 "Retail investments to shrink as new IPO system comes into play")
The BSE exchange is likely to appoint a fewer number of investment bankers this year for its Initial Public Offering (IPO) of equity than it had done in 2012; the latter plan didn't go through.
The number is likely to be under 10, compared with 14 in 2012, said sources. “The exchange does not want to have a large team this time, as the issue size is expected to be smaller,” said a person familiar with the matter.
“The exchange is likely to lean towards bankers with which it already has an established business relation,” said a second person, adding BSE was looking to raise anywhere between Rs 400 crore and Rs 1,200 crore from the IPO.
BSE declined to comment on the issue. In 2012, it had appointed 14 investment bankers to handle the IPO. These included foreign entities Bank of America Merrill-Lynch (BofA-ML), JPMorgan India, Barclays Securities and UBS Securities, beside domestic ones such as Kotak Mahindra Capital, Edelweiss Financial Services, ICICI Securities and Axis Capital. A final figure was not arrived at but the IPO size was reportedly pegged at Rs 1,000-1,250 crore.
Another person said in 2012, foreign investment bankers wanting to be part of high-profile IPOs were willing to quote lower fees to be part of the offerings. That’s no longer the case and several foreign i-banks also now have much smaller team sizes.
Market watchers believe the final team of bankers for this year’s IPO will have a mix of domestic and foreign i-bankers. “Paying high fees is not likely to be an issue for BSE,” said the first person quoted above.
The exchange has already appointed Edelweiss as lead merchant banker and is in the process of selecting others. The final appointment is likely to be completed by end-June, before the exchange files draft papers with the market regulator.
“Broker shareholders are not concerned about whether the issue is handled by five or 10 or 15 bankers, as long as it’s done professionally,” said Alok Churiwala, vice-chairman, BSE Brokers Forum. He added the valuations to be arrived at would depend not only on the company's fundamentals but also the demand from investors, especially abroad.
| THE ROAD TO GOING PUBLIC |
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BSE's consolidated net profit for 2015-16 declined 38 per cent to Rs 96.7 crore from Rs 155.5 crore the previous year. The dip could impact the exchange’s valuations when the IPO is sold to investors, feel observers.
“BSE has seen a dip in cash market volumes, its mainstay, and its market share in the segment would have fallen by at least a couple of percentage points in FY16,” said a broker who tracks developments in the exchange. “The derivatives segment has also seen a sharp dip in volumes.”
Equity derivative volumes slid to a four-year low on BSE, owing to the increase in contract size by the regulator last year and the exchange’s decision to gradually trim its incentive structure for market makers.
Earlier this year, BSE had told the Securities and Exchange Board of India (Sebi) it had met the requirements of the amended regulations on Stock Exchanges and Clearing Corporations (SECC), and was in a position to proceed with its IPO. Sebi had, via a January 1 notification, amended the SECC Regulations, 2012, making it easier for exchanges to list.
The exchange had first approached Sebi with a listing plan in January 2013 but could not get the required in-principle approval, owing to a lack of clarity on SECC norms.
