Mumbai: BSE Ltd, which runs Asia’s oldest stock exchange, has taken its first concrete step towards an initial public offering (IPO), which would offer its investors the opportunity for an exit.
In a letter dated 22 January, BSE told the Securities and Exchange Board of India (Sebi) that it is fully compliant with Sebi regulations and is ready for an initial public offering (IPO).
A copy of the letter has been reviewed by Mint. A BSE spokesperson confirmed the development in an email.
The move comes after Sebi issued a notification on amendments to the Stock Exchanges and Clearing Corporations, or SECC, Regulations 2012 on 1 January. The amendments were aimed at making it easier for exchanges to list.
BSE first approached the market regulator with a listing plan in January 2013. It could not procure in-principle approval from Sebi for an IPO due to lack of clarity on some SECC norms.
BSE basically faced hurdles on monitoring the post-listing shareholding thresholds at 2%, 5% and 15% and ensuring that every shareholder is ‘fit and proper’ as per Sebi norms.
In the recent amendment, Sebi allowed monitoring of the shareholding threshold through the depository mechanism. To remove the hurdle on monitoring the ‘fit and proper’ status, it said every shareholder could issue a self-declaration to the effect. This was an exemption sought by the BSE.
Additionally, BSE had been facing issues over the composition of its board. As per the original SECC regulations, if a person is on the board of the exchange and another company as well, that entity would be deemed to be an associate of the exchange. As per SECC an associate can not be listed on the same exchange.
In the meantime, the exchange has held meetings with merchant bankers to start the process of filing documents necessary to proceed with its listing plan.
In 2012, BSE hired 14 banks to manage an IPO, which included Bank of America Merrill Lynch, JPMorgan Chase and Co., Barclays Plc., UBS AG, Kotak Mahindra Capital Co. Ltd, ICICI Securities Ltd, Edelweiss Financial Services Ltd, Axis Capital Ltd and IIFL Holdings Ltd.
BSE has set up a committee that is reviewing various milestones that need to be achieved ahead of a listing and intermediaries to work with, it added.
The IPO will be an offer for sale for existing investors to sell their stake, as they have been invested for over five years now. The exchange plans to dilute 25% through the IPO.
BSE counts foreign stock exchanges such as Deutsche Boerse AG and Singapore Exchange Ltd among its shareholders. Other investors include Life Insurance Corporation of India, State Bank of India and Bajaj Holdings and Investment Ltd.
Foreign investors such as US billionaire George Soros’s hedge fund Quantum’s Mauritius investment arm Quantum (M) Ltd, Canada-based investor Thomas Caldwell’s Caldwell India Holdings Inc. and US fund Argonaut Private Equity are also investors in the exchange.
The listing would offer an exit opportunity to existing institutional shareholders, said Prithvi Haldea, founder-chairman of Prime Database, which tracks primary-market issuances.
“Listing of any entity leads to more transparency, greater disclosures and enhanced corporate governance, and also lends itself to a greater public scrutiny and analysis," he added.
For the fiscal year ended 31 March 2015, BSE reported revenue of ₹ 624.75 crore, up 18% from the ₹ 529.82 crore it earned in the previous year. In 2014-15, it earned a profit of ₹ 155.53 crore, up from ₹ 135.19 crore in the previous year.
Currently, Multi Commodity Exchange of India Ltd is the only listed exchange in the country.