DSE invites presentations from bankers

To divest 51 per cent stake as part of a demutualisation process, the Delhi Stock Exchange (DSE) has invited presentations from leading merchant bankers like DSP Merril Lynch, JM Morgan Stanley, ICICI Securities, Kotak Mahindra and Enam Securities.

DSE is looking to raise $10-15 million from this divestment. The exchange's equity is divided into 379 shares with members having one share each with a face value of Rs 2,000.

Earlier the exchange was looking for an overseas investor, but is now examining "all possibilities" as there is a lack of clarity on whether 51 per cent can be sold to a foreign partner.

DSE does not have a working business model. Therefore it has brought to the notice of the merchant bankers that 3,000 companies are listed on DSE and that, it earns listing fees of about Rs 5 crore. The exchange has also provided details of its fixed assets.

According to its balance sheet of 2003-04, apart from fixed assets, the exchange had cash assets of over Rs 56 crore.

The DSE demutualisation scheme is awaiting Sebi approval. All stock exchanges are required to separate ownership from management and divest at least 51 per cent to non-traders through a demutualisation scheme which requires the regulator's approval.

A strategic investor will not be able to sell DSE's building and other fixed assets since Sebi, in the recently approved Bombay Stock Exchange scheme, had stated that "in the interest of trade and in public interest, the assets and reserves (other than current assets) are used by the demutualised exchange only for exchange operations".

While the BSE has the option of an IPO or finding a strategic partner, the DSE has to look for a partner which can revive the stock exchange. "This might make it difficult to find a partner willing to pay a good price," an analyst said.

The IPO option for DSE looks unlikely as it does not have a business model and some members are of the opinion that a stake sale will result in better pricing and will also allow existing members to exit.

As per the BSE scheme, the trading member's voting rights are capped at a maximum five per cent (including voting rights of persons acting in concert). The members will not play a strategic role in the exchange's operation once it is demutualised.