Sebi ceiling may trip NYSE, Nasdaq plans for BSE stake

The Securities and Exchange Board of India (Sebi) decision to cap the individual equity holding in stock exchanges at 5 per cent is likely to discourage global bourses, including the likes of New York Stock Exchange (NYSE) and Nasdaq, from buying equity stakes in Bombay Stock Exchange (BSE).

Though the government policy on foreign direct investment (FDI) in stock exchanges is still awaited, Sebi sources said the individual limit of 5 per cent will be applicable within the to-be-prescribed FDI/FII limit by the government "� be it 26 per cent or 49 per cent.

It is felt that global bourses wanted a bigger slice in BSE and the present prescribed limit of 5 per cent will find no suitors from among the global bourses.

"Global exchanges may not find 5 per cent stake in BSE attractive enough," said an investment banker, who is connected with the MCX issue. "At the current individual ceiling of 5 per cent, only foreign institutional investors would be interested," he added.

The names of global exchanges, such as NYSE, Nasdaq, Australian stock exchange; FIIs, such as Goldman Sachs, Nomura and Fidelity; and private equity investor Tamasek, among others, have been doing the rounds ever since BSE announced plans to sell 26 per cent stake to strategic investors in July.

Analysts said the 5 per cent individual stipulation is also likely to bring down the valuation of BSE, Asia's oldest stock exchange.

Bankers were hoping for a valuation of $700 million to $1 billion for BSE. "Even a valuation of $700 million looks to be far fetched now," said an analyst with a brokerage outfit.

BSE has 800-odd members, who were allotted 10,000 shares of Re 1 each following its corporatisation. At an aggressive pricing of Rs 3,000 a share, the BSE valuation works out to be only Rs 2,400 crore (about $533 million).

There are others who feel BSE may not command more than Rs 1,500 a share. But, a BSE member pointed out that real estate assets and its reserves of Rs 900-odd crore would also come into play while valuing the exchange. "BSE may not be a growth story, but it is an exciting story," said a banker.

In terms of growth potential, however, the exchange cuts a sorry figure when compared with National Stock Exchange (NSE). BSE's derivative segment is yet to take off in a major way, despite several attempts, while NSE's derivatives segment logs in over Rs 30,000 crore on a daily basis. Similarly, half of BSE's over-4,000 listed stocks are not even traded.