BSE Ltd., Asia’s oldest stock exchange, plans to sell shares in an initial public offering in the next eight months as competition intensifies with a third Indian bourse planning to start operations.
The bourse, formerly known as the Bombay Stock Exchange and backed by Deutsche Boerse AG, will offer 25 percent of its shares in the sale, interim Chief Executive Officer Ashishkumar Chauhan said yesterday in Chennai. The exchange’s board has set up an IPO committee to complete the transaction, he said, while declining to give details on the specific timing and pricing.
National Stock Exchange of India Ltd., BSE’s main rival in India’s $1.1 trillion equities market, handles twice the amount of shares of its 136-year-old competitor and controls 90 percent of the nation’s $28 billion stock-derivatives market. Competition for the BSE, which started an incentive program to lure derivatives traders last year, is set to intensify when the MCX Stock Exchange Ltd. becomes the third bourse to trade local equities this year.
“There will be lot of interest from investors in a listed exchange as it is a new concept in India,” R.K. Gupta, managing director at Taurus Asset Management Co., which had about $673 million in assets at the end of June, said by phone from New Delhi today. “Introduction of new products and segments will help BSE have an early advantage over the new competitor MCX Stock Exchange.”
Jignesh Shah, vice chairman of the MCX bourse, said on July 11 the company will start trading currency options followed by equity and equity derivatives in the next two months.
Multi Commodity Exchange of India Ltd., which owns a 5 percent stake in MCX Stock Exchange, in March became the first Indian bourse to sell shares. The sale was oversubscribed 54 times as investors bet the exchange will gain from expanding trade in bullion, metals, crude oil and agriculture contracts.
MCX shares fell 0.1 percent to 1,159.4 rupees at 12:24 p.m. today. The stock has risen 12 percent from its the offer price of 1,032 rupees.
BSE’s proposed IPO comes amid record purchases of Indian equities by offshore funds this year. Foreigners have pumped in a net $11.3 billion into local equities since Jan. 1, a record for the period and the highest flows this year among 10 Asian markets tracked by Bloomberg. The benchmark BSE India Sensitive Index has advanced 14 percent year-to-date, after plunging 25 percent in 2011, its second-worst annual decline.
Chauhan took charge of the BSE when former CEO Madhu Kannan left in May.
The BSE last year started a 1 billion-rupee ($18 million) program to lure brokers to trade derivatives and win back share from the National Stock Exchange. The incentive plan has helped increase the value of derivatives contracts more than 3,000 times since it started in September, according to the bourse.
The BSE has “ventured into new products and segments such as derivatives recently and that may have made them confident about tapping the market at a time when many investors expect a rebound in stocks later this year,” D.K. Aggarwal, chairman of SMC Investments & Advisors Ltd., which has about $100 million in assets, said from New Delhi. “A listing could help them enhance their brand and profile.”
The MCX Stock Exchange controlled 44 percent of the local currency-futures market, compared with the NSE’s 39 percent in the year ended March 31, according to an MCX factsheet. Multi Commodity Exchange was the world’s third-largest commodity-futures bourse by volume last year, its website said.