Deutsche Boerse Said Unlikely to Increase BSE Stake Before IPOby and
German exchange can raise holding to 15% after rule change
India’s government allows foreign firms to take bigger role
Deutsche Boerse AG is unlikely to increase its stake in BSE Ltd. before the Indian stock exchange holds its initial public offering next year, according to two people familiar with the matter.
The German bourse’s stake in BSE was thrust into focus last month when India’s cabinet changed the law to allow foreign companies to own as much as 15 percent of equity exchanges. Despite the change, Deutsche Boerse has no plan to increase its 5 percent stake, said the people, who asked not to be named because the discussions are private. Deutsche Boerse spokesman Heiner Seidel declined to comment, as did BSE spokesman Yatin Padia.
Analysts have been speculating that BSE would be an attractive investment, as India loosens ownership restrictions and both BSE and its rival the National Stock Exchange of India Ltd. prepare to go public.
“Indian markets are growing very fast and the exchange space will see a lot of action in the coming days,” said Sanjay Sachdev, chairman at ZyFin Advisors Pvt., an asset management advisory firm. “Getting strategic foreign investors will help Indian exchanges to improve their technology, innovation and best practices.”
Deutsche Boerse is currently waiting for the outcome of its attempt to buy London Stock Exchange Group Plc. The two companies officially sought antitrust approval for the deal from the European Commission last week.
Deutsche Boerse bought its 5 percent stake in BSE, formerly known as the Bombay Stock Exchange, in 2007. The two companies announced a wide-ranging technology alliance in 2013, resulting in BSE shifting its equity and derivatives markets to Deutsche Boerse’s N7 trading platform.
Singapore Exchange Ltd. also owns a 5 percent stake in BSE. SGX will evaluate its stake “as with any of its investments, as to whether it continues to fit our priorities,” spokeswoman Leela Pandit said in an e-mail.
BSE is looking for a large strategic investor as it readies for its IPO. The exchange, which is majority owned by member brokers, plans to file draft listing documents with regulators in September, a person with direct knowledge of the transaction said last week. Axis Capital Ltd., Edelweiss Financial Services Ltd., Jefferies Group and Nomura Holdings Inc. are among the banks that have been hired, said the person.
BSE accounts for about 20 percent of cash equity trading in India. Its upgraded platform from Deutsche Boerse has helped the company, which runs Asia’s oldest stock exchange, to gain market share from NSE.
NSE, India’s largest bourse, said last week it had appointed bankers including Citigroup Inc. and Morgan Stanley as it prepares to go public early next year. The exchange said in June that it will file a draft offer document for a domestic listing by January.