Thursday, December 6, 2012

Just how valuable BSE is? ...USD1 billion it says

Three cheers to Bombay Stock Exchange (BSE) which is planning to come up with an IPO next year. The exchange has selected 14 banks including Bank of America Merrill Lynch, JPMorgan, Barclays Capital, and UBS for its IPO planned during the first-half of 2013. This is certainly not the first bourse to get listed but it is also not commonplace to find exchanges seeking public money. To be fair, public money comes with a lot of strings attached including increased public scrutiny and higher pressure to maintain corporate governance. Now this is arguably a difficult task in this line of business, it is therefore intriguing what prompted BSE to get a public listing. The exchange is not short of cash for sure.

Multi Commodity Exchange (MCX) is already listed and has a market capitalization of nearly INR78.81 billion (USD1.44 billion). Incidentally, BSE is also seeking a valuation in excess of USD1 billion, according to chief executive Ashishkumar Chauhan. Arms of Indian banks Kotak Mahindra Bank and ICICI Bank are also among the lead managers of the planned IPO, Chauhn said adding, "The process is on. We are targeting a launch in the first half of next year.”

Founded in 1875, the BSE, formerly known as Bombay Stock Exchange Ltd, has long considered an IPO. India's capital markets regulator in April approved listing of local stock exchanges, subject to some conditions.

BSE claims it is the world's No. 1 exchange in terms of listed members, with about 5,000 companies listed on it. At some point in time, it used to be the largest exchange in terms of trading volumes as well; however, opaqueness in its dealings and a resistance in adopting new technology pushed it behind National Stock Exchange which was founded in 1993.

Frankfurt-based Deutsche Boerse and the Singapore Exchange own a 5 per cent stake each in BSE, whose Sensex remains the benchmark stock index alongside the rival NSE's Nifty. Equity participation by Deutsche Boerse and Singapore Exchange may be the reason behind the IPO as it would offer an exit route to these investors.