Makeover moment

Calcutta, July 11: The Calcutta Stock Exchange (CSE) has valued itself at Rs 75 crore as the bourse prepares to convert into a widely-held company.

To fulfil the requirements of demutualisation, which will result in separation of trading rights from ownership of the bourse, CSE had asked its auditors L. B. Jha to evaluate its assets. These include bank deposits of a little over Rs 40 crore, its heritage headquarters in Lyons Range and a 10-acre plot off Eastern Metropolitan Bypass.

The exchange — which traces its origins to trading in bonds of the East India Company in the 1830s — was formally organised as an association of brokers in 1908. At present, the members of the exchange — or the brokers — are its shareholders.

Demutualisation will result in the exchange converting itself into a company. CSE will issue shares to its members, and list these shares on itself and other bourses.

“Given that there are around 1,150 members, each member would be entitled to shares worth Rs 6.5 lakh,” said a senior CSE official whose calculations were based on the ’provisional valuation’ of the exchange’s auditors.

In its demutualised avatar, the exchange will pay dividend to its shareholders. At present, it does not and enjoys tax exemptions for supposedly utilising its profits (if any) on social causes like investor education.

Demutualisation would enable a broker to sell off his ownership of the exchange without losing his right to trade on it. In fact, the securities market regulator wants brokers to divest their equity holding in bourses within three years.

The Kania Committee, which laid down the rules for demutualisation, said brokers’ shareholding in a stock exchange would have to be pared to at least 49 per cent over three years. This could be done either by issuing additional shares to such entities that would not trade on the exchange, or stripping brokers of their voting rights.

CSE authorities have not discussed the valuation with the brokers as yet, though they apprised brokers’ representatives today of the demutualisation roadmap.