BSE to set up global bourse at GIFT City, seeks Sebi nod

The Bombay Stock Exchange (BSE), Asia's oldest stock exchange, which last week announced its listing on rival National Stock Exchange (NSE), is planning to open an international stock exchange at GIFT City, in Gandhinagar, Gujarat, which is touted as India's own international financial services centre.

In its prospectus for the IPO, BSE said it has sought in-principle approval from the Securities and Exchange Board of India (Sebi) to open an international stock exchange.

BSE, which is ahead of NSE in getting its shares listed, is hoping for the first mover advantage – both in corporatising and internationalising.

BSE, however, is handicapped by losing market share and failure to attract investments in the equity derivatives segment, which could affect valuations.

BSE hopes to start operations in GIFT City by January during the Vibrant Gujarat summit, subject of course to Sebi's consent, reports quoting unnamed BSE officials said.

The new exchange will provide a platform for Indian companies to raise capital by issuing foreign currency instruments, allow start-ups to raise equity from foreign investors by getting listed on the international exchange and also allow companies incorporated outside India to list in the international financial services centre, the draft prospectus said.

It will enable members to ''trade from the international financial services centre in global capital markets such as NYSE, LSE, NASDAQ, etc, which many brokers are currently doing from other financial centres such as Singapore and Hong Kong,'' according to a presentation BSE made to investors and brokers soliciting membership in the proposed exchange.

An international exchange would open up a new stream of revenue for BSE, which has been losing market share to rival National Stock Exchange of India Ltd (NSE) for quite some time. In the last five years, BSE's market share in the equity cash-trading segment has halved to 15 per cent. Its share in the derivatives segment is close to negligible.

BSE's consolidated net profit dropped 37 per cent to Rs96.74 crore in fiscal 2016. In the June quarter, the exchange's net profit increased 40 per cent to Rs52 crore.

The new exchange ''will increase our brand's profile and also provide us with additional sources of revenue'', the prospectus said.

According to the draft prospectus, BSE plans to spend Rs50 crore to capitalise a clearing corporation and another Rs25 crore for the stock exchange. It expects to fund these through its internal accruals.

At the end of March, BSE had cash and bank balances amounting to Rs1,610 crore.

The exchange's IPO is a pure offer-for-sale (OFS), giving an exit opportunity for existing investors.

BSE will seek partnerships with other exchange operators to start the international exchange at GIFT City, the draft prospectus said. It intends to set up an international exchange and clearing corporation, both wholly owned subsidiaries.

The exchange signed an agreement with GIFT SEZ Ltd to set up these two entities in January 2015.

On 11 August, BSE secured approval from the ministry of corporate affairs to set up the international exchange.