USE shareholders okay rise in capital, stake sale plans

Authorised share capital to be raised from Rs 200 cr to Rs 250 cr to facilitate the exercise

The United Stock Exchange (USE) has got a nod from its stakeholders for raising more capital and bringing in additional shareholders. The authorised share capital is to be raised from Rs 200 crore to Rs 250 crore.

The decision was taken at an extraordinary general meeting, Saurabh Sarkar, the managing director (MD) and chief executive officer (CEO), told Business Standard.

“I expect many of the major shareholders to invest further capital to avoid dilution (in their stake),” he said, adding there had been preliminary discussions with active market participants for a stake sale. He also said shares would be sold at a premium but declined to comment on valuations.

USE has 21 public sector and six private sector banks as shareholders. Other stakeholders include Indian Potash, Jaypee Capital Services and Minerals and Metals Trading Corporation. Standard Chartered is the sole foreign bank with a stake. The Bombay Stock Exchange, the oldest in Asia, also has a stake. (GREEN SIGNAL)

It allows participants to trade in derivative contracts based on the exchange rate of the rupee against foreign currencies, including the euro, the dollar, the pound sterling and the yen. The contracts allow investors to bet on currency movements, as well as hedge their exposure to these.

Finance Minister P Chidambaram stated in his recent Budget speech that foreign institutional investors would also be allowed to trade in currency derivatives, to the extent of their rupee exposure in India, which should aid volumes, according to Sarkar.

USE started with a bang, with market share of a little over 50 per cent at launch but ran into rough weather a little over a year later. The first MD and founding CEO, T S Narayanasami, exited in October 2011. In November 2011, its market share dropped to 5.2 per cent.

This was followed by regulatory scrutiny, including from the Income Tax department, in March 2012. In May 2012, came an order from the Securities and Exchange Board of India, chastising the exchange after it emerged that a single shareholder, Jaypee Capital Services, accounted for 80 per cent of its volumes. Its market share touched a low of 0.16 per cent that month.

Subsequently, the board of directors appointed ex-foreign banker Saurabh Sarkar as the new MD & CEO, with effect from July 25, 2012.

USE accounted for 3.4 per cent market share in February. The National Stock Exchange and MCX Stock Exchange accounted for 61.5 per cent and 35.1 per cent of currency derivative volumes that month.

USE had a net loss of Rs 3.45 crore for the financial year ending March 2012, according to its financial statements. Sarkar said he expected the exchange to break even this financial year.