| Dalal Street: The lure of the mighty
Mumbai, June 15: Smaller stock exchanges, struggling to cope with the flight of brokers and investors, are now being deserted by blue-chip companies which pay them listing fee and keep them going.
Corporate top guns are queuing up with de-listing applications in droves at just the time when regional bourses failed to agree on forging a common trading platform.
“It had been coming for a long time now,” a senior official affiliated to a leading stock exchange said. Drifting away from exchanges in Calcutta, Delhi and Bangalore are Telco, Tisco, Reliance Industries, BSES and Asian Paints. The pretext is cost cutting, while the justification is the low trading volume clocked by their shares.
On Saturday, Tata Engineering said it would stay listed only on National and Bombay stock exchanges. Investors, therefore, will not find its share quotations elsewhere.
Companies argue retail investors will not face problems because the two premier exchanges, BSE and NSE, now have a pan-India presence that helps those in smaller towns to continue trading in their shares. Regional exchanges are, therefore, confronted with an exodus that will rob them of much-needed listing fees.
Last year, Sun Pharmaceuticals quit regional exchanges, but sprang a special offer to buy back shares from investors in regions away from NSE and BSE.
The scramble to delist comes even as small companies are desperate to hitch their wagons to NSE. PSL Holdings is a recent example, but the numbers are growing by the day. The move, they contend, will not mean a loss of liquidity since most brokers are linked to NSE.
Jindal Vijaynagar Steel has decided to delist from eight exchanges, including those in Bangalore, Mangalore, Calcutta and Delhi. The loss-making company with revenues of Rs 2,786 crore recently won a generous debt-restructuring package from financial institutions. “We pay listing fees to the tune of Rs 50 lakh annually to various stock exchanges. Delisting our shares from some bourses will save us Rs 35 lakh every year,” it said.
Prism Cement and IFCI are the other loss-making companies that intend to walk out of regional bourses. “With the extensive networking of the BSE and the extension of BSE terminals to other cities, investors have access to shares across the country. The bulk of the trading, in any case, takes place on the BSE,” it explains. There is another reason to this, says the analyst.
Behind the recent wave of de-listings, one of the ways to trim overheads with no downsides, is cost cutting. But, firms are also hassled by the complex web of procedures, as newer regulations stipulate a host of responsibilities to them. This could at best be avoided or reduced by being responsible to only a few exchanges.
For the likes of BSE and NSE, the listing fees account for a significant chunk of revenues — almost 9 per cent of BSE’s total revenues of Rs 150 crore in 2002-03.