Pie pick

Mumbai, March 7: Singapore Exchange (SGX) is picking up a 5 per cent stake in Bombay Stock Exchange Ltd (BSE) for Rs 189 crore ($42.7 million).

This investment comes nearly a month after Deutsche Borse group, the European exchange operator, picked up a 5 per cent stake in BSE for the same amount.

SGX will pay Rs 5,200 per share. Like in the case of Deutsche Borse group, both BSE and SGX are not looking at the stake sale as a mere financial investment.

The plan is to strengthen their relationship across a broad spectrum of business areas. Kotak Investment Banking advised BSE and UBS Investment Bank was the consultant to SGX.

The two exchanges have agreed to explore collaboration in various areas relating to listings and product development, leveraging on SGX’s leading position as a regional hub for derivatives and international listings and BSE's strong presence in India.

Rajnikant Patel, BSE managing director & CEO, said, “This strategic tie-up with SGX will offer the Asian advantage to BSE. SGX is Asia-Pacific’s first demutualised and integrated securities and derivatives exchange. They bring a huge amount of learning to this partnership.”

“This partnership will not only be mutually beneficial to both the exchanges, but also complement our association with Deutsche Börse. This alliance will position BSE to be an important player in the increasingly globalised market place,” he added.

While announcing the investment by Deutsche Borse, Patel had told newspersons last month that the bourse was open to tie-ups with other exchanges as well. Both Deutsche Borse and SGX will, however, not have a representation on the BSE board which will continue to have 12 members.

According to Hsieh Fu Hua, chief of SGX, “We look forward to supporting BSE's goal to strengthen their international position. Together, we aim to identify new business development opportunities and to foster an enduring partnership that is beneficial to both exchanges and our customers. Our investment in BSE is consistent with our strategy of building an Asian Gateway for securities and derivatives products.”

The picking up of stakes by these overseas stock exchanges forms part of the demutualisation process at BSE, according to which stakeholding of broker shareholders who now hold 100 per cent will be brought down to 49 per cent.

BSE has time till May to reduce its stake. Though there are speculations that BSE will also look at an initial public offering (IPO) to sell the remaining 41 per cent (after stake sales to SGX and Deutsche Borse), the exchange has hinted that it is not keen to tap the capital markets.