Home / Market / Stock-market-news /  Exit pangs for old BSE brokers as IPO draws near

Mumbai: BSE Ltd on Wednesday cleared the final hurdle for going public after securing shareholders’ approval for an initial public offering (IPO) via an offer for sale (OFS).

While a majority of institutional investors (89.04%) participated in the electronic vote, individual shareholders’ participation was limited. Individual shareholders, mainly brokers and trading members, hold 56.83% in the exchange. From this category, shareholders representing only 8.09% of the shares participated in the e-voting. The voting pattern is a reflection of the way the exchange’s oldest and largest stakeholders are looking at the proposed listing. Mint spoke to a number of BSE’s oldest shareholders and most of them are reluctant to pare their holding and participate in the OFS.

“Personally, I feel that BSE is poised for growth and the initial public offer will help increase the visibility of our exchange internationally. Considering how the exchange has been performing so far, it should command a decent valuation. Only after listing will we get the true picture. We will hold on to our shares," said Nikhil Dalal, owner of V Jethalal Ramji Share Brokers Pvt. Ltd, which was founded in the mid-18th century.

One of the oldest brokerage firms in India, V Jethalal Ramji is in fact as old as BSE. The founding member of the firm, Ramji Dalal, was one of the original members of BSE and attended the stock brokers’ meetings which were then held under banyan trees. The Dalal family has been holding BSE shares for more than a century-and-a-half and the share certificates have been passed on from one generation to the other.

Mint reported on 31 May that the exchange aims to sell a minimum of 10% and if more shareholders are interested in selling their stake, then it can go up to a maximum of 30%. The issue could be a mix of shares of existing shareholders and fresh issuance, at a proposed share price of 400. G.J. Shah, chairman of broking firm GJA Associates, who currently holds around 6,500 shares of the BSE, will also retain a chunk of his holding.

“Earlier, we had given away some part, we will give some 2,000 odd-shares as a token this time, if we are requested, but we will retain a chunk for sure for sentimental value. For most of the brokers, BSE is like a big family," Shah of GJA Associates said.

In 1874, the group of brokers who traded under banyan trees, relocated to Dalal Street and came to be officially known as “The Native Share & Stock Brokers Association" in 1875. On 31 August 1957, BSE became the first stock exchange to be recognized by the government under the Securities Contracts Regulation Act (SCRA).

Nalin Shah, owner of NVS Brokerage Pvt. Ltd, has been holding on to BSE shares since 1988 when the BSE decided to bring in 25 professionals into its fold by assigning them share certificates.

“We have not made up our mind but if at all we participate in the share sale we would pare only part stake and that too only to help the exchange meet the 10% threshold needed to go public," said Nalin Shah, a chartered accountant by profession.

“In 2007, every broker was given one share at 5,200 in lieu of their holding. Subsequently, in 2010 we were given 12 bonus shares for every one share we held. This is the reason why a price of at least 400 per share is desirable for shareholders," added Nalin Shah.

Until 2007, 790 broker-members held 100% of Asia’s oldest stock exchange which was, by and large, by the brokers, for the brokers and of the brokers.

The Securities Contracts Regulation Act (SCRA), 1956, was amended in October 2004 to facilitate the corporatization and demutualization of stock exchanges. In August 2005, BSE, which was formerly known as the Bombay Stock Exchange (BSE), decided to change into a corporate entity. Ownership and management were separated from trading rights and its name was changed to BSE Ltd.


Jayshree P Upadhyay

Jayshree heads a team of reporters focussing on legal, regulatory, investigative stories. She has worked for over a decade, reporting on financial scams, legal stories and the intersection of corporate and regulatory issues. She is based in Mumbai and has previously worked with Business Standard, Mint, The Morning Context and Bloomberg TV India.
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