Delhi Stock Exchange, whose board is meeting on 13 April to consider a listing on the Bombay Stock Exchange or the National Stock Exchange, isn’t just confident that it will be able to meet Securities Exchange Board of India’s (Sebi) deadline for demutualization—29 August; and demutualization is a process by which the exchange reduces the holding of its member-brokers to 49%, thereby becoming ‘independent’—but also that it will be able to revive its fortunes and become a preferred stock exchange.
Like other regional stock exchanges, DSE has seen its fortunes plummet after the emergence of the National Stock Exchange. In 2005-06, the latest period for which results are available, the exchange witnessed almost no trading activity, but registered a profit of Rs3.5 crore from listing fees, interest, and rental income.
The exchange, on which 3,000 companies are listed (1,800 of these are listed on it alone), sees demutualization as a way to attract foreign investors and revamp operations. “To refurbish the business, we are looking for technology collaboration with several Indian and foreign partners. Recently, around 100 small and medium enterprises have approached us to get listed on DSE. We also have plans to revive our 1,200 trading terminals in 80 cities,” said Bharat Bhushan Sahny, chairman of the exchange’s demutualization committee. Unlike several regional exchanges that don’t have any assets, DSE owns some real estate and has reserves of Rs90 crore.
In an effort to offer potential investors as well as its own broker-members an “exit route”, according to Sahny, DSE plans to get itself listed on either BSE or NSE. The board of the exchange is meeting on Friday to discuss this. “We plan to increase the paid-up capital of DSE to the required level of Rs300 lakh from the present Rs7.58 lakh,” said Sahny. This will be achieved by getting existing members to subscribe to more shares. The enhanced capital is a prerequisite to a listing. DSE has 379 owner-members and all of these are brokers; it also has four institutional investors.
With 29 August as the demutualization deadline, the DSE is also looking at strategic investors to divest 51% stake currently held by the broking members to non-broking members. At present, all its 379 members are broker-members; of these all but four are either individual or corporate members. The four are institutional investors, including PNB Capital subsidiaries, IFCI and IL&FS.
DSE has appointed Nexgen Capital, PNB Gilts, Mefcom Capital and Alliance Securities as its merchant bankers to effect the demutualization. Audit firm Deloitte Touche Tohmatsu has been appointed as the valuation agency