said earlier this year that the exchange was open to different options like offering stake to stock exchanges, banks, financial institutions or foreign bilateral agencies.
The exchange has appointed Kotak Mahindra Capital Company as advisors for the proposed dilution of the equity.
The investment bankers are estimating the shares of BSE, when they get listed, to be valued at over Rs 2,500 per share based on a P/E (price to earnings) ratio of 20 and EPS (earnings per share) of Rs 137 derived from its equity base and financial profit figures for the year ended March 2006. The P/E ratio of the benchmark Sensex as well as other major BSE indices range between 19 and 21.
