Influence of domestic banks, govt institutions goes down in two exchanges.
The shareholding pattern in the top domestic stock exchange is changing swiftly. Over the past few months, the influence of domestic banks and government institutions has gone down in the Bombay Stock Exchange ( BSE) and the National Stock Exchange (NSE), while foreign and private investors have become the dominant share holders.
According to analysts, as time passes this trend may continue. “The trend of more private and individual shareholders dominating the exchange business has been observed worldwide. This is because, exchanges are a direct and easy way of betting on any growing economy than stock picking. However, privately held exchanges undercuts the concept of public exchanges. But, they should be listed, so that there are checks and balances,” said a senior analyst with domestic research house, tracking the exchange space who did not want to be named.
In NSE, where the stake is divided among 54 shareholders, over 50.7 per cent stake is held by foreign and private shareholders. Among these, the individual shareholders control over four per cent stake while institutions like JM Financial, Tata Investment, Srei Infrastructure Finance, Reliance Strategic Investment, Kotak Mahindra Capital, Hero Honda Motors, Fedility and Financial Technologies among others have cornered over 24 per cent share.
Among the foreign shareholders in NSE, the dominating players include, Singapore government arm Temasek Holdings, General Atlantic, Citigroup Strategic, Norwest Ventures, Goldman Sachs Strategic Investment, Morgan Stanley Strategic Investment and SAIF II SE Investment Mauritius, who hold over 28 per cent.
In BSE too, over 37 per cent stake is held by foreign and domestic private and large individual shareholders who are among the top 20 shareholders of the exchange. These include, Deutsche Boerse AG, Singapore Stock Exchange, Dubai Financial Group LLC, media house Bennett Coleman and Company philanthropist George Kaiser and Thomas Caldwell among others. While Caldwell has been raising its stake recently, Kaiser has entered the elite club of BSE shareholders only this year. Less than 49 per cent stake is held by stock brokers and trading members of the exchange.
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Both the domestic government owned banks and financial institutions held over 50 per cent stake in both BSE and NSE just a couple of years ago and had a substantial say in the management of the exchanges. However, off late while the BSE has been inducting nominees from foreign bourse, NSE too is likely to make way for a Temesak nominee on its board.
“The advantage in India is that no private shareholder can hold over five per cent stake. This limits the involvement of investors in day-to-day functioning of exchanges if it is followed in spirit.. However, consolidation of stock exchanges cannot be stalled for a long time as globally as markets grow, exchanges are becoming a hot property. The only way for exchanges going forward would be to become listed entities. This similar debate has sparked a debate in the US too and the Chicago Board of Trade is coming out with its initial public offer in the next couple of weeks,” said another analyst.
BSE has expressed its intent to go public, but it is waiting for the Bimal Jalan committee report, which will give the overview on domestic stock exchange scenario and may also suggest a way forward.
The head of a domestic brokerage firm points out that the upcoming MCX SX, where over 80 per cent stake is held by government-owned banks and institutions, too will go the same way once it gets nod for equity trading. “The exchange had been lobbying hard to dilute its stake with foreign players like the London Stock Exchange. However, once equity trading starts on its platform only then will more private players consider entering it,”