Madhu Kannan quits BSE, to join Tata Sons3 min read . Updated: 04 Apr 2012, 12:56 AM IST
Madhu Kannan quits BSE, to join Tata Sons
Madhu Kannan quits BSE, to join Tata Sons
Mumbai: BSE Ltd managing director (MD) and chief executive officer (CEO) Madhu Kannan will join Tata Sons Ltd, the holding company of the Tata group, in a key role to assist Cyrus P. Mistry, 43, chairman-designate at the $83 billion (around Rs4.2 trillion) steel-to-software conglomerate.
Kannan, 38, the youngest CEO of Asia’s oldest stock exchange who joined BSE in 2009, will join as group head for business development at Tata Sons, the holding firm that owns a controlling stake in most companies within the Tata fold.
His exit comes a day after India’s market regulator allowed stock exchanges to raise capital by listing their shares—a demand that Kannan had long pitched for.
A simultaneous statement from Tata Sons said he will be reporting to Mistry, but gave no further details about his role.
Kannan is Mistry’s first pick from the industry as he prepares to take over from current chairman Ratan Tata in December.
A Tata group executive, who did not want to be named, said the position of group head (business development) is new, but not the function. Alan Rosling played this role in the past as an executive director. Rosling was also a member of the Tata Sons board.
The Tata group focuses on seven areas—materials, engineering, information technology and communications, energy, services, consumer products, and chemicals. Kannan’s job will be exploring opportunities for Tata Sons in these businesses across geographies.
According to a BSE executive, who didn’t want to be named, Kannan is particularly “excited" about his new role as the group explores “overseas opportunities" and continues its push into international markets.
He first got acquainted with Ratan Tata during his stint at the New York Stock Exchange (NYSE) where American depository shares of two group companies—Tata Motors Ltd and Tata Communications Ltd—are listed. Before joining BSE in 2009, Kannan had worked as MD (corporate strategy and business development) at Bank of America-Merrill Lynch, and as a senior vice-president at NYSE Euronext.
Incidentally, S. Ramadorai, former MD of Tata Consultancy Services Ltd, is non-executive chairman of BSE.
Kannan had taken over from Rajnikant Patel at BSE at a time when the bourse was losing market share to its younger, but bigger rival National Stock Exchange of India Ltd (NSE) on all fronts. BSE’s market share in the cash segment had dropped from 80% to 25% since NSE’s launch in 1994.
An electronics engineer from the Birla Institute of Technology and Science, Pilani, and a business management graduate in finance from Vanderbilt University in the US, Kannan tried several strategies to revive the flagging fortunes of BSE and in the process sparked a series of skirmishes between the two national exchanges.
Kannan took on the technologically savvier NSE by buying Marketplace Technologies to launch a new market access platform called Fastrade in November 2009.
He tried to lift BSE’s almost non-existent derivatives segment by paring transaction fees, introducing mid-month expiry of contracts, physical settlement and market making of illiquid derivatives.
The bid to regain market share didn’t succeed. In the cash segment, it has been further eroded. With a daily average turnover of Rs2,961.54 crore in March, the exchange had a 19.3% market share in the cash segment.
In the derivatives segment, BSE had a market share of 7.13% with a daily average turnover of Rs10,396.29 crore last month. When Kannan took over the assignment, BSE’s presence in this space was almost nil.
Kannan’s three-year term will end in May. Going by the norms of the capital market regulator, BSE will have to set up an expert committee to identify his successor.
According to the BSE executive cited earlier in the story, Kannan will work with the board to ensure a smooth succession. He met Securities and Exchange Board of India chairman U.K. Sinha on Tuesday evening.
Two of the key members of a new team that Kannan put in place to revamp the exchange have exited BSE. James Shapiro, who joined BSE as head of market development in August 2009, left in June 2011. Another key member of Kannan’s original team, Sayee Srinivasan, who had joined as head of product strategy in July 2009, left to join the Commodity Futures Trading Commission as a financial economist. Shapiro is now attached to BSE as an adviser.
The Tata group has been aggressively acquiring companies overseas, picking up 68 since 2000, to gain market share. In the process, it has accumulated huge debt.
Three of its big acquisitions—tea maker Tetley in 2000, steel maker Corus in 2007 and JaguarLand Rover in 2008—have been in the UK. It’s currently considering a bid for beleaguered British fibre optic firm Cable and Wireless Worldwide Plc.