Firms may be barred from bourse stakes

The Securities and Exchange Board of India (Sebi) proposes to allow only Indian banks and insurance companies to be strategic investors in stock exchanges and is expected to bar corporate houses from taking equity in any bourse.

Sebi is expected to finalise its stance on this at its board meeting next week.

Another proposal expected to be taken up relates to the fee structure of stock exchanges. Sources said the board proposed to levy a fee ranging from Rs 1 lakh to Rs 1 crore from stock exchanges.

The board, however, will not take any decision on foreign direct investment and investments by foreign institutional investors (FIIs) in stock exchanges, and will wait for the government to take a final decision on it.

It is learnt that the minimum level of strategic investments in stock exchanges will be set at 5 per cent.

It is also believed that multilateral institutions like the Asian Development Bank and the International Finance Corporation may be allowed to hold equity once guidelines on foreign investment in exchanges are finalised.

Internationally, corporate ownership in stock exchanges is rare, according to experts associated with a leading stock exchange.

Sources said the Sebi board was expected to finalise norms for divestment of brokers' stakes in exchanges at its November 2 meeting.

The bourses will be allowed to dilute brokers' stakes either through public issue, preferential allotment or private placement.

A decision by Sebi on strategic investments will pave the way for the Bombay Stock Exchange (BSE) to move forward in its proposed divestment of a 26 per cent stake to a strategic partner.

The BSE had appointed Kotak Mahindra to find a strategic partner for the purpose. Under the corporatisation of bourses, stock exchanges are required to bring down the equity stake of broker members to less than 50 per cent by May 2007.