Rs11,000 cr at risk: Jalan committee’s opposition to listing of bourses endangers investments
Moneylife Digital Team 30 November 2010

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
1 decade 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?
1 decade 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.
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