BSE awaits valuation by merchant banker

MUMBAI: The Bombay Stock Exchange (BSE) is trying to work out a proper valuation for its proposed 26% stake sale to a strategic partner. Even though the government policy on foreign direct investment in stock exchanges is not yet clear, the BSE has been talking to the New York Stock Exchange and Nasdaq for a possible stake sale.

According to a BSE member who attended the exchange’s annual general meeting on Tuesday, the merchant banker’s report on valuation of the exchange is awaited. “Though nothing of this sort (the proposed stake sale) was discussed officially at the meeting, members indicated that the exchange was having a certain price issue in its stake sale. They are waiting for the merchant banker’s report,” the member told DNA Money.

The exchange is planning to come out with a rights issue since there are some regulatory restrictions to issuing bonus shares, as was planned earlier. “The plan to increase the annual membership fee to Rs 25,000 has been dropped by the exchange and the fee will remain at Rs 7,000,” the member said. The BSE has a share capital of Rs 68 lakh which will be raised to around Rs 1.5 crore through a rights issue. The capital will again be raised to Rs 3 crore to list the exchange, at which point the current members’ shareholding will fall to 49% or below.

The low-brokerage war, which has been eating into the BSE’s share of revenue, came up for discussion. Many brokers are understood to have raised their voices against those luring clients away by promising very low brokerage charges.

“Actually there is no regulation on how much brokerage should be charged. But the maximum one could charge is 2.5%. But all these low-brokerage offers - some are offering a flat Rs 9 for trades, others even lower - are gimmicks to attract clients. BSE’s share of revenues will, of course, be affected by this suicidal brokerage game. But even if they do not regulate it, brokers will have to raise their charges since they cannot survive in the market with such a pricing policy,” said the head of a domestic brokerage.

The exchange has approved a total dividend of Rs 11.32 per share, which includes both the special dividend of 1,000% and the regular dividend of 132%.