Mumbai: The trend of senior-level resignations at Asia’s oldest bourse, the 133-year-old Bombay Stock Exchange, or BSE, reached a climax on Thursday with Rajnikant Patel, the exchange’s chief executive officer, or CEO, quitting without citing any particular reason.
Patel’s official term as CEO would have come to an end in September.
Patel was not available for comment but at least three BSE officials who asked not to be named said “the lack of trust” in the CEO among board members “forced” him to resign.
Kalyan Bose, head of corporate affairs at BSE denied this and said it was Patel’s personal decision to resign.
Patel’s exit follows a series of recent resignations, including some key executives of BSE.
In June, chairman Shekhar Datta and a director, Jamshed Godrej, resigned from BSE’s board.
More recently, in July, T.V. Rangaswami, the head of strategy and planning, was asked to resign by the board, according to two persons familiar with the development. None of them wants to be named and Mint could not independently confirm it. Ashok K. Raut, the chief operating officer, too was asked to leave in May. Raut was replaced by Mahesh L. Soneji in mid-July.
According to the BSE officials, some institutional investors in the exchange, who were unhappy with the performance and business objectives of the bourse, and some bad business decisions taken by the management, were behind the changes.
These officials add that a fairly expensive IT upgradation contract signed with a European firm caused a rift between key executives and some board members, leading to the internal scrutiny.
C.B. Bhave, the head of capital market regulator Securities and Exchange Board of India, or Sebi, had met BSE’s board members in early June and several of these issues were raised at that meeting, said these officials.
BSE’s Rs100 crore investment in the Calcutta Stock Exchange and a 26% stake purchase in Ahmedabad-based National Multi-Commodities Exchange of India Ltd, or NMCE, apart from its “lack of business focus” and continuing erosion in market share, were discussed at this meeting.
BSE has a cash reserve of around Rs2,700 crore. Its most valuable asset is its bellwether 30-stock index Sensex.
The Singapore Stock Exchange and Germany’s Deutsche Borse had picked up 5% each in BSE last year at Rs5,200 per share.
On both occasions, BSE issued fresh shares. Both the exchanges hold the right to pick up additional shares to maintain their 5% stake as and when BSE issues new shares to other institutional investors.
Thus far, BSE has been trailing far behind the National Stock Exchange, or NSE, in terms of trading volume. While NSE has a near monopoly in derivatives trades, it has also been steadily eating into the market share of BSE in the cash market.
“Since both were chasing the same pool of capital and BSE lagging way behind NSE, its (BSE’s) existence itself was in question,” said a senior executive at the exchange who asked not to be named.
Another senior person familiar with events at BSE and who too asked not to be named said: “Patel was a better surveillance person than a CEO. As a CEO, he could not put the right checks in place.”
A broker, associated with BSE for a long time, and asked not to be named said the bourse now requires a management that has the ability to visualize and conceptualise an innovative business strategy, which will give BSE reasons to justify its existence. BSE has applied to Sebi for permission to set up a currency derivatives segment in the exchange.
The worldwide average daily turnover in exchange traded currency derivatives grew at 23.2% in last two years, at least double the growth of the over the counter currency derivatives market. BSE is exploring strategic arrangements with certain established entities in the foreign exchange market to start this business.
BSE will form a committee to find a replacement for Patel. Meanwhile, Soneji, its chief operating officer, “will be looking after the interests of the exchange till a new appointment is made”, a BSE release said.
A few weeks ago, finance circles in Mumbai were abuzz with the rumour that Patel was planning to join Reliance-Anil Dhirubhai Ambani Group, or R-Adag, whose brokerage arm Reliance Money Ltd had bought 26% in NMCE. But, a senior executive at R-Adag had dismissed this rumour.