Bull run on NSE as cos vie for a slice

Aug 11, 2008
Sangita Mehta & Ashish Rukhaiyar
MUMBAI

INDIA’S leading exchange, the National Stock Exchange (NSE), continues to attract strong investor interest compared to its embattled rival, the Bombay Stock Exchange (BSE), with two corporates — Hero Honda and Srei Infrastructure Finance — acquiring stakes from IFCI and Stock Holding Corporation of India (SHCIL).

At a time when some members of the Bombay Stock Exchange have expressed their willingness to sell their shares at a price lower than what it was placed with institutional investors, the two corporates bought NSE shares at Rs 3,500 apiece. This is the same rate at which the shares of NSE were sold by the Life Insurance Corporation of India in April this year. Stock Holding Corporation, a depository, will earn Rs 20.02 crore by selling 57,200 shares while financial institution IFCI will net Rs 42 crore for the 1.20 crore shares which it put on the block.

This puts NSE’s valuation at close to $4 billion while the valuation of the country’s oldest exchange, Bombay Stock Exchange, has declined to a little less than $1 billion. Stock market players say there are few takers for BSE shares at Rs 4,500 or so.

BSE losing market share to NSE
AT THE height of the market boom, Deutsche Borse had paid Rs 5,200 per share when it acquired a stake of 5% in the BSE. As for the NSE, its share price has risen from Rs 2,100 to Rs 3,500. The decline in the value of BSE shares is largely on account of the fact that the BSE has been steadily losing market share to the NSE. The NSE accounts for almost the entire market share in the derivative space while in the cash market, the NSE has a 60% market share.

Confirming the development, chief executive and managing director of IFCI, Atul Kumar Rai said the move was aimed at bringing down IFCI’s shareholding to 5% as mandated by capital market regulator Sebi.

Senior officials from SHCIL said they were looking at selling their stake, but declined to provide more details. SHCIL has a 7.11% stake in the NSE. Officials in financial institutions said that following the sale of Rs 52,000 shares, SHCIL will continue to hold much higher shares than 5% in the NSE.

The sale of shares is close to the September 2008 deadline set by Sebi on single shareholder limit. Sebi has said no single shareholder can hold more than 5% of the equity in an exchange. At the end of March 31, 2008, LIC, the SBI, Infrastructure Development Finance Corporation and SHCIL have more than 5% stake in the exchange.

In January 2007, IFCI, ICICI Bank, GIC, IL&FS and PNB divested their holdings aggregating 20% in the NSE to the NYSE Group, Goldman Sachs, General Atlantic and Softbank Asian Infrastructure Fund.