The Bombay Stock Exchange (BSE), Asia’s oldest bourse, has initiated the process of floating an initial public offer (IPO). The IPO is intended to unlock the value of the exchange and provide liquidity for the shares held by the existing shareholders as well as a window to the secondary market.
Senior functionaries of the exchange met Securities and Exchange Board of India (Sebi) officials recently for a presentation on the IPO.
When contacted, BSE Chief Operating Officer M L Soneji confirmed the meeting with Sebi, but declined to disclose details, saying the proposal was still at an initial stage.
Initially, BSE had floated the idea of listing its shares on itself without an IPO. However, it is learnt that the proposal did not find favour with Sebi. Now, BSE has proposed to take the IPO route for listing.
If everything goes smoothly, BSE will be the first Indian stock exchange to get listed. The bourse, which is a cash-rich and profit-making organization, has many plans, including developing derivative segment and listing of its benchmark index Sensex on the Singapore Stock Exchange.
For unlocking value and providing liquidity, listing is necessary for BSE. Some broker members have even found buyers for selling the bourse’s shares. But, in the absence of a proper platform, shares in many cases have been sold at a discount, which is certainly not the true market value of the scrip.
Some institutional investors are also understood to have favoured listing to get an exit route. Two clarifications by Sebi in recent months have also created space for secondary market deals in the shares of exchanges. Sebi has allowed single investors to hold up to 15 per cent in security infrastructure firms that include exchanges.
Earlier, the maximum holding limit for single shareholders was 5 per cent. In another clarification, Sebi has allowed foreign institutional investors (FIIs) to buy stock exchange shares from the secondary market if they are not listed.
Listing brings with it other issues when the issuer is a stock exchange. If it has to list on itself, there are issues of corporate governance. And if it lists on a rival exchange, then the issue of confidentiality arises.
Globally, most exchanges go for self-listing and there are various models available for handling corporate governance issues. BSE is studying all such models and it will submit a formal proposal once approved by its board.
Though BSE shareholder members had been pressing for an IPO for over a year now, it’s only now that there has been some headway in this regard.
