The Central Depository Services Ltd (CDSL), one of the country’s two depositories, has opposed a move by the Bombay Stock Exchange (BSE) to increase its stake to 51 per cent from the current 36.5 per cent.
CDSL was originally promoted by BSE and started operations in 1999. BSE later diluted its stake in favour of banks, which collectively hold 40 per cent in the depository. Last week, the BSE board decided to raise its stake to improve the exchange’s consolidated profit and increase its presence on the CDSL board from three to four.
Asked about the development both CDSL and BSE declined to comment. CDSL has not received any official communication from BSE on the matter.
CDSL’s profit for 2008-09 was Rs 34 crore, higher than Rs 27 crore posted by rival National Security Depository Ltd’s (NSDL), promoted by the National Stock Exchange. At this profit, CDSL is valued at Rs 1,000 crore.
BSE proposed to raise its stake through a preferential allotment. At the current valuation of Rs 1,000 crore, it has to pay Rs 150 crore if it has to acquire the additional stake. Alternatively, BSE proposes to buy stake from shareholders.
Sources said CDSL is unhappy with BSE’s proposal on grounds that it will reduce the depository’s independence. For one, several clearing members from NSDL have become CDSL members. Of 435 such members, 120 are only NSE broker members. For another, with a third stock exchange coming up in the MCX SX, CDSL is keen to maintain its independent status to get business.
NSDL is perceived as independent since NSE has reduced its stake to just 16 per cent and half its board members are independent directors.
More From This Section
CDSL has 10 members on its board, of which three are BSE representatives and only two are independent members. CDSL wants to increase the number of independent directors, which will not be possible if BSE increases its stake.
BSE’s proposal comes at a time when the Securities and Exchange Board of India (Sebi) has set up a committee to review ownership patterns of stock exchanges, depositories and clearing corporations, among other issues.