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
The 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.
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%.
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.
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.
Bil-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 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 Name||Country||Number of Shares||Percentage Shareholding|
|Singapore Exchange Limited||Singapore||5098886||4.91%|
|Deutsche Boerse Ag||Germany||5098886||4.91%|
|Quantum (M) Limited||Mauritius||4015544||3.87%
|Atticus Mauritius Ltd||Mauritius||4015544||3.87%|
|Urbana Mauritius Inc||Mauritius||791000||0.76%|
|Standard Chartered Bank (Mauritius) Limited||Mauritius||116883||0.1%|
Top Indian Banks shareholding in BSE Limited
|Bank Name||No. of Shares Held||Percentage Shareholding|
|State Bank Of India||5019443||4.83%|
|Bank Of India||1061671||1.02%|
|Central Bank Of India||1061671||1.02%|
|The Federal Bank Ltd||233766||0.22%|
|Indusind Bank Limited||108000||0.1%|
|Union Bank Of India||77922||0.07%|
|Bank Of Baroda||77922||0.07%|
|United Bank Of India||77922||0.07%|
|Oriental Bank Of Commerce||77922||0.07%|
|Punjab Nattional Bank||77922||0.07%|
|Canara Bank Mumbai||77922||0.07%|
|Indian Overdeas Bank||77922||0.07%|
|Hdfc Bank Ltd||51948||0.05%|
|Icici Bank Ltd||51948||0.05%|
Largest Funds, Firms and Trusts shareholdings in BSE Limited
|Shareholder Name||No. of Shares||Percentage Shareholding|
|Life Insurance Corporation Of India||5019443||4.83%|
|Acacia Banyan Partners Limited||4015544||3.86%|
|Caldwell India Holdings Inc||4015544||3.86%|
|Bajaj Holdings And Investment Ltd||3006796||2.89%|
|Nadathur Estates Private Limited||1131000||1.09%|
|Isheta Realty Private Limited||1061671||1.02%|
|Bennett, Coleman And Company Limited||1061671||1.02%|
|Vyomit Shares Stock & Inv.Pvt. Ltd.||1061671||1.02%|
|Blue Star Investments And Financial Service Private Limited||1003212||0.97%|
|Aditya Birla Private Equity Trust||530842||0.51%|
|Aurostar Jewellery India Private Limited||520788||0.50%|
|Edelweiss Finance And Investments Ltd||298000||0.29%|
|Kotak Securities Limited||260000||0.25%|
|Shapoorji Pallonji And Company Private Limited||242750||0.23%|
|Span Caplease Pvt. Ltd||190000||0.18%|
|A P T Portfolio Pvt Ltd||180000||0.17%|
|Keynote Capitals Ltd||171054||0.16%|
|Prabhudas Lilladher Pvt. Ltd.||152802||0.15%|
|Anvil Share & Stock Broking Pvt. Ltd.||141401||0.14%|
|Joindre Capital Services Ltd.||141401||0.14%|
|Magnum Equity Broking Limited||141401||0.14%|
|A R Venture Funds Management Ltd||141388||0.14%|
|Hero Motocorp Ltd||140400||0.14%|
Top 5 Individual shareholders in BSE Limited
|Name||No. Of Shares||Percentage Shareholding (%)|
|Dinesh Bharatkumar Sheth||1061671||1.02%|
|Anil Ramniklal Shah||205000||0.19%|
|Mangala Dileep Nath||195000||0.18%|
More 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
|Name||Address||No. of Bonus Shares Allotted|
Dubai Financial Group Llc
|Emirates Towers-Level-38,( Off Towers) P O Box 73311,United Arab Emirates,Dubai||3706656
|Life Insurance Corporation Of India||Investment Department,6Th Floor, West Wing, Central Office,Yogakshema, Jeevan Bima Marg,Mumbai||4633332
|State Bank Of India, (Equity)||State Bank Of India,Securities Services Br. Equity Sec,Horniman Circle, B. S. Marg, Fort,Mumbai||4633332
|Atticus Mauritius Ltd||Db House,Hazarimal Somani Marg,Fort, Post Box - 1142,Mumbai||3706656
|Caldwell India Holdings Inc||Db House,Hazarimal Somani Marg,Fort, Post Box - 1142,Mumbai||3706656
|Acacia Banyan Partners Limited||Citibank N.A.,Custody Services,77 Ramnord House,Dr A B Road, Worli,Mumbai||3706656
|Bajaj Holdings And Investment Ltd||Bajaj Auto Ltd Complex,Mumbai Pune Road,Akurdi,Pune||2775504
|Mspl Limited||Baldota Bhavan,117 Maharshi Karve Road,Mumbai||1106544
|Nadathur Holdings & Investments Pvt Ltd||Trident Towers 278/23 3Rd Floor,10Th Main T. Mariappa Road,Jayanagar 2Nd Block,Bangalore||1044000
|Bennett, Coleman And Company Limited||Times Of India Bldg,Dr D.N.Road,Mumbai||980004
|Anuj Vasantlal Mehta||Cliff,14Th Floor,25 Bal Gangadhar Kher Marg,Malabar Hill,Mumbai||980004
|Bank Of India||Treasury Branch,Head Office,Star House,7Th Floor,C-5 'G' Block,Bandra Kurla Complex,Bandra East,Mumbai||980004
|Tgs Investment And Trade Private Limited||212 Tv Industrial Estate,2Nd Floor 52 S K Ahire Marg,Worli,Mumbai||490008
|Suryaprakash Singapur||Villa 166, Ph 1,Adarsh Palm Medows, Whitefield,Road, Ramagandanahalli,Bangalore Karnataka||372000
|First Global Stockbroking Pvt. Ltd||(Bse) No. 2, Crescent Chambers,4Th Floor,Tamarind Lane Fort,Mumbai.||360000
|Bang Equity Broking Pvt.Ltd.||37,Khatau Building,2Nd Floor,A.D.Modi Marg,Fort,Mumbai||360000
|Arjav Diamonds India Pvt Ltd||411 , Prasad Chambers ,Opera House,Mumbai,Mumbai Maharashtra||252000
|Anagram Stockbroking Limited||Anagram House, Darshan Society Road,Nr. Commerce Six Road Circle,Navrangpura,Ahmedabad||240000
|Kotak Securities Limited||Gr Flr Nirlon House,Dr Annie Besant Rd,Nr Passport Office Worli,Mumbai||240000
|Sumatilal Dhudalal Shah||Treasury Branch,Head Office,Star House,7Th Floor,C-5 'G' Block,Bandra Kurla Complex,Bandra East,Mumbai||205200
|Mangala Dileep Nath Dileep Nath||Kotak Securities Limited,Nirlon House,2Nd Floor Worli,Mumbai||180000
|Rajkumar Damani (Huf)||5, Surya Mahal,Burjorji Bharucha Marg,Fort Mumbai Maharashtra||168000
|Kamlesh D Shah||509 Prasad Chambers,Opra House,Mumbai,Mumbai||132000
|Kamlesh Dhudalal Shah||State Bank Of India,Securities Services Br. Equity Sec,Horniman Circle, B. S. Marg, Fort,Mumbai||144000
|Anvil Share & Stock Broking Pvt. Ltd||19 Bank Street Cross Lane,Near 'Voltas' , Fort,Mumbai||130524
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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