The Bombay Stock Exchange (BSE) will finalise a decision to issue new equity shares to the Singapore Exchange and Deutsche Boerse, along with HDFC Bank, next week. The preferential sale of shares will be approved by the exchange when its board meets for the sixth annual general meeting, said sources.
About 1.27 million shares would be issued by BSE to the three institutions, at Rs 375 each,, valuing the exchange between Rs 3,800 crore and Rs 4,000 crore. BSE shares were traded between Rs 200 and Rs 250 in recent months. The deals were largely between small investors and domestic stock brokers.
BSE's valuation had suffered after the Bimal Jalan committee, formed to suggest a road map for market infrastructure companies gave its report last year. A key recommendation of the Jalan report was not allowing stock exchanges to list. BSE has been planning to file for an Initial Public Offer for a long time.
Last year, the BSE had approved issue of six per cent fresh equity shares to strategic investors, to improve its equity capital base before the public offer.
Through the fresh issue, HDFC Bank's stake will rise by one per cent. HDFC is to buy a million shares, while the two foreign exchanges would pick up 135,000 shares each. The share sale will help BSE raise Rs 47 crore, to be partly used to pay market makers, say sources.
The share will be issued to Singapore Exchange and Deutsche Boerse to keep their holding in BSE at five per cent, as the new issue to HDFC would increase the equity base. At Rs 375 per share, BSE will be valued between Rs 3,800 crore and Rs 4,000 crore. In the first half of 2010, US investor George Soros picked up close to four per cent stake in BSE at Rs 370 each.
The National Stock Exchange was recently valued at nearly Rs 16,000 crore. This was when NSE's arch rival, Financial Technologies, sold the stake it had held in the exchange, in December 2010.