Vadodara SE demutualised, IPO undecided

The Vadodara Stock Exchange Limited (VSE) had been corporatised and demutualised in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956.

On September 15, the VSE received clearance form the Securities and Exchange Board of India (Sebi) for corporatisation of VSE, which was up till now a company limited by guarantee, into a company limited by shares.

"The main objective of the corporatisation and demutualisation is to segregate the ownership and management from the trading rights of the members. This brings more transparency into functioning of the stock exchange and also helps avoiding conflict of interest between the trading members of VSE and the management," said Prasad Akolkar, executive director, VSE.

He added that, with the corporatisation, the company will focus on churning out more profit which will now be its prime objective and for it, the company intends to generate new revenue models to increase its profitability.

The company had also applied to National Stock Exchange (NSE) to grant permission for derivative trading through its subsidiary company.

The composition of the board of directors will be changed with in the stipulated time frame of two months.

At present the majority of the directors are amongst the trading members of VSE, which will fall to 25 per cent and the remaining 75 per cent of directors will be outsiders, including Sebi nominees.

The board of directors will discuss the post demutualisation strategies in its meeting that will be held by the end of October. However, the company had not fixed for issuing its IPO (initial public offering).

Under the corporatisation and demutualisation scheme, the stock exchange has to issue IPO within 12 months.

The company is interested in entering the derivative market as it is the mint churning market. As the derivative market is approximately Rs 20,000 crore, which is far greater than Bombay Stock Exchange (BSE) and NSE.

VSE would aim to revive its floor trading, which is non-functional at present. With the corporatisation, VSE was hoping to revive the floor trading and also increase its membership.

Presently, there were 300 members registered with VSE, but only 70 are active members. However, the company has accepted that it needed to incorporate new technologies, which will be at par with the national stock exchange.

The company traded in the NSE cash segment and other segments through its subsidiary company "� VSE Stock Securities Limited.

The subsidiary company has a turnover of Rs 50 crore per day, which we expect to double in coming years following implementation of the corporatisation scheme. The corporatisation of the company will improve its functional transparency amongst the public, said Akolkar.

In the current fiscal year, the company had a Rs 1.79 crore surplus and its subsidiary company earned a profit of Rs 46 lakh. Substantial income was generated from its depository operations.The gross income of the stock exchange was Rs 3.66 crore, out of which Rs 1.30 crore was from depository operations.