Is it end of road for Ahmedabad Stock Exchange?

The capital market regulator, Securities and Exchange Board of India (Sebi), has almost closed the doors on revival of regional stock exchanges, including Ahmedabad Stock Exchange.

A circular — Exit Policy for De-recognized or Non-operational Stock Exchanges — issued by Sebi on Wednesday almost forces the stock exchanges to shutdown, get de-recognised and make an exit.

Public investors who have invested crores of rupees in regional stock exchanges of Gujarat — Ahmedabad Stock Exchange, Vadodara Stock Exchange and Saurashtra Kutch Stock Exchange — believe that with this circular, Sebi has backstabbed them.

The regulator has offered regional stock exchanges the option of making a voluntary exit or achieving an annual turnover of Rs1,000 crore (approximately Rs4 crore every day). This is a tough clause for regional stock exchanges.

If a stock exchange is not able to achieve the prescribed turnover on a continuous basis, Sebi shall proceed with compulsory de-recognition and exit of such stock exchanges.

Further, an earlier circular of the regulator had mentioned that a bourse should have net worth of Rs100 crore to operate. Ahmedabad Stock Exchange has a net worth of only Rs56 crore while the net worth of Vadodara Stock Exchange is around Rs45 crore.

The latest Sebi circular has come up with a third condition for the regional stock exchanges if they want to continue functioning. This condition implies that public investors will lose their money.

It says that in case of de-recognition and exit, the stock exchange concerned shall contribute up to 20% of its assets to the SEBI Investor Protection and Education Fund (IPEF) for the protection of investors and to cover future liabilities.

“This is backstabbing the investors. Five years back, before de-mutualisation of stock exchanges, the regulator had promised us that the regional stock exchange will get listed in future and we will get our money back. So we had invested in it. Now the exchanges have no option but to close and we will lose our money. This is nothing but Sebi backstabbing public investors of regional stock exchanges,” said Gaurang Dalal, public investor and member broker of ASE. 

However, the chairman of ASE, Hemantsinh Jhala, still has some hope. “We have called an AGM on June 5. At this meeting, we will have to decide whether we can start the exchange in two years or have to make an exit,” he said.

Similarly, the Vadodara Stock Exchange is struggling for revival. “For the individual regional stock exchange, it is very difficult or rather almost impossible to achieve the target of annual turnover of Rs1,000 crore. A few investors had put in more than Rs40 crore in the Vadodara Stock Exchange. They will lose their money. It seems Sebi has forgotten the promise it had made to us five years back,” said public investor of VSE, Sudhir Shah.

Parimal Nathwani, chairman of VSE, could not be contacted for his comments despite several efforts.

The Rajkot-based SKSE is all set to make an exit. “We are meeting the regulator on June 4 in Mumbai. The members of the exchange are of that we should opt for de-recognition and continue trading as a subsidiary,” said member of SKSE, Sunil Shah.