Investor interest in UP bourse surges

The threat of closure of Kanpur-based Uttar Pradesh Stock Exchange has receded as the applications received to the offer of private placement of shares from the public have far exceeded the requirement of demutualisation.

Exchange Administrator KD Gupta told Business Standard: "We have received 98 applications for 1,600 shares, while we need 49 applicants for 552 shares.

Thus, now we are faced with the problem of plenty. How do we allocate shares to various parties who have applied for more? Whatever we may do there is bound to be dissatisfaction."

The shares have suddenly attracted the attention of investors when it was learnt that the UPSE subsidiary held 10,000 shares of the BSE, which it has, unlike other regional stock exchanges, not divested, according to Vivek Saran, a senior broker.

He said the UPSE also held an 8.33 per cent equity in the Inter-connected stock exchange (ISE). These together would be worth about Rs 6 crore at current prices. The exchange will have its own depository, for which it has earmarked Rs 1 crore, and will take the ticket of the National Stock Exchange in its subsidiary for Rs 4 crore.

All this, plus the building, which when given on rent, will fetch about Rs 1 crore a year on conservative estimates, has made the investment attractive.

The response has made the brokers and the administrators happy. The plan is to increase the authorised share capital of the exchange from 750 shares at a face value of Rs 2,000 to 1,000 shares of Rs 2,000 each, by creating another 250 shares.

This are sought to be done through private placement since there is no time for a public issue and this means that more then 49 persons cannot be given shares, which is the limit for private placement.

At the moment the authorised share capital of the company is 750 shares, of which 540 shares are paid up. Another 92 shares are vested in the exchange itself. Therefore 552 shares will be issued for allotment, of which 92 will be for reissue.

Each share has been valued at Rs 38,000. Gupta said although the 51:49 ratio between the asset value shares and trading shares will be reached if we issue 510 shares, as a measure of abundant precaution, we are issuing 552 so that if there is any hitch, we have some cushion to absorb.

Further, another positive aspect is that of the 448 members, nearly 168 have relinquished their trading rights and another 7-8 members' position is not clear. Thus effectively there are 261 members who have trading rights; there shall be 1,000 members, including the 261 with asset value shares."