The Telegraph
Since 1st March, 1999
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CSE may put premium on shares

Calcutta, July 12: The Calcutta Stock Exchange (CSE) may issue shares to its members at a premium, said a senior official of the bourse.

L.B. Jha — the exchange’s auditors — have pegged the value of its assets at Rs 75 crore. Based on this valuation, each of the exchange’s 1,150 members will receive shares worth Rs 6.5 lakh, if shares are issued at face value.

“The auditors have assessed the net asset value of the exchange and did not seek to evaluate intangibles like the business potentials of the exchange or the worth of trading rights.

“However, turning the exchange into a publicly-held company will separate ownership from trading rights. It will enable our members to sell their trading rights without having to part with their equity holding in the bourse,” said a CSE official.

The future of the exchange looks bleak in its present form, but if it merges, or in someway connects, with a larger bourse like the National or Bombay Stock Exchange — which looks more or less a certainty — its trading right will command a significant value, say observers.

“Question is whether the exchange should consider the value of trading right when issuing shares to its members. If we do factor it in, we’ll be issuing shares at a premium,” the CSE official said.

The exchange will discuss the proposal with its members, and it is quite obvious that they are going to strongly resist the levying of a premium.

And given the fact that broker-directors of the bourse outnumber public representatives and executives in board meetings these days, it might be difficult to push the proposal through.

A section of members have already said that the exchange’s assets — which include cash deposits of a little over Rs 40 crore, its building in Lyons Range and its 10-acre plot off Eastern Metropolitan Bypass — had been undervalued.

Meanwhile, the exchange has posted a cash-profit of around Rs 2.5 crore in the financial year that ended on March 31. However, if provisions for depreciation are considered, the exchange posted a loss.

There are two principal sources of revenues for the exchange: the fee it realises from brokers — which is a small percentage of the value of transactions — and the listing fee paid by the companies.

With transactions on the bourse declining to Rs 7 crore per day, the exchange’s income from turnover fees has dwindled to a pittance.

CSE meets its expenses out of the listing fee. But with companies making beeline to delist their shares from the exchange, income from listing fee, too, is expected to fall sharply in the current financial year.

There’s little doubt that the exchange’s expenditure would exceed its income in 2003-04, unless it is able to increase transactions at the bourse.

The exchange had embarked on a drive to cut costs during the tenure of erstwhile executive director P.K. Sarkar, who had even mooted a separation scheme for its 125 employees, but his proposal has been put on the backburner since he quit office.

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