BSE Limited IPO: Exchange Trading on Exchange

BSE Limited

BSE Limited, is Asia’s oldest stock exchange and among the world’s 10 largest exchanges in terms of market value. The exchange was established in 1875 and later incorporated as a company  in 2006 when over 500 broking firms ,banks and individuals were issued shares worth 7 million in INR at Rs 1 per share . BSE Limited today has more than 5,000 companies listed on it and over 2900 firms/institutions trading on it. The total market capitalization (M-cap) of BSE-listed firms for the fiscal year 2016-17 in September had touched USD 1,667.88 billion.

On 14th March, 2016 SEBI (Securities and Exchange Board of India) permitted BSE Limited (the stock exchange) to list its own equity shares. Soon after on 24th June, 2016 current shareholders of BSE Limited also approved the IPO.

BSE Limited is proposing an ‘Offer for Sale’ allowing exiting over 8000 shareholders to sell their respective equity shares giving them an excellent opportunity to exit the investment.

All shareholders barring Venture Capital Funds (VC’s), Alternative Investment Funds (AIFs), Foreign Venture Capital Investor (FVCI’s)  & Employees will be restricted (locked-in) from transferring their equity shares for a period of 1 year  post the IPO. However this restriction does not apply to shareholder who choose to exit their investments by participating in the ‘Offer for Sale’ through this IPO.

BSE Limited may or may not undertake a fresh issue of equity shares as a part of this IPO thus making it evident that the focus of this issue is to provide an exit opportunity to current investors and not raising capital for infusion into the company. The price per share has been set at Rs. 400/- and a cap on number of shares available for trading has been put at 30% post issue.

Does BSE India have the potential to pass on profits to its new retail and corporate investors who participate in this IPO or is it just a drop in the bucket from a  stock that has already maxed out ? Nexensus Explores.

Historic Investments & Performance of BSE Limited

Major investment was raised by BSE Limited from Singapore Stock Exchange and Deutsche Bourse of Rs  2040 Million each respectively between 2008-2009 who paid Rs. 5200 premium per share. Later in 2015 investment was raised by BSE Limited from top Indian Banks who paid a premium of Rs 383.20 per share. Between 2009 and 2015 the premium per share dropped significantly from Rs 5200 to Rs 383.  The investment timeline since 2005 shows the trend and new investors that participated in the allotment process.

BSE Investment & Share Allotment Timeline

BSE Limited Historic TimelineThe shares of BSE Limited is likely to get listed at Rs 400 and at this price other than individuals and stock brokers who were issued shares at Rs. 1, the main investors like Singapore Stock Exchange, Deutsche Bourse and major banks will barely recover their investments. It would thus be safe to conclude that BSE listing is a great exit opportunity for over 8000 brokers and individuals who are likely to participate in this ‘Offer For Sale’. On the other hand we expect companies like Deutsche Bourse and Singapore Stock exchange to wait it out.

Interestingly the Union Cabinet in July, 2016 approved raising of the shareholding limit of any foreign entity to 15 per cent from the existing five per cent in Indian stock exchanges. This new development may lead companies like Deutsche Boerse , Singapore Stock Exchange and other current foreign investors in BSE Limited to increase their shareholding in the company through an allotment process before the IPO. Alternatively they may choose to buy shares when BSE gets listed on the stock exchange.

BSE Performance

The key question remains if new retail and corporate investors are indeed likely to gain much from this investments. The historical  financial trends of BSE Limited show that its performance peaked around 2010 with an annual Revenue of INR 4852.1 Million, Profit of 2129.43 and a high 44% profitability margin. The overall low EPS (Earning Per Share) of Rs 18.3 could be attributed to the 54.5 Million Bonus shares that were issued in 2009.

BSE hit rock bottom in 2013 when its profit dropped to 295.5 Million due to a drop in revenue which was considerable at INR 3389.1 million lowering profitability margin to only 8.7% . This indicates that the fixed cost for the exchange are very high.

With the economy bouncing back, increased capital market activity has helped BSE recover in the last 2 years. In 2015 BSE clocked revenue of INR 4391.8 Million, Profit After Tax of INR 1014.1 Million and improved profitability margin to 23.1%.

Profit & Revenue Trend
Profit & Revenue Trend
Earnings Per Share
Earnings Per Share

Entity Structure of BSE Limited

BSE Limited has 13 subsidiaries of which 6 companies are wholly owned subsidiaries. BSE Limited has diversified significantly through its subsidiaries into areas of FinTech and Start Up Investments and Investment Management.

BSE Limited Entity Structure

From this list 2 lesser known companies are especially noteworthy. These include Zone StartUp India ( Bil-Ryerson Technology Startup Incubator) and Market Place Technologies Private Limited.

Zone Start Up IndiaBil-Ryerson Technology Startup Incubator aka Zone Startup India is a fund and incubator which is operating as a 51% subsidiary of BSE India Limited. The company is investing in early stage Start-Ups.Zone Start-Up India has incubated and funded over 80 companies including Auto Tranz, Algo Engines,Baby Chakra, Citrus , Shield Square and CareerTopper to name a few.

Market Place Technology Private LimitedMarket Place Technologies Private Limited on the other hand is a IT Solutions company with a focus on Fin Tech. Some of the many broking solutions  it has developed include Payment Gateway Solution “e-Pay”, Bulk Mailer Solution “e-signer”, Clearing & Settlement application “e-Class”, Client Record Maintenance Application “Citrus” and Real time trading solution “FastTrade”.

Top Shareholders of BSE Limited

BSE Limited has over 8000 shareholders. With 75% corporate bodies and firms account for a major chunk of shareholding in BSE Limited. The breakup of shares owned by various stakeholders show that 35% of these investors are Broking Firms, 23% are Foreign Institutional Investors , 22.3% are Individuals & HUF’s,  8.4% are Indian Banks,  4.6%  Insurance companies and remaining 6.7% by Trusts and LLP.

Foreign Institutional Shareholders of BSE Limited

Shareholder NameCountryNumber of SharesPercentage Shareholding
Singapore Exchange Limited Singapore50988864.91%
Deutsche Boerse Ag Germany50988864.91%
Gkff Ventures USA49138634.73%
Quantum (M) Limited Mauritius40155443.87%
Atticus Mauritius Ltd Mauritius40155443.87%
Urbana Mauritius Inc Mauritius7910000.76%
Standard Chartered Bank (Mauritius) LimitedMauritius1168830.1%

Top Indian Banks shareholding in BSE Limited

Bank NameNo. of Shares HeldPercentage Shareholding
State Bank Of India 50194434.83%
Bank Of India 10616711.02%
Central Bank Of India 10616711.02%
The Federal Bank Ltd2337660.22%
Indusind Bank Limited1080000.1%
Union Bank Of India779220.07%
Bank Of Baroda779220.07%
Andhra Bank779220.07%
Allahabad Bank779220.07%
United Bank Of India779220.07%
Oriental Bank Of Commerce779220.07%
Punjab Nattional Bank779220.07%
Canara Bank Mumbai779220.07%
Indian Overdeas Bank779220.07%
Hdfc Bank Ltd519480.05%
Icici Bank Ltd519480.05%

Largest Funds, Firms and Trusts shareholdings in BSE Limited

Shareholder NameNo. of SharesPercentage Shareholding
Life Insurance Corporation Of India 50194434.83%
Acacia Banyan Partners Limited 40155443.86%
Caldwell India Holdings Inc 40155443.86%
Bajaj Holdings And Investment Ltd 30067962.89%
Mspl Limited 11987561.15%
Nadathur Estates Private Limited 11310001.09%
Isheta Realty Private Limited 10616711.02%
Bennett, Coleman And Company Limited 10616711.02%
Vyomit Shares Stock & Inv.Pvt. Ltd. 10616711.02%
Blue Star Investments And Financial Service Private Limited10032120.97%
Aditya Birla Private Equity Trust 5308420.51%
Aurostar Jewellery India Private Limited 5207880.50%
Edelweiss Finance And Investments Ltd 2980000.29%
Kotak Securities Limited 2600000.25%
Shapoorji Pallonji And Company Private Limited 2427500.23%
Span Caplease Pvt. Ltd 1900000.18%
A P T Portfolio Pvt Ltd 1800000.17%
Keynote Capitals Ltd 1710540.16%
Prabhudas Lilladher Pvt. Ltd. 1528020.15%
Anvil Share & Stock Broking Pvt. Ltd. 1414010.14%
Joindre Capital Services Ltd. 1414010.14%
Magnum Equity Broking Limited1414010.14%
Sharekhan 1414010.14%
A R Venture Funds Management Ltd 1413880.14%
Hero Motocorp Ltd 1404000.14%

Top 5 Individual shareholders in BSE Limited

NameNo. Of SharesPercentage Shareholding (%)
S Gopalakrishnan 10616711.02%
Dinesh Bharatkumar Sheth10616711.02%
Anil Ramniklal Shah 2050000.19%
Mangala Dileep Nath 1950000.18%
Vineet Nayyar 1776710.17%

ROI CalculationMore than 60% of the shareholders of BSE Limited are broking firms and individuals who will benefit from the listing significantly. Many of these shareholders contributed Rs 1 per share when BSE Limited was incorporated in 2006 and 10000 shares were issued to each.

Later in 2009 BSE Limited issued large number of bonus shares in the range 10000 t0 4,600,000 to almost 130 shareholders.

Unlike the foreign investors and banks who payed a significant premium per share on allotment, these shareholders will book extraordinary returns between 400% to as high as 5000% on their initial investment in this IPO

Top Firms/Individuals to be awarded Bonus Shares by BSE Limited

NameAddressNo. of Bonus Shares Allotted

Dubai Financial Group Llc
Emirates Towers-Level-38,( Off Towers) P O Box 73311,United Arab Emirates,Dubai
Life Insurance Corporation Of India
Investment Department,6Th Floor, West Wing, Central Office,Yogakshema, Jeevan Bima Marg,Mumbai
State Bank Of India, (Equity)
State Bank Of India,Securities Services Br. Equity Sec,Horniman Circle, B. S. Marg, Fort,Mumbai
Atticus Mauritius Ltd
Db House,Hazarimal Somani Marg,Fort, Post Box - 1142,Mumbai
Caldwell India Holdings Inc
Db House,Hazarimal Somani Marg,Fort, Post Box - 1142,Mumbai
Acacia Banyan Partners Limited
Citibank N.A.,Custody Services,77 Ramnord House,Dr A B Road, Worli,Mumbai
Bajaj Holdings And Investment Ltd
Bajaj Auto Ltd Complex,Mumbai Pune Road,Akurdi,Pune
Mspl Limited
Baldota Bhavan,117 Maharshi Karve Road,Mumbai
Nadathur Holdings & Investments Pvt Ltd
Trident Towers 278/23 3Rd Floor,10Th Main T. Mariappa Road,Jayanagar 2Nd Block,Bangalore
Bennett, Coleman And Company Limited
Times Of India Bldg,Dr D.N.Road,Mumbai
Anuj Vasantlal Mehta
Cliff,14Th Floor,25 Bal Gangadhar Kher Marg,Malabar Hill,Mumbai
Bank Of India
Treasury Branch,Head Office,Star House,7Th Floor,C-5 'G' Block,Bandra Kurla Complex,Bandra East,Mumbai
Tgs Investment And Trade Private Limited
212 Tv Industrial Estate,2Nd Floor 52 S K Ahire Marg,Worli,Mumbai
Suryaprakash Singapur
Villa 166, Ph 1,Adarsh Palm Medows, Whitefield,Road, Ramagandanahalli,Bangalore Karnataka
First Global Stockbroking Pvt. Ltd
(Bse) No. 2, Crescent Chambers,4Th Floor,Tamarind Lane Fort,Mumbai.
Bang Equity Broking Pvt.Ltd.
37,Khatau Building,2Nd Floor,A.D.Modi Marg,Fort,Mumbai
Arjav Diamonds India Pvt Ltd
411 , Prasad Chambers ,Opera House,Mumbai,Mumbai Maharashtra
Anagram Stockbroking Limited
Anagram House, Darshan Society Road,Nr. Commerce Six Road Circle,Navrangpura,Ahmedabad
Kotak Securities Limited
Gr Flr Nirlon House,Dr Annie Besant Rd,Nr Passport Office Worli,Mumbai
Sumatilal Dhudalal Shah
Treasury Branch,Head Office,Star House,7Th Floor,C-5 'G' Block,Bandra Kurla Complex,Bandra East,Mumbai
Mangala Dileep Nath Dileep Nath
Kotak Securities Limited,Nirlon House,2Nd Floor Worli,Mumbai
Rajkumar Damani (Huf)
5, Surya Mahal,Burjorji Bharucha Marg,Fort Mumbai Maharashtra
Kamlesh D Shah
509 Prasad Chambers,Opra House,Mumbai,Mumbai
Kamlesh Dhudalal ShahState Bank Of India,Securities Services Br. Equity Sec,Horniman Circle, B. S. Marg, Fort,Mumbai
Anvil Share & Stock Broking Pvt. Ltd
19 Bank Street Cross Lane,Near 'Voltas' , Fort,Mumbai


BSE Limited faces increased competition from NSE ( National Stock Exchange), furthermore newer companies like Snapdeal, Flipkart, Paytm and Ola are choosing to raise capital through  unconventional channels including Private Placements, FDI, Venture Funds and Start Up Listing. Financing options through Debt, NBFC have also increased.

Listing a company and maintaining all statutory obligations required of a Listed company is a deterrent and often viewed as a financial burden. While the government is working towards easing the norms the equity market has overall taken a hit in the last few years.

Therefore, it may be very difficult for BSE Limited to bounce back to the performance heights it had touched in 2010 and expecting the profitability margin to return to 40-50% sounds incredibly implausible. If BSE Limited manages to partner with the global players like Deutsche Bourse and Singapore Exchange Limited for technological advantages and incorporating start up exchanges to cater to the new ways of financing it may be able to pass the benefit to new investors.

For many who hope getting 400% return on investment over the next 10 years it is safe to suggest, that ship sailed long back in 2009.

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