BSE's crucial test

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M C Vaijayanthi

Mumbai, March 8

 

It is the last day for BSE members to tender their shares into an escrow account at a base price of Rs 5200 per share as per the demutualisation schedule fixed by the regulator. But doubt has arisen if members will stick to the deadline and offer the shares by the end of the day.

 

"I do not think they will get the required number of shares", said an active trading member on the exchange on conditions of anonymity.   But, Mohan Vijan, Chairman, BSE Brokers Forum, the agency that is coordinating the offer for sale, says the response is very good. "Indians have a tendency to wait till the last day, so we would have to wait till the offer closes", says Vijan.

 

The total numbers of shares to be put on offer for sale are 46,57,500 shares and to get 51 per cent of ownership offloaded, BSE needs 39,00,500 shares from its members. BSE needs to offload 51 per cent of shares owned by its members to other investors by May 2007. Members say BSE would have no other option but to seek extension of time from SEBI to complete the offer.

 

"We are deliberately planning to offload up to 60 per cent to show that BSE is not any more a broker owned exchange", said Vijan. But sources from broking community say that only 160 members out of around 735 members had offered their shares by Thursday morning.

 

Not all members are sure about the number of shares they want to offer and the price they want for the share.   "I have offered all my 10,000 shares. But my uncle who is also a member of the exchange has not yet decided on whether or not to offer his shares", says a member who is not willing to be identified. "I am willing to sell out at current price as I am not sure of what future holds, but others are looking for a higher price of Rs 6000 to Rs 7000 a share", he said.

 

Brokers expectations of a higher price and fears about dilution of equity after BSE management decided to issue 10 per cent fresh equity has created confusion about the successful completion of tendering of shares. Shortage of time, the management said forced BSE to rope in Deutsche Bourse and Singapore Exchange Ltd by offering fresh equity of five per cent each.

 

Though this route has brought them two global strategic partners, BSE members are now worried about the placement process for their shares. "If we offer shares after listing there would not be any capital gains liability. But now we have to pay 20 per cent tax. So we would prefer to take a middle path and offer part of the shares now and waiting for the listing to offload further stake", said a member.

 

P.S. Written for the Hindustan Times. It is an example of how not to judge an issue before it is officialy closed. The demutualisation did go through and now the exchange is ready for IPO.

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