Market regulator Securities and Exchange Board of India (Sebi) has passed an order allowing 78-year old Madras Stock Exchange Limited (MSE) to exit the business. MSE will be 14th stock exchange to exit under the Sebi’s exit policy, which was issued in May 2012. The exit policy mandates regional stock exchange (RSEs) to have a minimum networth of Rs 100 crore and an annual trading volume of Rs 1,000 crore. Sebi had given the exchanges a two-year window to comply or exit. In May 2014, MSE, in a request to Sebi sought its exit following a special resolution passed at an extraordinary general meeting of its shareholders. Last Thursday, Sebi whole-time member Rajeev Kumar Agarwal in an order stated that from the valuation report and undertaking of MSE, it was observed all the known liabilities of MSE had been brought out and there was no other future liability as on date. “..... I note that MSE has substantially complied with the conditions contained in the Exit Circular, 2012, subject to its undertakings. I, therefore, am of the view that it is a fit case to allow exit to MSE in terms of clause 8 of the Exit Circular, 2012,” said Agarwal in the order. MSE is among the country’s oldest regional exchanges and was the largest in terms of cash volumes in the 1990s. According to National Stock Exchange (NSE) data, collective turnover of the MSE-listed companies trading on the NSE in 2012-13 stood at around Rs 8,000 crore. Meanwhile, industry participants expressed concerns about the future of small investors and brokers associated with the exchange. A private agency had sent out a letter to the shareholders of companies listed on the exchange, with an intent to buy the shares. One such letter to buy shares of a Chennai-based company, available with Business Standard, stated the company “is ready to make the best offer if the shareholders wish to sell holdings.
We will send you payment by person. Kindly note this offer is for a limited quantity of shares required by us. You, therefore, are requested to respond immediately to take our attractive offer and payment terms.” MSE insiders said the prospects of survival of the exchange were “very good”, but Sebi’s norms had “forced” its exit. He claimed MSE was capable of generating trading volumes of around Rs 1,000 crore per annum. Earlier, senior officials said the stock exchange was facing three major challenges— upgradation of technology, marketing and expansion — for which it required around Rs 100 crore either through private equity or private placement. It also had an in-principle tie-up with the National Securities Clearing Corporation Ltd (NSCCL) for clearing and trading operations. In the last five years, collective trading volume of the 60 companies listed on the MSE and allowed to trade on the NSE had been estimated to be around Rs 25,000 crore. The MSE-listed companies include well-managed companies like TTK Healthcare, Amrutanjan and Lakshmi Mills. While the market watchdog Sebi’s recent circular title ‘Companies exclusively listed on De-recognised/Non-operational Stock Exchanges’ gave some relaxation for those companies, which are getting de-listed from the regional stock exchanges to list on the national stock exchanges, industry experts are of the view these relaxations would not help the companies unless otherwise they are more specific and binding on these exchanges. They argue the entry barriers were quite high for MSMEs to get into the main board of the national-level stock exchanges in terms of higher market capitalisation as well as higher listing fees.
The listing fee should be considerably reduced in tandem with the size of the MSMEs & affordability and the entry barrier also be reduced substantially, without compromising on any other listing compliance.
Major challenges in listing in the SME exchange includes, equity issue, floating stocks, liquidity, compulsory market making and others.