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Diwali date for BSE makeover

Mumbai, Aug. 24: You could own a chip of the Bombay Stock Exchange (BSE) soon if the country’s oldest bourse can turn into a company as quickly as it hopes to.

The exchange intends to rename itself BSE Ltd and issue 10,000 shares of Re 1 to its trading members under a plan — BSE corporatisation & demutualisation scheme — submitted recently to the finance ministry and the Securities and Exchange Board of India (Sebi).

If the approvals come through, the 128-year-old bourse could don corporate robes as early as Diwali, a source familiar with the developments told The Telegraph.

The board of BSE Ltd will comprise 17 persons, including a non-executive chairman, who will not have anything to do with brokerages or share trading houses. It will also have a CEO, to be appointed by the board, and a whole-time director. Five broker representatives, members of the exchange, and as many shareholder representatives who are not brokers or sub-brokers, will be elected by shareholders.

Five investor representatives will be picked from a Sebi-formed panel of academics, professionals, industry experts, public figures or nominees of investor associations, and be appointed by the BSE Ltd board.

To allow listing and trading of its shares, the new scheme states: “A shareholder of BSE Ltd shall not be deemed to be a trading and clearing member of BSE Ltd, merely by reason of holding any equity shares of the firm.”

This means sale of shares by a BSE broker will not result in the loss of licence to trade on the exchange. On the contrary, a bonanza awaits them: on a conservative estimate, the 10,000 shares could fetch at least Rs 55 lakh. A recent BSE card auction fetched Rs 65 lakh.

No “person or persons acting in concert” can hold more than 5 per cent of BSE Ltd’s equity, a provision aimed at protecting the interests of the exchange and its assets.

The plan submitted to Sebi says: “Fifty persons referred to as first shareholders shall take 10,000 fully paid-up equity shares of BSE Ltd for cash at par in the dematerialised form. Subsequently, the remaining members get their quota of shares amounting to 10,000 shares.”

The new corporate entity will transfer to its books the ownership of prime properties like The Stock Exchange, Mumbai, the Rotunda Building and the Cama Building — a veritable real estate windfall for the new firm. Six months into the life of BSE Ltd, the excess reserves and surplus will be transferred as interest-free “membership security deposit”. BSE will have a lien on it.

However, if one ceases to be member, the exchange will refund the deposit. This could be another bonanza given BSE’s reserves and surplus run into Rs 325-350 crore. The firm will be free to dilute up to 50 per cent of its equity, and usher in more members over a period of time.

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