Rs11,000 cr at risk: Jalan committee’s opposition to listing of bourses endangers investments

The Bimal Jalan committee’s proposal to kill the listing dreams of stock exchanges, ignites fears among big investors in the bourses and BSE brokers that billions could vanish overnight

Several high-profile private and institutional investors in the national bourses could be left high and dry if the proposed recommendations of the Bimal Jalan committee are accepted as they are. Together, these investors have put in a stupendous Rs11,000 crore in various bourses at the national and regional level, on the hope that these exchanges would go public one day. However, the Jalan committee has effectively scuttled their dreams of making money on their investments, by frowning upon the listing of stock exchanges.

The Bimal Jalan committee, which was appointed by the Securities and Exchange Board of India (SEBI) to report on the structure of market infrastructure institutions, has proposed that such entities should be prohibited from getting listed. It argues that self-listing may lead to misgovernance. Classifying stock exchanges as 'public utilities', the seven-member panel says that fluctuations in stock prices of exchanges would be detrimental to the market as a whole.

But this proposal will leave a bunch of institutional investors fretting and biting their nails nervously. In the absence of a public offering, these investors could struggle to exit their holdings with reasonable gains. Along with a host of broking firms, institutional investors had poured in substantial funds into the bourses.

According to reports, the National Stock Exchange (NSE) attracted as much as Rs6,500 crore from private investors, among them such big-ticket institutions like Goldman Sachs and the New York Stock Exchange. The Bombay Stock Exchange (BSE) also managed to rake in Rs3,500 crore from several intermediaries, despite its floundering business operations. Regional bourses also received funds to the tune of Rs1,000 crore.

The interest in having a stake in the premier stock exchanges is undoubted. These are some of the most profitable institutions in the country - a fact that has enabled them to attract so much attention from foreign institutions in the past. Last year, the NSE reported a net profit of Rs614 crore while the BSE posted Rs232 crore as profit for the same period. However, with this startling announcement, the stock exchange space suddenly appears less attractive. How would the exchanges be able to attract fresh investments if the lure of huge gains on exit has vanished?

These investors would have been hoping to earn robust returns on their investments once the exchanges accessed the primary markets. For, even if there were no plans for listing, institutional investors were able to sell their shares to each other over the last two years in the hope that they would be listed some day.



Quentin Dsouza

6 years ago

Wonder what will happen to the esops which Bhave and Vaidyanathan have collected from NSDL? Also, esops are the reason why they are desperately trying to shift all the mutual fund business on to the bourses. RTI anyone for pecuniary benefits accruing to SEBI Chairman for actions leading to monetary gain to the detriment of the mutual fund market?


6 years ago

Atleast the Mr.Bimal Jalan, Mr.Uday Kotak should have applied their basics and must have enquired into the scheme and circumstances, reasons, history and background of demutualisation etc. before preparation / submission of report.
It seems / indicates that report is nothing but bunch of papers to please the sebi.

Tuesday Closing Report: Watch out for 19,200 on the Sensex

While the market opened with a negative bias tracking the Asian bourses, the GDP growth numbers for the September quarter along with buying in second-rung stocks ensured a green close for the second day running.

The market opened in the red, tracking its regional peers that were trading lower on concerns about the pace of the global recovery process. It traded in a narrow range till noon, with the strong gross domestic product (GDP) numbers for the second quarter giving the indices the much-needed boost, pushing them up into positive territory.

Buying in the broader market in the post-noon session propelled the market further northwards to the day's high. However, a minor bout of profit-taking saw the indices paring some gains but closing around half a percent higher.

The Sensex closed 116.15 points (0.60%) up at 19,521.25. The index touched an intraday high-low of 19,610.46 and 19,218.02. The Nifty settled at 5,862.70, 32.70 points (0.56%) higher. The barometer touched a high of 5,892.25 and a low of 5,768.35.

The market breadth was mixed today. While the Sensex had 26 declining stocks against four gainers, the Nifty closed with 32 advancing stocks and 18 losers. The broader indices outperformed the key benchmarks. The BSE Mid-cap index surged 1.39% while the BSE Small-cap index jumped 1.90%.

The top Sensex gainers included DLF (up 7%), Bharti Airtel (up 6.45%), Tata Motors (up 4.31%), State Bank of India (up 3.97% and Reliance Communications (up 3.41%). Tata Steel (down 1.48%), Reliance Industries (down 1.14%), ICICI Bank, Tata Power (down 0.90% each) and Larsen & Toubro (down 0.89%) were the notable losers today.

BSE Realty (up 5.67%), BSE Consumer Durables (up 2.08%), BSE Power (up 1.84%), BSE Public Sector Undertaking (up 1.73%) and BSE Fast Moving Consumer Goods (up 1.38%) were the key performers in the sectoral space. BSE Oil & Gas (down 0.56%) was the lone sectoral loser today.

Driven by good performance of agriculture and manufacturing, the Indian economy grew by 8.9% in the second quarter of the current fiscal, up from 8.7% in the corresponding period a year ago.

The growth rate for the first quarter was revised upwards to 8.9% from 8.8% as estimated earlier. This took the overall economic expansion during the first half (April-September) to 8.9%, up from 7.5% in the corresponding period a year ago.

Markets in Asia settled mostly in the red on speculations that China would hike rates further to keep a firm tab on inflation and on the continuing European debt crisis.

The Shanghai Composite tumbled 3.11%, the Hang Seng shrank 1.11%, the Jakarta Composite tanked 1.72%, the KLSE Composite was down 0.31%, the Nikkei 225 declined 1.48% and the Straits Times shed 0.53%. On the other hand, the Seoul Composite gained 0.65% and Taiwan Weighted added 0.06%.

Finance minister Pranab Mukherjee said International Monetary Fund (IMF) may prove correct in its assessment of India's economic growth, given the second quarter growth rate of 8.9%, which has surpassed the assessment of various experts.

"I always go by conservative estimates... As per IMF (International Monetary Fund) estimates, the GDP growth would be more than 9%...IMF may be correct this time," Mr Mukherjee said while commenting on the second quarter growth figures announced earlier in the day.

The US markets closed weak on Monday as lingering concerns over the lingering debt crisis in Europe weighed on investors' minds. Besides, the European Commission said it expects weak global markets and government efforts to cut deficits to bring a "gradual and rather uneven" recovery across the region's 27 member states. On the positive side, US retail sales during Thanksgiving weekend totalled about $45 billion, the National Retail Federation said, quoting a survey conducted by BIGresearch.

The Dow declined 39.51 points (0.36%) to 11,052.49. The S&P 500 shed 1.64 points (0.14%) to 1,187.76. The Nasdaq fell 9.34 points (0.37%) to 2,525.22.

Back home, foreign institutional investors were net buyers of Rs156.20 crore in the equities segment on Monday and domestic institutional investors net buyers of Rs199.33 crore on the same day.

Drug major Ranbaxy (up 1.01%) today said it had received final approval from the US health regulator to manufacture and market generic Donepezil Hydrochloride tablets used for treating Alzheimer's disease with 180 days market exclusivity.

The approval for Donepezil Hydrochloride tablets has been given by the US Food and Drug Administration (USFDA) in the strengths of 5 mg and 10 mg, company said in a filing to the Bombay Stock Exchange (BSE).

IT services firm Spanco (up 5.21%) today said it had received a Letter of Intent (LoI) from the Bihar government to implement IT infrastructure for the state's electricity board with an order value of Rs160 crore.

The project has been awarded under the Re-structured Accelerated Power Development and Reform Program (R-APDRP).

State-owned BHEL (up 2.35%) has bagged an order worth Rs3,700 crore from Karnataka Power Corporation Ltd (KPCL) to supply the country's first super critical 700-MW coal fire unit for its thermal power station (TPS) at Bellary.

Bellary TPS is already equipped with a 500-MW unit supplied by BHEL and another unit with the same capacity is under execution.


HLL Lifecare plans IPO in next nine months

State-owned contraceptives manufacturer HLL Lifecare Ltd said it plans to come up with an initial public offer (IPO) to raise funds in next nine months.

Earlier known as Hindustan Latex, the company plans to invest Rs570 crore in new projects such as setting up a 'Vaccine Complex' and 'Medipark'. The vaccine complex is being set up at Chingleput in Tamil Nadu. Besides the vaccine complex, the company is also setting up a 'Medipark' to manufacture medical equipment.

Established in 1966, the company started operations in 1969 under the Ministry of Health and Family Welfare. It manufactures a host of health-care products, including condoms, contraceptive pills, Copper T and medical devices


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