US micro hedge fund legend George Soros and the world’s third biggest philanthropist George Kaiser are in the race to acquire close to 4 per cent in the Bombay Stock Exchange (BSE), Asia’s oldest stock exchange.
Soros has bid for the BSE stake, held by the embattled Dubai Financial Group LLC, through Soros Fund Management LLC, and Kaiser has done so through private equity fund, Argonaut.
Other investors who have bid for BSE stake include New York-based private equity majors J C Flowers and Caldwell Investment, promoted by Toranto investment broker Thomas Caldwell. Caldwell is a specialist investor in stock exchanges and bought 4.3 million shares of the New York Stock Exchange in 2006. Sources added that a private equity fund has bid Rs 370 for each share, valuing BSE at over Rs 3,800 crore. Avendus Capital is advisor to the deal.
Dubai Financial, part of sovereign fund Dubai Holding, holds 3.92 per cent stake in BSE, which it bought when the exchange was demutualised in 2007. BSE was then valued at Rs 3,780 crore. While BSE and Avendus could not be reached for comment, sources familiar with the developments said Dubai Financial felt the exchange deserved a higher valuation in the current situation.
In the recent past, the valuation of the exchange saw a sudden spurt after a new management team took over in 2009.
While some stock brokers sold BSE shares at around Rs 180 a piece some six months ago, a bank auctioned 0.27 million shares at Rs 320 a couple of months ago.
Under the new management, BSE changed its derivative trading cycle to compete with the National Stock Exchange, launched a mutual fund trading platform and is upgrading its technology platform. BSE currently has a near 28 per cent share of the equity spot market in the country and has been making efforts to develop its derivative trading segment, where National Stock Exchange is a monopoly player. BSE will launch currency derivatives in May and is also in the process of increasing its stake in Central Depository Services Ltd to 51 per cent.
Currently, six foreign investors hold 25.65 per cent of BSE and five Indian institutions hold 12 per cent.
A little under 62 per cent of BSE’s shares are widely held. Among the key Indian shareholders are firms such as Bajaj Holdings and Investment, which owns 2.94 per cent, Infosys Technologies CEO and MD S. Gopalakrishnan, who owns 1.04 per cent and media major Bennett, Coleman and Co, which owns 1.04 per cent.
BSE recently announced 12 bonus shares for every share held and the exchange currently has around Rs 2,000 crore of cash reserves, which translates into cash per share of at least Rs 190.
BSE posted a net profit of Rs 55.42 crore on revenue of Rs119.21 crore for the quarter ended December 2009.