Brokers find few takers for BSE shares

THE downtrend in the stockmarket has claimed an unexpected victim. Asia’s oldest stock exchange, which saw its benchmark index falling over 40% from its peak, is now facing a drop in its own share price. People familiar with the development say some members are ready to sell BSE shares at a discount to the price at which they received it when the exchange was demutualised in 2007.

“I would be happy if I could get Rs 4,800 (per share),” says Arun Sureka, an investor who is holding 877 shares in BSE. He also claims to know two other investors, who are holding a similar quantity of shares and looking for an exit.
Since a trading platform is not available for BSE shares, brokers do not have much option, but to call fellow brokers to enquire about any interested entities.

It is believed that the low business volume in the cash segment of BSE, coupled with the insignificant derivatives turnover has affected valuations. The lack of clarity over the proposed listing of the shares is also playing spoilsport. The immediate trigger for the share sale is attributed to the steep fall in the income of most brokers who are now looking at alternate sources of revenue.
Brokers, however, have been disappointed as the value of the shares has fallen and there are not many interested buyers in the market. The Bombay Stock Exchange completed the demutualisation process in May 2007 when it placed 51% of its equity with 21 investors, including Singapore Exchange and Deutsche Borse.

A BSE release at that time said the fresh issue and placement of shares in the offer for sale were priced at Rs 5,200 per share, pegging the market capitalisation of BSE at around $1 billion. At the time of demutualisation, BSE broker-members were given 10,000 shares of the exchange for every single card held.
The developments come close on the heels of SBI’s decision to sell a part of its holding in the National Stock Exchange (NSE). According to people close to the development, the bank is hoping to rake in at least Rs 315 crore from the stake sale, which implies a valuation of close to $4 billion for NSE.

A market observer, when questioned about the current value of BSE shares, said it was difficult for anyone to extract a price of more than Rs 4,500 per share due to the dismal performance of the exchange in terms of business volume and also due to the fact that the interest in equity market has dwindled. “The growth in business volume of BSE has not been as much as that of NSE and so the valuations have come down,” he said. A fall in benchmark indices in the period between May 2007 and the present can also act as a barometer for the BSE share price, he added.

Another factor that is believed to have impacted the share price is that of size. Brokers who are currently willing to sell their shares are doing so in small lots and so not many fellow brokers are interested. Also, foreign entities cannot be sounded out, as the maximum permissible limit of foreign holding in the exchange has already been reached. Many large-sized brokerages, interestingly, feel that the share would fetch a far higher price if done by renowned entities.

THE BEAR MINIMUM
Broker members were given shares in May 2007 when BSE was demutualised Brokers got 10,000 shares at Rs 5,200 per share for each BSE card Proposed listing of BSE would have provided trading platform for its shares With listing nowhere in sight, brokers & other shareholders looking for ways to sell these shares There are not many entities that are ready to offer over Rs 5,000 for these shares BSE losing share to its much newer counterpart NSE believed to have affected its valuations NSE’s valuation is said to be around $4 billion, while BSE’s pegged around $1 billion

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