Mumbai, Nov. 16: The Securities and Exchange Board of India (Sebi) has finally allowed the private placement of shares of stock exchanges, paving the way for London Stock Exchange or Nasdaq to pick up a stake in the Bombay Stock Exchange (BSE).
The world’s largest bourses have been eyeing a stake in BSE and preliminary talks have been held over the past few months.
In a notification issued today, Sebi has allowed offer for sale, placement of existing shares held by members and also private placement of fresh shares to increase the public shareholding of stock exchanges.
This also means that an Indian investor, for the first time, will be able to hold the share of a stock exchange in ones portfolio.
According to the demutualisation scheme, stock exchanges have to increase their public shareholding to at least 51 per cent.
Sebi had also submitted a report on the scheme in May, which had mentioned that it would allow strategic partners. However, the final guidelines have been awaited since then.
The Bombay Stock Exchange had announced its plans of a strategic sale of 26 per cent and had appointed Kotak Mahindra Capital Company as its financial adviser.
The remaining 25 per cent will be offered through an initial public offering or an offer for sale.
Although BSE chief executive officer and managing director Rajnikant Patel had admitted that various global and Asian stock markets have been wooing the exchange, no names were disclosed.
However, according to the market grapevine, the London Stock Exchange and Nasdaq appear to have emerged as strong contenders as possible investors.
“We do not comment on market speculation,” the LSE spokesperson told The Telegraph over phone from London.
“However, India is a key market for us and we believe that Indian companies can benefit significantly from being listed on the LSE. Also, we are exploring several business opportunities with various entities in the country, though the details cannot be divulged at this stage.”
Interestingly, certain limitations imposed by Sebi might now actually facilitate more institutions to have a piece of the cake.
According to the regulations, no entity, either directly or indirectly, shall be allowed to hold more than 5 per cent of the paid-up capital of the exchanges.
Also, no entity, either individually or together with persons acting in concert shall be allowed to acquire or hold more than 1 per cent of the paid-up capital of the exchanges without prior Sebi approval.
The BSE chief had earlier mentioned that they would also look at other investors, including financial institutions, both domestic and foreign.
While the deadline to complete the corporatisation process had been extended to May next year, the BSE is expected to make the strategic sale by December this year.
Sebi allows bourses to privately place shares held by members.
Stock exchanges can also private place fresh shares to increase public shareholding.
For the first time, a retail investor can hold shares of stock exchanges