BSE Share Price Rises as Listing Nod Revives Investor Interest

Latest share transactions in April were done at a 15% premium to the last one in end February

 Share prices of the unlisted BSE have strengthened in the past few weeks boosted by the Securities and Exchange Board of India's recent move to allow listing of bourses and hopes of a pick-up in the exchange's derivatives volumes. 

In at least two separate transactions in late April, BSE shares changed hands at . 210-215, said brokers familiar with such transactions. BSE shares are traded in off-market deals. The recent transaction is 15% higher than the last reported deal in end February, in which the shares were traded between non-institutional shareholders at . 180 a share. 

"Sebi's permission to list was the first thing that led to the bullish sentiment. Sentiment greatly improved with rising volumes in derivatives segment because if it really clicks with traders, then the entire financials of the exchange will improve. With both cash and derivative segments working together, the revenue stream will greatly increase," said KR Choksey, chairman, KR Choksey Securities, a member of the BSE. 

At the last transacted price, the bourse is valued at nearly . 2,200 crore. The price is still way below the price of . 375-380 that billionaire investor George Soros had paid for a 4% stake in August 2011. Pessimism about BSE's prospects because of the falling market share had resulted in its shares plunging to a low of around . 130. Brokers said the renewed buzz around possible listing of stock exchanges after Sebi's nod and the successful debut of Multi Commodity Exchange has lifted sentiment. 

"The talk of listing of stock exchanges to give exit to its investors has been doing the rounds. So, the price of shares immediately increased when Sebi's permission came in, and it was a good time to sell," said a member of the exchange, who sold a few hundred shares recently. Investors, holding BSE shares, are now pinning hopes on a further growth in the exchange's derivatives segment to lift the value of their holdings, brokers said. 

In April, the average daily turnover was . 18,500 crore, up almost 75% from . 10,400 crore in March. 

In May, the turnover in the exchange's derivatives segment has been around . 20,000 crore. The rise is attributed to a liquidity enhancement scheme offered by the exchange, which compensates brokers for generating volumes in the segment. Between September 2011, when the scheme was launched, and the end of the last financial year, the bourse paid . 60.49 crore towards such incentives, it said in its annual financial statement. 

"The exchange's revenues have not gone down in the previous financial year, but the profit reduced mainly because of the payouts to develop the derivatives markets," said Choksey. 

nihar.gokhale@timesgroup.com