BSE starts process to accept shares for IPO

Shareholders invited to deposit all or part of their holding in demat form in escrow account by Aug 22

Asia’s oldest bourse, BSE, has set up an escrow account to enable shareholders to tender shares for the exchange’s offer for sale (OFS), to culminate in an initial public offering (IPO), with shareholders getting about a month for the process.

Shareholders have to give a consent form, a notarised power of attorney and deposit their shares in an escrow account by August 22. They may offer all or part of their shares in the offer, if these are in dematerialised form and have been held for a continuous period of one year prior to filing of the draft prospectus with the Securities and Exchange Board of India (Sebi), it wrote on July 5.

Shares not sold in the OFS shall be locked-in for a year from the date of allotment/transfer of shares in IPO. Venture capital funds, category-1 alternative investment funds or foreign venture capital investors registered with Sebi will be exempt. Those taking part in the OFS may not participate in the IPO as investors.

BSE has said it would offload 30 per cent stake before end-March 2017 through an OFS, along with a possible fresh sale of shares. During the tendering process, if the total number of shares set aside for the OFS exceeds this 30 per cent mark, the shares will be offered on a pro rata basis. For instance, if the total number of shares offered are 200 and three investors offer 40, 50 and 20 shares, these would get 20, 25 and 10 shares in the OFS, respectively, assuming an OFS size of 100 shares.

The sellers will receive the same sale price as the issue price for the IPO, net of expenses and applicable taxes.

“There is a regulatory requirement to dilute 10 per cent of equity. If that many shares are not tendered in the OFS, the exchange will make up the deficit by issuing fresh shares,” said a person familiar with the matter.

He added that if less than 20 per cent of the shares are tendered in the OFS, liquidity could be impacted after listing, due to the mandatory one-year lock-in of the remaining shares.

BSE did not respond to a separate questionnaire sent to it on the IPO.

The exchange is likely to file its draft prospectus and select bankers by September, said the person quoted above. BSE has already appointed Edelweiss Financial Services as lead merchant banker, with AZB & Partners and Nishith Desai Associates as legal advisors.

The exchange’s shareholders include foreign bourses Deutsche Boerse and Singapore Exchange, as well as domestic entities such as Life Insurance Corporation of India and State Bank of India, among others.

Earlier this year, BSE had told Sebi it had met the requirements of the amended regulations on the Stock Exchanges and Clearing Corporations (SECC) rule, and was in a position to proceed with its IPO. Sebi had, via a January 1 notification, amended the SECC Regulations of 2012, making it easier for exchanges to list. The exchange had first approached Sebi with a listing plan in January 2013 but could not get the required in-principle approval, owing to a lack of clarity on SECC norms. In 2012, it had appointed 14 investment bankers to handle the IPO.

INCHING TOWARDS AN IPO

• BSE has set up an escrow account to enable shareholders to tender shares for its offer for sale
   
• Shareholders have to submit a consent form, notarised power of attorney and deposit their shares in an escrow account by August 22
   
• Shareholders can offer all or part of their shares in the offer provided the shares are dematerialised and have been held for continuous period of one year prior to filing of  the DRHP
   
• Shares not sold in the OFS will be locked-in for one year from date of allotment of shares in  the IPO
  

 

Sellers will receive the same sale price as the issue price for IPO, net of expenses and applicable taxes
 

BSE will offload 30 per cent stake before 31 March 2017 through the OFS along with a possible fresh sale of shares
 

If the number of shares tendered during the OFS exceeds 30 per cent, the shares will be offered on a pro rata basis