Listing without making an initial public offering? That is an option being explored by the 132-year old Bombay Stock Exchange (BSE), which recently offered stake to institutional and individual investors under its demutualisation process.

Having completed the process, the BSE is now looking to list, on the NSE and BSE, so that the shares can be traded. While BSE’s chief executive officer and managing director Rajnikant Patel has been saying that the exchange has no plans to list soon, broker members, who own stake in the bourse, are demanding that it should look to list at the earliest.

They feel the shares will get a better valuation in the secondary market. The BSE may be treated as a special case and exempted from going to the public for listing purpose, according to brokers.

The possibility of listing without an IPO also emerges due to the fact that the BSE is flush with cash and can meet its financial requirements without raising additional funds through an IPO.

Over the past several years, the BSE’s net worth has improved significantly and stood at Rs 927 crore as on March 31, 2006. The sale of 10% stake to two global stock exchanges - Deutsche Boerse and SGX - have added about Rs 450 crore to the BSE’s reserves.

Merchant bankers say, technically, a company can list shares without IPO provided part of its equity is held by investors other than promoters. Citing an example, a senior official with a leading Mumbai-based merchant banker said, “In early 90s after the government liberalised the economy, many PSUs divested a small part of their equity in favour of institutional investors and got listed on stock exchanges.

With the divestment of broker members’ stake, it is possible for the BSE to list shares, as 51% of its equity is now held by the public, the official said. Under the demutualisation scheme, the exchange has offered stakes to different investors at Rs 5,200 per share.

Apart from the two foreign stock exchanges, the list of shareholders also includes leading financial institutions like LIC and UTI, Bank of India, Bajaj Auto, a corporate shareholder, and a few foreign private equity investors. Post-demutualisation, the BSE has an equity capital of about Rs 85 lakh, representing as many shares of Re 1 each.

A company should have capital of at least Rs 10 crore to become eligible for listing on the NSE and Rs 3 crore for a BSE listing. In case the BSE decides not to make a public issue, it would have to raise equity by issuing additional shares in the form of rights or bonus, say brokers.  
 
Source: The Economic Times