To the Members
The Directors present the Twelfth Annual Report of BSE Limited(the Company') along with the audited financial statements for the financialyear (FY) ended March 31 2017.
FINANCIAL SUMMARY/ HIGHLIGHTS OPERATIONS STATE OF AFFAIRS
The financial performance of the Company for the year ended March 312017 is summarized below:
| || || || |
( `in Lakhs)
|Particulars ||Standalone || ||Consolidated || |
| ||2016-17 ||2015-16 ||2016-17 ||2015-16 |
|Total Revenue ||55099 ||51542 ||80075 ||67009 |
|Total Expenses ||35137 ||31389 ||47530 ||41155 |
|Profit before exceptional items & tax ||19962 ||20153 ||32545 ||25854 |
|Exceptional items ||(364) ||7327 ||2079 ||4660 |
|Profit before tax ||20326 ||12826 ||30466 ||21194 |
|Provision for tax ||462 ||(460) ||4064 ||3705 |
|Share of Profit/Loss of Associate and Joint ventures ||- ||- ||107 ||224 |
|Net Profit for the year ||19864 ||13286 ||26509 ||17713 |
|Net Profit attributable to the shareholders of the Company ||19864 ||13286 ||22057 ||13293 |
|Net Profit attributable to the non-controlling interest ||- ||- ||4452 ||4420 |
|Other comprehensive income (net of tax) ||(12) ||5 ||(642) ||3 |
|Total comprehensive income for the year ||19852 ||13291 ||25867 ||17716 |
|Net Profit attributable to the shareholders of the Company ||19852 ||13291 ||21431 ||13298 |
|Net Profit attributable to the non-controlling interest ||- ||- ||4436 ||4418 |
The total income of the Exchange during the FY 2016-17 on aconsolidated basis was ` 80075 Lakh reflecting an increase of
` 13066 Lakh (19.50%) over previous year. The total expenses for theyear were higher by ` 6375 Lakh (15.49%) at ` 47530 Lakh. During the year the expenseswere higher mainly due to technology related costs employee costs and impairment loss onfinancial assets (mainly representing higher provisions for bad and doubtfuldebts/investments). The increase was offset by decrease in overall administrativeexpenses. It may be noted that during the financial year Securities Contracts(Regulation) (Stock Exchanges and Clearing Corporations) Regulations 2012 ("SECCRegulations") have been amended whereby the requirement of transfer of 25% of profitsto the Settlement Guarantee Fund ("SGF") has been done away with from August 292016; resulting in decrease in contribution to the SGF by 59.58% compared to previousyear. In view of the same the profit before tax was higher by ` 9272 Lakh (43.75%) to `30466 Lakh as against ` 21194 Lakh in the previous year and Net Profit attributable tothe shareholders of the Company for the year was higher by
` 8764 Lakh (65.93%) to ` 22057 Lakh as against ` 13293 Lakh in theprevious year.
The total income of the Exchange during the FY 2016-17 on a standalonebasis was ` 55099 Lakh reflecting an increase of
` 3557 Lakh (6.90%) over previous year. The total expenses for theyear were higher by ` 3748 Lakh (11.94%) at ` 35137 Lakh. During the year the expenseswere higher mainly due to technology related costs employee costs and impairment loss onfinancial assets (mainly representing higher provisions for bad and doubtful debts). Theincrease was offset by decrease in overall administrative expenses. It may be noted thatduring the financial year SECC Regulations have been amended whereby the requirement oftransfer of 25% of profits to the SGF has been done away with from August 29 2016resulting in decrease in contribution to SGF by 59.58% compared to previous year. In viewof the same the profit before tax was higher by ` 7500 Lakh (58.47%) to ` 20326Lakh as against ` 12826 Lakh in the previous year and Net Profit attributable to theshareholders of the Company for the year was higher by ` 6578 Lakh (49.51%) to ` 19864Lakh as against ` 13286 Lakh in the previous year.
The Board in its meeting held on February 14 2017 declared an interimdividend of ` 5/- per equity share of the face value of ` 2/- each fully paid up. Furtherthe Board in its meeting held on May 5 2017 has recommended a final dividend of ` 23/-per equity share of the face value of ` 2/- each fully paid up for the FY 2016-17 subjectto the approval of the shareholders at the Twelfth Annual General Meeting("AGM") and if approved would result in a cash outflow of approximately `15111 Lakh including corporate dividend tax. The total dividend on equity sharesincluding dividend tax for the FY 2016-17 would aggregate ` 18396 Lakh resulting in apayout of 93% of the standalone profits of the Company.
Under Clause 5.3 of the BSE (Corporatisation and Demutualisation)Scheme 2005 (the Scheme) the allotment of equity shares to 12 Trading Members of theerstwhile BSE has been kept in abeyance for various reasons as on March 31 2017 ascompared to 14 Trading Members whose shares were kept in abeyance as on March 31 2016.Meanwhile all corporate benefits including dividend as may be declared by the Exchangefrom time to time are being provided for and would be payable on the allotment of theseshares. For further details on allotment of Shares to two erstwhile members please readShare Capital section of this report.
Transfer to Reserves
The Exchange does not propose to transfer any amount to the GeneralReserve out of amount available for appropriations.
LISTING OF BSE'S EQUITY SHARES
The Company successfully completed its ` 1243 Crore Initial PublicOffer through Offer For Sale route and listed its equity shares on the National StockExchange of India Limited ("NSE") on February 3 2017.
BUSINESS PERFORMANCE OVERVIEW Economic Environment GlobalOutlook
Global Gross Domestic Product ("GDP") growth is projected toincrease rising from just under 3% in Calendar Year ("CY") 2016 to 3.30% in CY2017 and around 3.50% in CY 20181. There have been positive signs ofaccelerating activity and rising consumer and business confidence in recent months inadvanced economies and a number of emerging market economies including improved momentumaround the turn of the year. The rise in interest rates and oil prices will offset thissomewhat although higher commodity prices will benefit some emerging market economies.Confidence has improved but consumption investment trade and productivity are far fromstrong with deceleration in growth and higher inequality. This comes against thebackground of a five-year period where the global economy has been in a low-growth trap.
1 Source: OECD Interim Economic Outlook March 2017
The modest pick-up in global growth in CY 2017 and CY 2018 reflects theeffect of ongoing and projected fiscal initiatives notably in China and the UnitedStates together with an easier stance in the Euro area and initiatives in other economiessuch as Canada. These are expected to catalyze private economic activity and push upglobal demand. Exiting the low-growth trap depends on the joint impact of macroeconomicstructural and trade policy choices as well as on concerted and effective implementationof existing initiatives.
While global trade growth was weak in CY 2016 at around 2% recent datasuggest some improvement particularly in Asia. However trade growth is likely to remainbelow pre-2008 crisis growth rates in part reflecting a slowdown or reversal of theexpansion of global value chains.
Headline inflation is rising in most countries as the result of higherenergy prices following the OPEC agreement in November 2016 to cut oil production.However underlying inflation in advanced economies is still subdued and will pick up onlyslowly as the expansion gains traction and supports a more robust wage growth across allincome groups. Infiation is easing in a number of emerging market economies as the effectof past exchange rate depreciations fades and the effect of monetary policy actions worksthrough commodity importers are exposed to rising commodity prices.
Domestic demand in the United States is set to strengthen over the nexttwo years and expand at a solid pace helped by gains in household wealth and a gradualupturn in energy production. Employment is rising steadily although the pace is expectedto ease and wages should continue to pick up as the labour market tightens. GDP growth isprojected to pick up to 2.40% in CY 2017 and 2.80% in CY 2018 supported by an anticipatedfiscal expansion especially in CY 2018 despite higher long-term interest rates andcontinued headwinds from the stronger US dollar. Policy choices including on thecomposition of fiscal spending taxation regulation and trade are likely to have asignificant impact on growth outcomes.
In the United Kingdom the pace of expansion in CY 2016 was lower thanin previous years despite support from resilient household spending actions by the Bankof England and adjustment to the fiscal stance following the Brexit vote. Thecountry's growth is expected to ease further as rising inflation weighs on realincomes and consumption and business investment weakens amidst uncertainty about thecountry's future trading relations with its partners due to Brexit.
In the Euro area GDP growth is projected to continue at the currentmoderate pace supported by accommodative monetary policy and a modest fiscal easing overthe coming years. There is fiscal space for more ambitious and effective fiscalinitiatives in Europe. There are encouraging signs that business investment may bestrengthening but high non-performing loans and labour market slack in some Euro areacountries continue to hold back growth prospects. Growth is set to remain solid inGermany but will continue at a slower pace in France and Italy. Headline inflation hasbeen pushed up a little but the recovery is not yet sufficiently advanced to durablyraise core inflation.
In most other major advanced economies growth is projected to continuearound the current modest path. In Japan data revisions show a somewhat more positivepicture of recent growth outcomes. Industrial production and exports have strengthenedhelped by the depreciation of the Yen but consumption spending remains subdued. Thefiscal easing will help GDP growth pick up to 1.20% in CY 2017.
Growth in China is expected to edge down further to 6.30% by CY 2018 asthe economy is undergoing a transition including shifting towards consumption andservices adjustment in several heavy industries working off excess housing supply andensuring credit developments are sustainable. Demand is being supported by veryexpansionary fiscal policy including via policy banks which in turn is boosting privateinvestment and trade. Producer price inflation has picked up strongly but consumer priceinflation remains low. Higher commodity prices and easing inflation are supporting arecovery from deep recessions in Brazil Russia and some other commodity producersalthough short-term supply restrictions will limit the positive impact of higher oilprices on production in some countries.
Economic Environment Indian Outlook
Economic performance in financial year ("FY") 2016-17
According to Government of India estimates2 economic growthslowed down marginally to 7.10% in FY 2016-17 below 7.90% growth in FY 2015-16. Much ofgrowth in FY 2016-17 came from strong agriculture and Government services. Agriculturegrew by a robust 4.40% as a healthy monsoon helped food grain production grow by 8.10% tonew records. Excluding government services growth in value added dropped from 6.70% to6%. Overall India remains the fastest growing large developing economy as it benefitsfrom strong private consumption and gradual introduction of significant domestic reforms.
After growing by 8.20% in FY 2015-16 industry decelerated to 5.80% inFY 2016-17. Mining slowed considerably as oil and natural gas production contracted.Manufacturing value added grew by a healthy 7.70% though down from the 10.60% recorded ayear earlier. Growth reflected robust performance by large private manufacturers whichbenefitted from lower input costs. Construction was muted growing by 3.10% as the cashcrunch possibly affected real estate activity in the second half of the fiscal year.
Services growth also moderated to 7.90% with slowdowns in finance andreal estate as well as in trade hotels and transportation and communication services.Anemic credit growth continued to weigh on financial services though deposit growthpicked up substantially immediately after demonetization. Contraction in railway ridershipand tonnage and subdued growth in commercial vehicle sales restrained expansion intransportation services. By contrast there was strong growth in government servicesincluding public administration and defense on account of salary hikes for centralgovernment employees. Government consumption is estimated to have grown at its fastestpace since FY 2010-11 to pay the higher wages and salaries. Despite a 10.60% increase incentral government capital expenditure overall investment remained fiat growing by only0.60% as private investment continued to be weighed down by low capacity utilization andslow progress toward deleveraging. GDP growth got a further impetus from a robust increasein net taxes buoyed by strong indirect tax collection.2 Source: Asian Development Outlook2017 by Asian Development Bank Monetary Policy Report April 2017
Infiation remained subdued for a second consecutive year averaging4.70%. While food inflation inched up in the first few months of FY 2016-17 with rises forvegetables pulses and sugar subsequent months saw prices cooled by a better monsoon andsummer crop. Retail inflation is down considerably since November 2016. Domestic fuelinflation has remained relatively subdued at 3%. Core inflation was also stable rangingfrom 4.50% to 5%. Subdued inflation allowed the Reserve Bank of India the central bankto reduce policy rates by 50 basis points during FY 2016-17 for a cumulative decline of175 basis points since January 2015. Moreover with deposit accretion far outweighingcredit growth commercial banks lowered their lending rates by 4090 basis points astheir new deposit costs came down.
The central government budget for FY 2016-17 was presented a monthearlier than usual at the beginning of February 2017 to speed appropriations. The centralgovernment succeeded in narrowing the fiscal deficit to 3.50% of GDP in FY 2016-17. Thisreduction was accompanied by improved quality of expenditure. While capital expenditurewas originally targeted to contract by 2.40% in FY 2016-17 to compensate for highergovernment salaries estimates show capital expenditure growing by 10.60%. Currentexpenditure grew by 12.80%. Subsidy spending continued to decline from the equivalent of1.90% of GDP in FY 2015-16 to 1.70% as fertilizer and petroleum subsidies fell owing tolow oil prices and the expansion of a program that pays the cooking gas subsidy directlyinto recipients' bank accounts to reduce leakage.
Government revenue grew by a healthy 16.70% in FY 2016-17 aided bystrong growth in tax revenue and public enterprise dividends and profits. Personal incometax witnessed robust growth at 22.80% as the government introduced in FY 2016-17 two taxamnesties to encourage income disclosure. Excise tax collection also grew strongly for asecond year partly on higher revenues from several hikes to excise rates on petroleumproducts in FY 2015-16. Buoyant excise tax collections can also be attributed to growthfrom other products.
Fiscal Responsibility and Budget Management ("FRBM")committee set up to review avenues to fiscal consolidation recommended sustainable debtas the principal macroeconomic anchor for fiscal policy and called for reining in theratio of public debt to GDP from the current 67% to 60% by FY 2022-23. To achieve thistarget the committee recommended capping the fiscal deficit at 3% of GDP in the 3 yearsfollowing the FY 2016-17 budget which had a deficit equal to 3.20% of GDP. This is inline with the FRBM recommendation.
Imports declined for a second consecutive year contracting by anestimated 3.70% in FY 2016-17. Although oil imports fell by nearly 2% in FY 2016-17 muchof the contraction was concentrated in the first half of the fiscal year. Oil pricesfirmed considerably in the second half and oil imports picked up. Gold imports declinedsubstantially because of softening global prices and demonetization. Imports other thanoil and gold were relatively steady as commodity prices stabilized and domestic demand wasmuted.
Exports revived in the second half of FY 2016-17 growing by anestimated 2.50% for the year. The revival was driven largely by a pickup in refinedpetroleum exports and stronger demand from the advanced economies especially the US andGermany. In particular exports of gems and jewelry iron and steel and motor vehiclespicked up in the second half of FY 2016-17. The net services trade surplus narrowed in FY2016-17 tracking a slowdown in exports of software and financial services. Remittanceinflows weakened a bit as low crude oil prices squeezed host economies in the Middle East.
Net Foreign Direct Investment ("FDI") inflows remained strongfor a second consecutive year at USD 36.7 Billion after the government simpli_edguidelines and allowed more FDI in sectors like real estate airport and air transportservices and e-commerce. Net Foreign Portfolio Investment ("FPI") flows remainedsubdued by comparison. The Q3 FY 2016-17 brought a large outflow possibly a result of aUS interest rate hike in December 2016 and uncertainty following demonetization. Netportfolio debt outflows amounted USD 2 Billion in FY 2016-17. While varying month tomonth equity inflows amounted to USD 7 Billion in FY 2016-17 which pushed stock priceson the S&P BSE Sensex up by 16% over the year. Net deposits by nonresident Indiansturned negative in FY 2016-17 largely because of the repayment of maturing deposits thatthe central bank had attracted from them in FY 2012-13. However because these outflowswere buffered by a forward sale-and-swap arrangement established earlier by the centralbank they did not significantly drain holdings of foreign reserves which stood at USD367 Billion in March 2017.
Economic Prospects for FY 2017-18
With the central bank printing new currency to replace the demonetizednotes and lifting limits on deposit withdrawals in March 2017 the cash crunch easedmarkedly toward the end of FY 2016-17. Consumption deferred from the second half of FY2016-17 by the cash crunch will likely surface in FY 2017-18 and lift consumption growth.Consumption will receive a further boost as several state governments hike salaries andpensions for their employees in FY 2017-18 following a similar hike for central governmentemployees in FY 2016-17. A good monsoon being experienced would allow rural consumption togrow at a healthy rate.
With the effects of demonetization turning out to be short-lived andmodest relative to some early expectations the outlook for FY 2017-18 has been brightenedconsiderably by a number of factors. Firstly with the accelerated pace of demonetizationdiscretionary consumer spending held back by demonetization is expected to have picked upfrom Q4 FY 2016-17 and will gather momentum over several quarters ahead. The recovery willalso likely be aided by the reduction in banks' lending rates due to large inflows ofcurrent and savings accounts ("CASA") deposits although the fuller transmissionimpact might be impeded by stressed balance sheets of banks and the tepid demand for bankcredit.
Secondly various proposals in the Union Budget FY 2017-18 are expectedto be growth stimulating: stepping up of capital expenditure; boosting the rural economyand affordable housing; the _awless roll-out of the Goods and Services Tax("GST"); and steps to attract higher FDI through initiatives like abolishing theForeign Investment Promotion Board ("FIPB").
Thirdly global trade and output are expected to expand at a strongerpace in CY 2017 and CY 2018 than in recent years easing the external demand constraint ondomestic growth prospects. However the recent increase in the global commodity prices ifsustained could have a negative impact on our net commodity importing domestic economy.
Sentiment in the corporate sector improved during Q4 FY 2016-17according to the Reserve Bank of India's ("RBI") industrial outlook survey.The improvement was led by optimism on future production order books exportsemployment financial situation selling prices and profit margin. Amounts mobilizedthrough initial public offerings ("IPOs") in recent months and the number ofcompanies _ling red herring prospectus with the Securities and Exchange Board of India("SEBI") have been higher which suggest investment optimism in the periodahead. Both manufacturing and services firms expected output to be higher a year from nowaccording to the Purchasing Managers' Survey for March 2017. Professional forecasterssurveyed by the RBI in March 2017 expected real Gross Value Added ("GVA")growth to accelerate from 6.50% in Q4 FY 2016-17 to 7.60% in Q4 FY 2017-18 led by growthin services and industry.
Considering the baseline assumptions the fast pace of demonetizationsurvey indicators and updated model forecasts RBI staff's baseline scenario projectsthat real GVA growth will improve from 6.60% in Q3 FY 2016-17 and 6.50% in Q4 to 7% in Q1FY 2017-18 and 7.40-7.60% in the remaining three quarters of FY 2017-18 with risks evenlybalanced around this baseline path. Looking beyond FY 2017-18 and assuming a normalmonsoon a congenial global environment no policy induced structural change and no supplyshocks structural model estimates yield real GVA growth of 8.10% in FY 2018-19.
Higher oil prices will boost refined petroleum exports which havecontracted in the past two years. Global growth improvement would help exports though anappreciating Rupee in real effective terms could dent India's competitiveness. Pricerecovery for commodities like metals chemicals and food would lift exports as volumesfor them have held up. Overall exports are forecast to grow by 6% in FY 2017-18.
The national GST implemented from July 2017 is expected to lower pricesfor capital goods providing impetus to investment. After easing for four consecutiveyears consumer price inflation is expected to inch up in FY 2017-18. With global pricesfor oil forecast to increase by 20% in FY 2017-18 and with most domestic fuel pricesbecoming deregulated domestic fuel inflation is forecast to rise by 1020 basispoints. Higher procurement prices for pulses and wheat along with an uptick in rural wagespose an upside risk to the forecast for food inflation. Infiation is likely to average5.20% in FY 2017-18 accelerating to 5.40% in FY 2018-19 with further firming of globalcommodity prices and strengthening of domestic demand.
The quality of expenditure is expected to improve further with capitalspending in FY 2017-18 projected to grow by 10.70% against growth in current expenditureby only 5.90%. The budget continues to prioritize infrastructure and rural developmentwith higher outlay on roads and highways railways electric power affordable housingand irrigation. Subsidy payments are forecast to decline as petroleum and fertilizersubsidies are curtailed.
In FY 2016-17 India surpassed China to become the fastest growingeconomy and continues to be in FY 2017-18 despite the expected slowdown in growth. Theagenda set for FY 2017-18 is transform energize and clean India'. The GST Billis likely to lead to spurring growth competitiveness indirect tax simpli_cation andgreater transparency.
FY 2016-17 has been marked by historic economic policy developmentshighlighted by structural reforms notably the passing of the Bankruptcy and InsolvencyAct and the Constitutional amendment paving the way for implementing GST. Demonetizationhas also brought the digital agenda to the fore like never before. Given the low rate oftax compliance in the country the Government recognizes that in order to make quantumleaps in the levels of compliance and overall tax revenues the digital paymentinfrastructure and GST can pave the way. The effect of _awless GST implementation wouldimprove the sovereign credit rating as well as reduce personal income tax in the long run.
Digital Economy is one of key focus themes for establishing speedaccountability and transparency in the system. The demonetization drive resulted in peopleadopting the electronic payment options. The Government looks resolute to leave a mark asit forges ahead with all regulatory and operational measures necessary to achieve a moretransparent and a resilient digital economy.
This push towards a cashless digital economy has the potential togenerate long-term benefits in terms of reduced corruption greater digitalization of theeconomy increased flows of financial savings and greater formalization of the economyall of which could eventually lead to higher GDP growth better tax compliances andgreater tax revenues.
India continues to enhance its reputation as an attractive FDIdestination by improving the ease of doing business and liberalizing regulations andsector caps for FDI. India's economy has grown at a strong pace in recent years andgrowth prospects are favorable over the medium term due to the implementation of criticalstructural reforms loosening of supply-side bottlenecks appropriate fiscal and monetarypolicies favorable terms of trade and lower external vulnerabilities.
BSE is the world's fastest Stock Exchange and the largest stockexchange in terms of number of companies listed. As of March 2017 BSE is ranked #2 incurrency options traded #3 in currency futures traded and #10 by market capitalization3among global stock exchange.
This refers to aggregate market capitalization of all listed companiesat BSE.
The total number of companies listed (Equity as well as Debt) on BSE ason March 31 2017 was 5834 as compared to 5911 as on March 31 2016.
During FY 2016-17 25 companies came to the market through the IPOprocess on the Mainboard of BSE. The amount raised through Mainboard IPOs in FY 2016-17was ` 27156.56 Crore as against ` 15374.99 Crore in FY 2015-16.
Further there were no Mainboard Follow on Public Offer("FPOs") in FY 2016-17. In addition to 25 IPOs on the Mainboard another 48companies raised ` 431.69 Crore through the Small and Medium-sized Enterprises("SME") IPO process in FY 2016-17. Further one SME listed company raised ` 9.99Crore through FPO.
The total amount mobilized through Privately Placed Debt Instruments("PPDI") at BSE in FY 2016-17 was ` 420995 Crore as against ` 235402Crore in FY 2015-16. During FY 2016-17 there were 16 public issues of bonds whichmobilized ` 29547.15 Crore as against ` 33811.92 Crore in the FY 2015-16. Out of these16 public issues 8 issues (50%) were exclusively listed on BSE. BSE's platform wasused to collect ` 37621 Crore and the average bids garnered through BSE's Internetbased Book Building software ("iBBS") platform for these debt public issuanceswas 90%.
BSE BOND - Electronic Book Platform for bidding of debt securitiesissued on private placement was made live effective from July 1
2016 as per the guidelines of SEBI circular CIR/IMD/DF1/48/2016 datedApril 21 2016. The BSE BOND platform has been a preferred choice for companies to raiseDebt Capital in India. In the FY 2016-17 74 Issuers with 434 issues of bonds havesuccessfully raised ` 216726 Crore using BSE BOND platform.
? Mutual Fund Segment [Innovations and unique Features for on BSE StARMF Platform]
Innovations and unique features for on BSE StAR MF Platform.
Technology Infrastructure:_BSE has invested and created_world class_robust technology and operational capabilities for accepting mutual funds orders andproviding seamless settlement through Indian Clearing Corporation Limited("ICCL").
The technology Infrastructure_ has created a super highway which has_eliminated the barrier to expand mutual funds distribution for_ traditional distributorsas well as new age e-commerce.
Only platform in India that supports both Demat and Non dematmode for both Pool based settlement Mutual Fund Investor ("MFI") mode as wellas direct settlement Mutual Fund Distributor ("MFD") / Registered InvestmentAdvisor ("RIA") mode with end Investors.
24X7 order acceptance is available on BSE StAR MF Platform.
Overnight Investment framework facilitates BSE StAR MFRegistered Investors:
- To route idle monies as overnight investments monies can be investedeven for a single day i.e. overnight.
- As an alternative investment avenue for idle monies with Investors byinvesting in MF Liquid Schemes for better returns and relatively lowers risk.
- Subscription and redemption can happen simultaneously on the sameday.
Only Platform in India that support 3 modes via SystematicInvestment Plan ("SIPs") which can be initiated as under:-
Paperless SIP: Wherein the link for payment is created for 1stInstallment as well as subsequent Installment only available with BSE.
X-SIP / National Automated Clearing House ("NACH")based SIP Facility: Under this product a single mandate can be used for investing in SIPsacross all schemes and all Asset Management Company ("AMCs") registered withStAR MF. The SIP administration and the cost of administration is borne by BSE and themoney is debited to the client's bank account directly instead of debiting the memberpool account.
X-SIP Facility with First order today flexibility: Enabling BSEStAR MF members to start SIP within couple of minutes instead of waiting for a month.
Paperless_Internet based SIP ("ISIP") wherein BSE isBiller in leading banks of India Single ISIP Mandates can be used across all schemes ofdifferent AMCs with First order today flexibility. This facility is available only onBSE.
Any day Systematic Transfer Plan ("STP") andSystematic Switch Plan ("SWP") with First order today facility.
6 day order holding facility.
Multiple mode of payments viz. payment gateway one timemandate cheque RTGS/NEFT.
Completely digital and real time investor's registration.
Direct pay-out of units to client ("DPC") Facility:DPC accounts option to member broker available only on BSE.
Connectivity: Multi mode of platform access; a) Web browser with CO-BRANDING facility b) APIs over leased lines c) WEB Services - APIs overinternet.
SMS/email based redemption order authentication in MFD mode
Provision for Minimum redemption quantity facility useful whenthe holdings fall below permitted minimum lot only available with BSE
Multi-ARN facility useful when settlement of trades can be donefor other AMFI registration no. ("ARNs") of same group company or otherwiseonly available on BSE.
Android based mobile application.
Secondary Market? Equity Segment
The S&P BSE SENSEX ended FY 2016-17 at 29621 compared to 25342 atyear end of FY 2015-16 an increase of 16.89% over the year which has been one of thefactors for increased trading volumes this year. The average daily value of equityturnover on BSE in FY 2016-17 was ` 4025 Crore an annual increase of about 34.35% from `2996 Crore in FY 2015-16.
? Equity Derivatives Segment
Equity derivatives daily average volume was 498 contracts per day in FY2016-17 as compared to 4.32 Lakh contracts from FY 2015-16. BSE has decided to discontinueits Liquidity Enhancement Incentive Programme Scheme ("LEIPS") that has beenrunning for the past few years.
? Currency Derivatives Segment
In the currency derivatives BSE's market share increased to38.09% in FY 2016-17 from 36.41% in FY 2015-16. Members' participation in thissegment increased to 332 (16 Banks and 316 Members) during FY 2016-17 compared to 285 (14Banks & 271 Members) in FY 2015-16. Open Interest ("OI") for FY 2016-17 was17.42 Lakh contracts an increase of over 35.35% as compared to 12.87 Lakh contractsduring FY 2015-16.
? Interest Rate Derivatives
During FY 2016-17 BSE's market share in interest rate derivativesincreased to 29.20% from 17.19% in FY 2015-16.
Members' participation increased to 104 (8 Banks 4 PrimaryDealers & 92 Members) in 2016-17 from 94 in FY 2015-16.
? BSE SME Platform
The framework for SME Platforms to serve small and medium-sizedenterprises on stock exchanges were established by SEBI vide its circular dated May 182010. The BSE SME platform received the final approval of SEBI on September 27 2011. BSESME IPO Index was launched on December 14 2012 with 100 as the base.
On March 31 2017 the value of this index reached 1288.88.Additionally the total market capitalization of all the 175 companies listed on BSE SMEPlatform reached ` 16925.72 Crore. During FY 2016-17 the SME platform continued to be afront-runner with a market share of over 80%.
During FY 2016-17 48 companies raised ` 436.46 Crore from the market.
? Migration to Main Board
BSE issued a circular on November 26 2012 stating that companies haveto be mandatorily listed and traded on the SME Platform for a minimum period of two yearsfor them to migrate on to the Main Board as per SEBI guidelines.
During FY 2016-17 9 BSE SME companies have migrated to the BSE MainBoard.
? Global Recognition for the BSE-SME platform
In its research report of July 2015 International Organization ofSecurities Commissions ("IOSCO") commended BSE's SME platform for being themost cost effective platform for SME listing in the world. In March 2016 it also receivedthe SKOCH Achiever Award from Shri. K. T. Rama Rao Hon'ble Minister of ITGovernment of Telangana. In the same period the World Federation of Exchanges put forth areport on SME funding through exchanges and has used the BSE SME platform as a key casestudy.
? Debt Segment
The Fixed Income segment at BSE provides an array of products andservices to market participants. In this space BSE also offers reporting of SecondaryMarket Trades in Government Securities Treasury Bills Corporate Bonds Certificate ofDeposit ("CDs") and Commercial Paper ("CPs") on the Wholesale DebtMarket platform called Indian Corporate Debt Markets ("ICDM"). BSE witnessedreporting of Over the Counter ("OTC") trades in Corporate Bonds on ICDM worth `288372 Crore in FY 2016-17 as against ` 207652 Crore in the previous year marking anincrease of 39%. In case of Statutory Liquidity Ratio ("SLR") securities i.e.Government Securities and Treasury Bills trades worth ` 200469 Crore were reported onICDM in the current year as against ` 227124 Crore in FY 2015-16.
Trading in Non-Convertible Debentures ("NCDs") and Bonds onF' group on BOLT saw increased activity of ` 4770 Crore in FY 2016-17 asagainst ` 4608 Crore in the previous year. BSE has retained a market share of over 57.60%in the retail trading of Corporate Bonds in FY 2016-17. During the year BSE introducedclean price mechanism for retail debt trading platform.
No significant activities were observed in trading in GovernmentSecurities on the Retail Debt Market ("RDM") G' group across theentire market.
In accordance with RBI and SEBI guidelines BSE has developed aplatform called E-settle' to facilitate clearing and settlement of secondarymarket trades in corporate bonds CPs and CDs on Delivery Vs Payment 1 ("DvP1")basis through the ICCL.
The settlement volume for corporate bonds witnessed business of `116030 Crore in FY 2016-17 as against ` 57874 Crore in the previous year which is anincrease of over 100% over previous FY 2015-16.
BSE had launched the New Debt segment ("BSE-NDS") on March20 2014 in accordance with SEBI guidelines for new dedicated debt segment on stockexchanges issued in January 2013 and the risk management framework therein issued inSeptember 2013. 135 Trading Members and Institutional Members are registered on BSE NDS.
? Sovereign Gold Bonds
BSE's got permission from RBI and SEBI for acting as a ReceivingOffice for the Sovereign Gold Bond ("SGB") Scheme. Three tranches of SGBaggregation to RBI were carried by banks and post offices. From fourth tranche onwardsStock Exchanges are allowed to act as a receiving office. In this receiving office roleBSE role would be limited to aggregation of applications and transfer of funds.
Please find below table on SGB bids received on BSE in the respectiveTranches.
|Tranche ||Total No. of Members ||Total No. of Bids ||Volume in Kgs. ||Value in ` Crores |
|4th ||161 ||3931 ||158.84 ||49.54 |
|5th ||214 ||4770 ||149.99 ||44.00 |
|6th ||206 ||6772 ||202.70 ||59.94 |
|7th ||173 ||3545 ||103.00 ||29.80 |
? ebidXchange Auction of FPI limits for debt
A custom designed platform called ebidXchange' forallocation of FPI limits for investment in government securities and corporate bonds waslaunched by BSE in May 2009.
The ebidXchange platform pioneered the auction of multiple products -Infrastructure Bonds Corporate Bonds and Government Securities. During FY 2016-17 BSEconducted 5 auction sessions all of which were conducted seamlessly and received positiveresponse from market participants. The total cumulative amount bid for these 5 auctionswas ` 41355 Crore.
? Exchange Traded Funds ("ETF")
As at March 2017 BSE had 50 ETFs listed compared with 45 as on March2016. During FY 2016-17 the average daily turnover in ETFs increased by 35% i.e. ` 39.05Crore from ` 28.99 Crore in FY 2015-16.
? Offer for Sale ("OFS") & Offer to Buy("OTB")
During FY 2016-17 there were 22 OFS issues of which BSE was appointedas the Designated Stock Exchange in 19 issues (86%). Out of the 19 OFS issues 15 issueswere conducted exclusively on the BSE platform. In FY 2016-17 the total amount raisedthrough OFS issues was ` 5672.86 Crore.
During FY 2016-17 there were 88 OTB issues of which BSE was appointedas the Designated Stock Exchange in 86 issues (98%). Out of the 86 OTB issues 81 issueswere conducted exclusively on BSE platform the total amount raised through OTB issues was` 29206 Crore.
? Securities Lending & Borrowing ("SLB")
ICCL acts as an Approved Intermediary under the SEBI Securities Lendingand Borrowing Scheme 1997. The registration of ICCL as an Approved Intermediary wasrenewed for a further period of three years from June 28 2016 to June 27 2019. The SLBturnover increased by 297% from ` 313.23 Crore in F.Y. 2015-16 to ` 1244.38 Crore in F.Y.2016-17 while the lending fees collected increased by 331% from ` 1.46 Crore to ` 6.29Crore during this period.
| ||FY 2015-16 ||FY 2016-17 |
|Segment || || |
| ||` ( Crore) ||` ( Crore) |
|Turnover for the period - 1st ||313.23 ||1244.38 |
|Leg of SLB transactions || || |
|(quantity x underlying price of || || |
|the stocks as on previous day) || || |
|Lending fees. ||1.46 ||6.29 |
? BSE Hi-tech for Start Ups
The Company had launched a new segment BSE Hi-Tech following theannouncement of the new Institutional Trading Platform Regulations by SEBI in August 2015.This platform has been launched to facilitate young fast growing companies to accesscapital and provide liquidity to early stage investors. The Company has formed an AdvisoryPanel comprising eminent persons from the ecosystem and organized several knowledgesessions. There has been no listing on this platform yet. Feedback has been gathered fromthe companies investors and other stakeholders and the Advisory Panel which is sharedwith the policy makers to get benefit of this important initiative of the Government tohelp Start Up industry.
? Dissemination Board
SEBI issued a circular in October 2016 requiring all exclusivelylisted companies of Regional Stock Exchanges which are derecognized and which are onDissemination Boards of Nationwide Stock Exchanges to either list on a nationwide stockexchange or to provide exit to its investors. Following this BSE has reached out to over1500 such companies admitted to BSE's Dissemination Board. BSE is working closelywith SEBI to ensure smooth and proper exit to investors' in such companies.
? Disinvestment Drive of GOI and BSE's support
In the FY 2016-17 BSE's iBBS platform has facilitated Governmentof India Disinvestment Programme through OFS OTB and Central Public Sector EnterprisesExchange Traded Fund ("CPSE ETF") to garner more than ` 25000 Crore formingmore than 50% of the Total Disinvestment by the Government of India in FY 2016-2017.
The Company also has extended the facility for acceptance ofsubscriptions for further Fund Offer of CPSE ETFs by introducing an online mechanismcalled BSE iBBS Platform for Mutual Fund ("BiMF").
Business Operations Review
During FY 2016-17 52 Deposit Based Membership ("DBM")applications were received at BSE. Since launch of new DBM scheme in April 2010 BSE hasreceived a total of 841 DBM applications.
Corporate Services (listing)
The Corporate Services segment of the Company registered healthyrevenue growth in FY 2016-17. Annual Listing Fees (equity debt and MF) increased by 2.82%to ` 104.19 Crore compared to ` 101.33 Crore in FY 2015-16. This increase in AnnualListing Fees is mainly attributed to an increase in number of companies listed underIPO.
The Company also provides other services to corporates such as bookbuilding software buy-back facilities reverse book building software etc. Fees earnedfrom such services were ` 14.31 Crore in FY 2016-17 as compared to ` 11.23 Crore in FY2015-16 a rise of 27.43% from the previous year on account of new primary marketissuances and the newly introduced OTB facility.
Data Information Products
The Company and Deutsche Bourse have entered into a partnership inOctober 2013 under which Deutsche Bourse would act as the licensor of the Company'smarket data and information to all international clients. Under the co-operation DeutscheBourse is responsible for sales and marketing of all the Company's market dataproducts to customers outside India while the Company continues to serve its domesticclients. Deutsche Bourse also shares the joint responsibility along with the Company forproduct development and innovation which includes extending its existing infrastructureand creation of new market data solutions to support the Company's product offerings.
The business for sales and marketing of the Company's market dataproducts to International customers by Deutsche Bourse commenced from April 2014. Thetotal revenue from the sale of market data and information products was ` 24.67 Crore inFY 2016-17 as compared to ` 22.42 Crore in the previous year. The increase in revenue wason account of increase in subscription for the Company's information products andservices by new customers.
Asia Index Private Limited ("AIPL") is a joint venturebetween S&P Dow Jones Indices LLC and BSE. AIPL launched 3 new indices in FY 2016-17:
The S&P BSE Liquid Rate Index was launched on July 26 2016;the index is designed to measure the returns from a daily rolling deposit at theCollateralized Borrowing and Lending Obligation ("CBLO") rate.
The S&P BSE SENSEX 50 Index was launched on December 62016; the index is designed to measure the performance of the top 50 largest and mostliquid stocks in the S&P BSE Large Mid Cap.
The S&P BSE SENSEX Next 50 Index was launched on February27 2017; the index is designed to measure the performance of the next 50 largest and mostliquid stocks after the constituents of the S&P BSE SENSEX 50 in the S&P BSE LargeMid Cap.
Secondary Market Policy Developments
Data analytics based systemic solution for tracking company news
The Company undertakes various regulatory policy and systemic measuresfor enhanced due-diligence surveillance corporate governance in the Indian capitalmarkets to comply with SEBI regulations. In this regard the Company has implementedartificial intelligence based framework for rumour detection since November 2016.
The primary objective is to detect and mitigate potential risks ofmarket manipulation rumour and reduce information asymmetry arising from it on digitalmedia platforms including social media.
In recent past news media has undergone a sea of changes with digitalmedia and social media becoming the frontline in news reporting or sharing informationdigitally for easier faster and wider reach. On this background any material news orrumour floating in the social media can have potential impact on the sentiments of theinvesting population which can further impact price/volumes of securities traded onexchange platforms.
The data analytics based systemic solution relies on artificialintelligence based framework to track news related to listed companies on digital mediausing social media like twitter etc.
Alerts generated by this social media solution is monitored by theCompany from the standpoint of material information and also vis--vis possible rumoursappearing in various media including print and on-line channels as per SEBI regulations.
Graded Surveillance Measure ("GSM")
The Exchange has pro-actively taken series of surveillance actions onits stocks in recent past as a pre-emptive measure to ensure safety and integrity of themarket.
In continuation to various surveillance measures already implementedSEBI and Exchanges pursuant to discussions in joint surveillance meetings have decidedthat along with the aforesaid measures there shall be additional GSM on securities whichwitness an abnormal price rise not commensurate with financial health and fundamentalslike Earnings Book Value Fixed Assets Net Worth P/E Multiple etc.
The main objective of these measures is to alert and advice investorsto be extra cautious and advice market participants to carry out necessary due diligencewhile dealing in the securities.
Under the GSM framework which became effective from March 14 2017based on satisfaction of certain pre-defined objective criteria the securities shallattract following additional graded surveillance actions:
I. Shifting of scrips on Trade to Trade ("T2T") basis withprice band of 5% or lower T2T
II. T2T with 100% Additional Surveillance Deposit ("ASD")equivalent to buy value of transaction
III. T2T + 100% ASD + Once a week trading IV. T2T + 200% ASD + Once aweek trading V. T2T + 200% ASD + Once a month trading
VI. T2T + 200% ASD + Once a month trading + Freezing of price on upperside
As on April 25 2017 a total of 778 companies have been identified tobe a part of GSM framework. Out of these 141 companies are in Stage I 54 companies are inStage II while 5 companies are in Stage III.
Surveillance & Investigation
Statistics for FY 2016-17:
As part of market monitoring activities during FY 2016-17; 69062surveillance alerts were generated of which 1339 alerts were taken up for snapinvestigations. Subsequently 173 cases were taken up for preliminary/detailedinvestigations of which 111 preliminary/ investigation reports have been forwarded toSEBI. Based on the findings 431 observations letters were issued to various members/clients. Further on account of surveillance measures there were 1833 price bandreductions. The Company has also provided e-BOSS the member level surveillance system totrading members to monitor their clients positions and manage risk at a nascent stage.
607 inspections of members were conducted during FY 2016-17 whichinclude 518 routine inspections and 89 special inspections. This also included 25inspections on the basis of risk based supervision.
The Company redresses investor complaints against trading members andlisted companies by taking prompt action upon receiving the complaints. Investorcomplaints against trading members are received through the SEBI Complaints RedressalSystem ("SCORES") of SEBI a web based system where investors can lodge theircomplaints online. The Company in turn communicates the complaints to the memberselectronically through the BSE Electronic Filing System ("BEFS") therebyreducing the communication time resulting in expeditious resolution of investorcomplaints. All actions taken in the process of redressal are then updated on this system.The investors can also lodge complaints directly with the Exchange. The complaints againsttrading members are redressed through mediation and counselling by Investor GrievancesRedressal Committees ("IGRC") wherein the IGRC is also empowered to decide theclaim value.
The Company provides IGRC as well as arbitration services at itsRegional Investor Service Centers located at Mumbai Chennai Delhi Kolkata AhmedabadHyderabad Kanpur Indore Jaipur Pune Bangalore Patna Vadodara Lucknow. During theyear the Company commenced new investor services centres at ten cities namelyBhubaneshwar Chandigarh Dehradun Guwahati Jammu Kochi Panaji Raipur Ranchi andShimla. Thus the Company currently provides IGRC and arbitration services from 24 investorservices centres located at different parts of the country. BSE is the only Exchange inthe country where 13 Registrars and Transfer Agents ("RTAs") regularly visitits Investor Service Centre at Mumbai for redressal of investor complaints againstcompanies listed on BSE.
Update on eXtensible Business Reporting Language ("XBRL")
BSE is the first and only Exchange in India to introduce the globallyaccepted reporting format XBRL as it is more popularly known for certain criticaldisclosures required under the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 ("Listing Regulations")These are Shareholding PatternCorporate Governance Report Voting Results and Financial Results.
Since introduction of XBRL reporting in 2015 we have seen anincreasing number of companies making their _lings in XBRL voluntarily. Encouraged by thisresponse and the improved efficiency of data dissemination the Exchange has made the_ling of Shareholding Pattern Corporate Governance and Voting Results mandatory.
In continuation with these initiatives the Exchange has recently madeit mandatory for companies to file Financial Results in the XBRL format (initially in pdfand in XBRL within 24 hours) for all results filed from the quarter ended March 31 2017onwards. This important development has also been noted and reported in the Newsletter ofXBRL International.
Trading in the securities of certain listed companies has beensuspended for a long period of time on account of non-compliance with the critical clausesof the erstwhile Listing Agreement.
BSE under the guidance of SEBI had advised companies that have beenunder suspension for a period of three years or more to expedite the completion of allformalities for revocation or else be compulsorily delisted from the Exchange as per theprovisions of the SEBI (Delisting of Equity Shares) Regulations 2009.
During the FY 2016-17 the Exchange has delisted 294 companies. This isan ongoing activity and is expected to be completed by September 2017.
Corporate Announcement Filing System ("CAFS")
The Company has been making continual efforts to improve on theturnaround time for disseminating critical information received from listed companies tothe shareholders and the public at large on its website without compromising on thequality of the information.
Towards this objective the Exchange introduced the CorporateAnnouncement Filing System ("CAFS")_ with effect from_ March 1 2017 in betamode. The system provides for seamless dissemination of _lings/disclosures by listedcompanies directly on the Exchange website without any pre-verification by the Exchange.This is done using security measures such as Two Factor Authentication ("TFA")and has ensured almost instantaneous dissemination of price sensitive information to theinvestors. The system makes companies wholly accountable for their _lings leading to muchfaster efficient and informed decisions by investors and the public at large.
Over 90% of listed companies at BSE have registered for this facility.In case of any inadequacies or discrepancies clarifications are sought from the companiesand the responses again disseminated on the website. Post dissemination of these criticalannouncements in the public domain the Company carries out further checks with respect toadequacy and accuracy.
Social Media Analytics
The Company has implemented Social Media analytics using ArtificialIntelligence to predict rumors and verification of news floating in the market on itslisted companies and its impact on the stock market. Such real time approach has resultedin prompt dissemination of information pertaining to the companies. The Company hasdeployed this technological innovation to mitigate the potential risks of marketmanipulation and information asymmetry arising from it. This would enhance marketintegrity orderly functioning and investor protection in the Indian Capital Markets.
As the first phase of the project the Company implemented a liveframework to monitor the news websites using data management and machine learning. In thesubsequent phases the framework for collecting data from Facebook and Twitter wasimplemented.
Social Media analytics has helped faster processing and disseminationof information. This was one of the primary criteria for success of this project. As thequantum of processing information increased the Company was able to monitor impact ofcertain news on the prices. Employee involvement and productivity reached new highs asthe team involved were equipped with better and more information. Overall savings in costin terms of resources deployed for manual tracking and other indirect costs weredrastically reduced.
Major milestones achieved by IPF
BSE Investor Protection Fund ("IPF") has done 4499investor awareness programs across 30 states during the year. Highest in a single year.
Participated at the India International Trade Fair (held for 14days) along with SEBI in New Delhi in November 2016 to showcase the Company'sproducts and services to Investors.
Participated at the Vibrant Gujarat Trade Fair (held for 4 days)in January 2017 to showcase the Company's products and services to Investors.
Managing 25 Investors Service Centres covering major statecapitals.
Enhanced Supervision of Stock Brokers
The Company has announced enhanced supervision of stock brokers tofacilitate reporting of their Bank and Demat accounts.
This new initiative is in line with SEBI's directive (vide SEBICircular SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/95 dated September 26 2016. Reporting on most ofthe clauses has been made applicable w.e.f. July 1 2017 and for the remaining clauses onvarious dates notified from time to time subsequently.
SEBI has issued guidelines which cover following broad areas:-
Uniform nomenclature to be followed by stock brokers forNaming/Tagging of Bank and Demat Accounts and the reporting of such accounts to the StockExchanges/Depositories.
Monitoring of Clients' Funds lying with the Stock Broker bythe Stock Exchanges through a sophisticated alerting and reconciliation mechanism todetect any misutilisation of client's fund.
Changes in the existing system of internal audit for stockbrokers/depository participants viz. appointment rotation of Internal Auditorsformulation of objective sample criteria monitoring of quality of Internal Audit Reportstimeline for submissions of Internal Audit Reports etc.
Monitoring of Financial Strength of Stock Brokers by StockExchanges so as to detect any signs of deteriorating financial health of stock brokers andserve as an early warning system to take preemptive and remedial measures.
Imposition of uniform penal action on stock brokers/depositoryparticipants by the Stock Exchanges/Depositories in the event of non-compliance withspecified requirements.
a. Uploading client's funds and securities balances by StockBrokers to Stock Exchange System and onward transmission of the same to the clients forbetter transparency. b. Clarification on Running Account Settlement. c. ProvidingPermanent Account Number ("PAN") details of Directors Key Management Personneland Dealers to Stock Exchanges and any change thereof.
MARKETING AND COMMUNICATIONS
During the year the Company continued with the task of educatinginvestors and; supporting and launching new products.
The launch of the International Exchange and the listing of BSE were 2significant events for the Company during the year. The International
ExchangeIndia Internationa Exchange (IFSC) Limited (India INX) wasinaugurated by the Hon'ble Prime Minister of India Shri Narendra Modi. The event hadover 5000 people attending in person and millions witnessing it live on their televisionsets.
BSE emerged as India's first listed stock exchange a significantmilestone supported by an integrated communication campaign covering television print andsocial media.
The Company did get significant coverage in all leading national/international newspapers and channels while its presence on social media grew manifold.The Company hosted more than 240 events ranging from international delegations toeducational programs to roundtables on important national and international topics.
During the course of the year the Company witnessed many high profilevisits and delegations from the government industry and other sectors from India andabroad.
The dignitaries include:
1. Shri Narendra Modi Hon'ble Prime Minister of India
2. Shri CH Vidyasagar Rao Hon'ble Governor of Maharashtra
3. Shri Arun Jaitley Hon'ble Union Minister of Finance CorporateAffairs and Defence Government of India
4. Shri Suresh Prabhu Hon'ble Minister of Railways Government ofIndia.
5. Shri Venkaiah Naidu Hon'ble Former Minister of Information andBroadcasting Urban Development Housing and Urban Poverty Alleviation Government ofIndia
6. Smt. Smriti Irani Union Cabinet Minister of Textiles Informationand Broadcasting Government of India
7. Shri Devendra Fadnavis Hon'ble Chief Minister of Maharashtra
8. Shri Vijay Rupani Hon'ble Chief Minister of Gujarat
9. Shri Laxmikant Parsekar Former Hon'ble Chief Minister of Goa
10. Shri Piyush Goyal Minister of State with Independent Charge forPower Coal New & Renewable Energy and Mines in Government of India
11. Shri Ramdas Athawale Minister of State for Social Justice &Empowerment Government of India 1
2. Shri Hansraj Gangaram Ahir Union Minister of State for HomeAffairs.
13. Shri Jayant Sinha Hon'ble Minister of State for CivilAviation Government of India
14. Shri Arjun Ram Meghwal Minister of State Finance & CorporateAffairs Government of India
15. Shri Arvind Sawant Member of Parliament Loksabha
16. Shri Sudhir Mungantiwar Hon'ble Minister for Finance andPlanning Forest Government of Maharashtra 17. Shri Rajkumar Badole Hon'bleMinister for Social Justice and Special Assistance Government of Maharashtra 18. Shri RamKadam Member of Legislative Assembly of Maharashtra State
19. Prime Minister of Serbia H.E. Mr. Aleksandar Vu i 20. Mr. JohnTory Hon'ble Mayor of Toronto
21. Mr. John Halligan T.D. Hon'ble Minister for Training Skillsand Innovation Ireland
22. Mr. Navdeep Singh Bains Hon'ble Minister of InnovationScience and Economic Development Canada
23. Mr. Pat Breen TD Hon'ble Minister of State for Employment andSmall Business Irish Government
24. Mr. Meng Jianzhu Special Envoy of President Xi Jinping Member ofthe Political Bureau of the Central Committee of the Communist Party of China (CPC)Secretary of the Political and Legislative Affairs Committee of the CPC Central Committee.
25. Mr. Panos Kalogerpoulos Hon'ble Ambassador of Greece to India
26. Mr. Steven Armour Director Huston Polo Club and National Governorof United States Polo Association
27. Mr. Taro Kono Member of Japanese Parliament
28. Mr. Rajcoomar Rampertab Hon'ble MP Mauritius &Parliamentary Private Secretary and in charge Development Desk Office of Prime Ministerof Mauritius.
29. Shri Shaktikanta Das Secretary (Economic Affairs) Ministry ofFinance
30. Shri D. K. Jain Addl. Chief Secretary Govt. Of Maharashtra 31.Shri Praveen Garg Joint Secretary Department of Economic Affairs Ministry of FinanceGovt. of India 32. Shri Ajay Tyagi Chairman SEBI
33. Shri. U. K. Sinha Former Chairman SEBI
34. Dr. Harshdeep Kamble Commissioner FDA Maharashtra 35. Hon. Adv.Shri Prakash Yashwant Ambedkar Head Bharipa Bahujan Mahasangh 36. Smt. Nita MukeshAmbani Chairperson & Founder Reliance Foundation and Non-Executive DirectorReliance Industries 37. Shri Azim Premji Chairman WIPRO
38. Shri Mukesh Kumar Suhana CMD HPCL 39. Shri Sanjeev GoenkaChairman CESC Ltd.
AWARDS AND RECOGNITION
Business World Digital Leadership and CIO Award
The IDC Digital Transformation Awards 2017
The Best Exchange of the year award for equity and currencyderivatives in Te_a's Commodity Economic Outlook Award 2017
Best Brand award 2017 by Economic Times
CIO POWER LIST 2017
Best Corporate _lm encompassing Vision History Value andSpirit of Excellence award Best Corporate _lm on Employer Branding award and MostIn_uential HR Leaders in India award at World HRD Congress 2017
Best Exchange of the year' award at 4thIndia Bullion & Jewellery awards 2017.
Red Hat Innovation Awards 2016 by Red Hat Solutions.
Skoch Achiever Award 2016 for SME Enablement.
Best IT Implementation Award 2016 in the "Most ComplexProject Category" by PCQuest.
InfoSec Maestros Awards 2016.
Lions CSR Precious Awards 2016.
During the year under review the face value of the equity shares ofthe Company was consolidated from ` 1/- (Rupee One only) to ` 2/- (Rupees Two only) pershare vide resolution passed by the members of the Company on November 25 2016.
Pursuant to clause 5 of BSE (Corporatisation and Demutualisation)Scheme 2005 (BSE Scheme 2005) approved by SEBI vide its notification dated May 20 2005every trading member having membership right of the Exchange or his nominee as the casemay be as on record date was entitled to 10000 equity shares of the face value of ` 1/-per share against membership right of erstwhile BSE._It may be noted that the entitlementagainst membership right post consolidation of share capital stands changed to 5000 equityshares of face value ` 2/- per share. The said shares as on March 31 2017 have been keptin abeyance for various reasons.
The Company on March 27 2017 allotted 130000 equity shares of theface value of ` 2/- per share along with corporate benefits accrued thereon as on thesaid date to two erstwhile trading members having membership rights whose entitlements toshares were kept in abeyance pursuant to BSE Scheme 2005. The said allotment of 65000equity shares to each of the above trading member comprised of 5000 equity shares towardsinitial entitlement of equity shares pursuant to BSE Scheme 2005 and 60000 bonus equityshares issued by the Company in the year 2009.
The above share allotment resulted in an increase in equity sharecapital of the Company from ` 107356344 to ` 107616344 as on March 31 2017. Theauthorised capital of the Company as on March 31 2017 stood at ` 3000000000. As perBSE Scheme 2005 remaining 12 erstwhile trading members having an aggregate 12membership rights continue to remain in abeyance till date.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
A detailed disclosure of the particulars relating to Loans andinvestments by the Company as per Section 186 of the Companies Act 2013 (theAct') is provided in notes to the financial statements.
SUBSIDIARIES/ JOINT VENTURES/ ASSOCIATE COMPANY
The Company has the following sixteen subsidiary companies (direct andindirect) and one joint venture as on March 31 2017 names of which are given below:-
BSE Investments Limited BSE Sammaan CSR Limited
BSE CSR Integrated Foundation (Section 8 Company) BSE Institute LimitedBFSI Sector Skill Council of India (Section 8 Company) BSE Skills Limited
BIL Ryerson Technology Startup Incubator Foundation (Section8 Company) Central Depository Services (India) Limited CDSL Ventures Limited CDSLInsurance Repository Limited CDSL Commodity Repository Limited (w.e.f. March 16 2017)India International Exchange (IFSC) Limited (w.e.f. September 12 2016)
India International Clearing Corporation (IFSC) Limited (w.e.f.September 12 2016) Indian Clearing Corporation Limited Marketplace Technologies PrivateLimited Marketplace Tech Infra Services Private Limited
Asia Index Private Limited
The statement containing the salient features of the financialstatements along with the names of the subsidiaries/ joint ventures of the Company aregiven in Form AOC 1 which forms a part of this Annual Report.
Further the financial statements of the Subsidiary companies are keptfor inspection by the shareholders at the Registered Office of the Company. The Companyshall provide a copy of the financial statements of its subsidiary companies to theshareholders upon their request in writing. The statements are also available on thewebsite of the Company www.bseindia.com
BSE Skills Limited have filled application to Registrar of Companies(ROC) for removing its name from register of companies. There has been no material changein the nature of the business of the other subsidiaries and joint venture.
Changes in subsidiaries/ joint ventures/ associate company
The Company incorporated the following subsidiaries during the yearended March 31 2017: -
1. India International Exchange (IFSC) Ltd. (India INX) wasincorporated under the Act on September 12 2016.
2. India International Clearing Corporation (IFSC) Ltd. (India ICC) wasincorporated under the Act on September 12 2016.
3. CDSL Commodity Repository Limited was incorporated under the Act onMarch 16 2017.
Central Depository Services (India) Limited (CDSL)
During the FY 2016-17 the Company sold 4.15% equity stake in itssubsidiary CDSL. The shareholders of the Company have also approved divestment of 26.05%equity stake in CDSL through a postal ballot during FY 2016-17. The Company hassuccessfully tendered 27217850 equity shares i.e. 26.05% of its equity stake in CDSLthrough offer for sale post which the aggregate shareholding of the Company standsreduced to 25080000 equity shares i.e. 24%. Accordingly CDSL along with itssubsidiaries namely CDSL Venture Limited CDSL Insurance Repository Limited and CDSLCommodity Repository Limited ceased to be subsidiaries of the Company and have become anassociate companies with effect from June 29 2017.
DIRECTORS AND KEY MANAGERIAL PERSONNEL ("KMP") Appointmentand Re appointment of Directors
During the year under review Shri Sumit Bose and Justice VikramajitSen were appointed as Public Interest Directors w.e.f. May 19 2016.
In accordance with the provisions of the Act read with the applicablerules as amended Dr. Sriprakash Kothari Shareholder Director retires by rotation andbeing eligible offered himself for re-appointment at the ensuing Annual General Meeting.
Cessation of Directors
Dr. Sanjiv Misra ceased to be Public Interest Director w.e.f. April 222016. Shri Roland Schwinn was appointed as Shareholder Director in place of Shri ThomasBendixen w.e.f. June 13 2017.
Shri Sudhakar Rao ceased to be Public Interest Director and Chairmanw.e.f. June 28 2017 due to successful completion of his tenure.
The Company places on record its appreciation and gratitude for thevaluable contributions made by them during their tenure as member of the Board.
Changes in KMP
During the year Smt. Prajakta Powle was appointed as a CompanySecretary & Compliance Officer of the Company w.e.f. September 7 2016 in place ofSmt. Neena Jindal erstwhile Company Secretary of the Company.
Declarations by Public Interest Directors (PID')
All PIDs have given declarations under section 149(7) of the Act thatthey met the criteria of Independence as laid down under Section 149(6) of the Act andRegulation 16 of Listing Regulations. Further all PIDs have also given the declarationsthat they satisfy "fit and proper" criteria as stipulated under Regulation 20 ofSECC Regulations.
MEETINGS OF THE BOARD
As on March 31 2017 eight (8) meetings of the Board were held duringthe year. For details of meetings of the Board please refer to the Corporate GovernanceReport forming part of this report.
Separate meetings of the Independent Directors was held on May 4 2016and February 13 2017.
The Board of Directors of the Company carried out annual evaluation ofits own performance committees of Board and individual Directors pursuant to variousprovisions under the Act Regulation 17 19 and Schedule II of the Listing Regulations andbased on the SEBI circular dated January 5 2017 which provides further clarity on theprocess of board evaluation ("SEBI Guidance Note").
The Company has implemented a system of evaluating performance of theBoard of Directors and of its Committees and individual Directors on the basis of astructured questionnaire which comprises evaluation criteria taking into considerationvarious performance related aspects.
The procedure followed for the performance evaluation of the BoardCommittees and individual Directors is enumerated in the Corporate Governance Report.
There are various Board constituted Committees as stipulated under theAct and Listing Regulations namely Audit Committee Nomination
& Remuneration Committee Stakeholders Relationship CommitteeIndependent Directors' Committee and Corporate Social Responsibility (CSR) Committee.Brief details pertaining to composition terms of reference meetings held and attendancethereat of these Committees during the year has been enumerated in Corporate Governancereport.
Additionally Company being an Exchange has also constituted otherRegulatory Committees as stipulated under SECC Regulations.
AUDIT AND AUDITORS REPORT
The auditors Deloitte Haskins & Sells LLP Chartered Accountants(Firm Registration No. 117366W/W-100018) Mumbai had been appointed in the Ninth AGMheld on August 1 2014 for a period of three years to hold the office from the conclusionof the Ninth AGM until the conclusion of the Twelfth AGM to be held in the year 2017accordingly they retire at the AGM.
The Board in its meeting held on May 5 2017 approved and recommendedthe appointment of S R Batliboi & Co. LLP Chartered Accountants (Firm RegistrationNo. 301003E/E300005) as statutory auditors of the Company for a period of five years witheffect from ensuing AGM of the Company subject to rati_cation by shareholders at everyAGM. The auditors have confirmed that their appointment would be in accordance with theSection 139 of the Act and the rules made thereunder and that they are not disqualifiedin terms of Section 141 of the Act.
The statutory auditors' report dated May 5 2017 on the financialstatements of the Company for FY 2016-17 is unmodified and does not have reservationsqualifications or adverse remarks.
The Board appointed M/s. Ragini Chokshi & Co. Practicing CompanySecretaries to conduct Secretarial Audit of the Company for the financial year 2016-17.
Secretarial audit report for the year ended on March 31 2017 asprovided by M/s. Ragini Chokshi & Co. Practicing Company Secretaries is enclosed as AnnexureA.
The secretarial auditor's report does not contain anyqualifications reservations or adverse remarks.
Policy on Directors' Appointment and Remuneration
The Company's policy on Director's appointment andremuneration provided in Section 178(8) of the Act has been disclosed in the AnnexureB enclosed with this report.
Corporate Social Responsibility ("CSR")
The Company has constituted a CSR Committee in accordance with Section135 of the Act. The details of the CSR Policy its development and initiatives taken onCSR during the year as per annexure attached to the Companies (Corporate SocialResponsibility Policy) Rules 2014 have been enclosed as Annexure C to thisreport.
Whistle Blower Policy
The Company promotes ethical behaviour and has put in place a mechanismfor reporting illegal or unethical behaviour. The Company has a Vigil Mechanism andWhistle-blower policy under which the employees are free to report violations ofapplicable laws and regulations and the Code of Conduct. Employees may report theirgenuine concerns to the Chairman of the Audit Committee. During the year under review noemployee was denied access to the Audit Committee.
The details of establishment of such mechanism has been disclosed onthe website http://www.bseindia.com/downloads1/Whistle_ Blower_policy.pdf
Particulars relating to the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013
The Company has always believed in providing a safe and harassment freeworkplace for every individual working in its premises through various policies andpractices. The Company always endeavours to create and provide an environment that is freefrom discrimination and harassment including sexual harassment.
The Company has adopted a policy on Prevention of Sexual Harassment atWorkplace which aims at prevention of harassment of employees and lays down the guidelinesfor identification reporting and prevention of undesired behavior. An Internal ComplaintsCommittee ("ICC") has been set up by the senior management (with women employeesconstituting the majority). The ICC is responsible for redressal of complaints related tosexual harassment and follows the guidelines provided in the Policy.
During the year ended March 31 2017 no complaints pertaining tosexual harassment have been received
RISK MANAGEMENT AND COMPLIANCE
The risk management report discusses various dimensions of theCompany's enterprise risk management. The risk related information outlined in thissection may not be exhaustive. The discussion may contain statements that are forwardlooking in nature. The business is subject to uncertainties that could cause actualresults to differ materially from those reflected in the forward looking statements.Members are advised to refer the detailed discussion of the risk factors and relateddisclosures in the regulatory _lings and exercise their own judgment in accessing risksassociated with the Company.
Risk Management is an enterprise wide function at the Company whichcovers major business and functional areas including strategy operations technology andcompliance. Major risks identified by the businesses and functions are systematicallyaddressed through mitigating actions on a continuing basis. Several risks can impact theachievement of a particular business objective. Similarly a single risk can impact theachievement of several business objectives. The focus of risk management is to assessrisks deploy mitigation measures and review them including the risk management policy ona periodic basis. This is done through periodic review meetings of the Risk ManagementCommittee comprising of the Board members.
The risk in relation to internal control over financial recording andreporting is reviewed by the Audit Committee. The Company's internal control systemsare commensurate with the nature of its business and the size and complexity ofoperations. These systems are routinely tested and certified by Statutory as well asInternal Auditors. The Audit Committee reviews adequacy and effectiveness of theCompany's internal control environment and monitors the implementation of auditrecommendations including those relating to strengthening of the Company's financialrisk management policies and systems.
The key roles and responsibilities regarding risk management in theCompany are summarized as follows:
|LEVEL ||Key Roles and Responsibilities |
|Board of Directors ||? Approving key business objectives to be achieved by the Company. Ensuring that the executive |
| ||management focuses on managing risks to key business objectives |
| ||? Reviewing the performance of the Risk Management Committee |
|Risk Management Committee ||?? Composition of Committee: |
| ||? ? Smt. Usha Sangwan |
| ||? ? Shri Sumit Bose |
| ||? ? Shri Sethurathnam Ravi |
| ||? ? Shri Thomas Bendixen (Ceased to be Shareholder Director w.e.f. June 13 2017) |
| ||? ? Shri Nehal Vora |
| ||? ? Shri V. Balasubramaniam (Ceased to be Member w.e.f. July 11 2017) |
| ||? ? Shri Nayan Mehta |
| ||? Review and oversight with regards to identification evaluation and mitigation of the strategic operational |
| ||technology and compliance risks |
| ||? Reviewing and approving risk related disclosures |
| ||? Monitoring and approving the risk management framework and associated practices of the Company |
|Role of Risk Team ||? Adhering to the risk management policies and procedures |
| ||? Implementing prescribed risk mitigations actions |
| ||? Reporting risk events and incidents in a timely manner |
The Company's Risk Management Framework considers the followingbroad categories of risk:
Risks arising out of the choices we have made in defining our strategyand the risks to the successful execution of these strategies are covered in this category for e.g. risks inherent in our industry and competitiveness are analyzed andmitigated through strategic choices of target markets the Company's marketofferings business models and talent base. Potential risk to the long term scalabilityand sustainability of the organization are also analyzed and mitigation plans areformulated. We periodically assess risks to the successful execution of devised strategysuch as the effectiveness of tactical programs that are being executed the momentum innew initiatives the impact of strategy on financial performance leveraging of inorganicplans effectiveness of organisation structure and processes retention and development ofhigh performing talent and leadership.
(b) Operational and Technology
Risks arising out of internal and external factors affecting thepolicies procedures people and systems in our support functions thereby impactingdelivery of services; compromises our core values. Risks not in accordance with generallyaccepted business practices or impacting the client's operations are covered in thiscategory. For e.g. risks of business activity disruption due to natural calamitiesterrorist attacks war or regional conflicts; or disruption in telecommunications systemsfailures virus attacks or breach of cyber security.
Risks arising out of threats posed to the financial organisational orreputational standing resulting from violations or non-conformance with laws regulationscodes of conduct prescribed practices or contractual compliances are covered in thiscategory. For e.g. risks of potential litigations breach of contractual agreementsnon-compliances to regulations potential risks arising out of majorregulatory/geopolitical changes and potential risks arising out of strategic oroperational business decisions.
Risk Management Procedure
(a) Risk Identification
Risk Management is a continuous interplay of actions that permeate theCompany. It is brought into effect by the Company's risk committee management andother personnel. The risk management process of the Company aims at providing reasonableassurance regarding achievement of its objectives.
In order to provide reasonable assurance the Company's riskmanagement process endeavors to help:
Identify assess and escalate new risks impacting the objectivesof the Company
Define mitigation actions to respond to the new riskseffectively
Monitor effectiveness of existing risk management mitigationactions and
Report risks and risk management mitigation actions to the RiskManagement Committee on a periodic basis.
The risk analysis and evaluation are carried out using scenario basedassessments to decide the potential impact likelihood of occurrence and in some casesthe ability to detect risk.
(b) Risk Mitigation
Mitigation actions are prepared and finalised owners are identifiedand the progress of these actions are monitored and reviewed. The Risk ManagementCommittee periodically evaluates the effectiveness of mitigating risks and provides itsadvice to the relevant teams.
(c) Risk Reporting
The top risk from the risk registers its mitigation plans periodicreview of processes and new risks emanating from such reviews are assessed by the RiskManagement Committee.
Risk Management Framework for the year
During the year the Company's risk management practices wereprimarily focused on the effectiveness of strategic programs in improving the competitiveposition and differentiation in market segments the momentum of new initiatives toachieve long-term business aspirations readiness to address any incidents that may causebusiness disruptions to the physical and technological infrastructure strengtheninginternal controls to detect fraudulent activity leadership development leadershipsuccession planning and monitoring possible impact of changes in the regulatoryenvironment.
The following risk management activities were carried out during thelast fiscal year:
Assessed and strengthened the enterprise risk managementframework for further standardization of risk identification assessment and governance ofrisks across the organization.
Identified top ten risks at the Company level and the same isbroadly categorized under strategic and business risks operational and technology risksregulatory and compliance risks.
Identified and established various risk mitigation controls tomitigate the risk.
Assessment of our business momentum relative to competition andcompetitive position in key market segments comprising currency derivatives interest ratederivatives and mutual fund segment were conducted.
Regularly assessed progress on the execution of strategicprograms specifically progress on the growth of new derivative products and performanceof subsidiary businesses.
Monitored key developments in the regulatory environmentespecially amendments and notifications issued by SEBI and other authorities which areapplicable to the business.
INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has maintained adequate internal financial controls overfinancial reporting.
These includes policies and procedures
a. Pertaining to the maintenance of records that is reasonablydetailed accurately and fairly reflects the transactions and dispositions of the assetsof the Company
b. To provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with IndianAccounting Standards ("IAS") notified under the Companies (IAS) Rules 2015 asamended from time to time and that receipts and expenditures of the Exchange are beingmade only in accordance with authorization of management and directors of the Company and
c. To provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition use or disposition of the Company's assetsthat could have a material impact on the financial statements. Such internal financialcontrols over financial reporting were operating effectively as of March 31 2017 basedon the criteria established in COSO Internal Control Integrated Framework issued bythe Committee of Sponsoring Organizations of the Treadway Commission in 2013 (COSOFramework).
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES REFERREDTO IN SUB-SECTION (1) OF SECTION 188 OF THE COMPANIES ACT 2013
The Company has formulated a policy on Related Party Transactions. Thesame is available on the Company's website at http://www.bseindia.com/downloads1/Related_Party_Transaction_Policy.pdf.
The Policy intends to ensure that proper reporting approval anddisclosure processes are in place for all transactions between the Company and relatedparties. This policy specifically deals with the review and approval of material relatedparty transactions keeping in mind the potential or actual conflicts of interest that mayarise because of entering into these transactions. Prior approval was obtained of AuditCommittee for all the related parties and transactions thereof entered in the ordinarycourse of business and at arm's length. All related party transactions are placedbefore the Audit Committee for its review on a quarterly basis. All related partytransactions are subjected to independent review by a reputed accounting firm to establishcompliance with the requirements of related party transactions under the Act and ListingRegulations.
A detailed disclosure of these transactions with the related parties isenclosed with this report in Form AOC-2 as Annexure D.
INVESTOR PROTECTION FUND (IPF)
The Company through its IPF regularly conducts Investor AwarenessProgrammes ("IAPs") throughout the country. IPF has conducted a total of 4499IAPs during FY 2016-17. During the year IPF conducted 103 Regional Investor Seminarsexclusively with SEBI across different parts of the country. BSE IPF also periodicallybrings out advertisements on Do's and Don't's for investors to educateinvestors and enable them to safeguard their interests.
IPF has started publishing research reports on traded companies to fillthe information gap for the benefit of investors in those companies. As of March 31 2017there were 1508 Company Research Reports available free of cost on the Company'swebsite for the investors. Search _lters available on the website give easy access toinitiation research reports as well as quarterly reports. During the year severaleducational and other capital market awareness events were sponsored by BSE IPF to raiseawareness about corporate best-practice. BSE IPF has also supported global conferences andseminars that enhance understanding of Indian markets both in India and abroad. IPF iscurrently managing 25 offices across India covering all the major state capitals. In orderto create Capital Market Awareness with Post Graduate college students IPF Secretariathas conducted more than 700 programs with Universities and Educational Institutions acrossIndia.
Major Initiatives include:
1) India International Trade Fair with SEBI New Delhi from November14 2016 to November 27 2016.
2) 44th National Convention of Institute of CompanySecretaries Ahmedabad November 17 2016.
3) Vibrant Gujarat Global Trade Show Gandhinagar from January 102017 to January 13 2017.
4) The Institute of Chartered Accountants of India ("ICAI")Convention 2016 Chennai on January 20 2017.
5) BSE IPF opened new Investor Service Centers across 9 cities during2016-17 as per the mandate from SEBI.
These include: Chandigarh; Dehradun; Guwahati; Bhubaneshwar; Ranchi;Panaji; Raipur; Shimla and Jammu.
IPF supports research projects in the area of Capital Market. During FY2016-17 IPF has completed following Research Projects:
1. "Analyzing investor behavior to increase the awareness ofInvestor awareness and Education Program" prepared by students of TA Pai Institute ofManagement Studies Manipal under the BrandScan project.
2. "CFA Institute Research Challenge" hosted by the IndianAssociation of Investment Professionals Season 2016-17.
In order to spread awareness about capital market as part of financialinclusion and to educate investors at national level across India especially in tier 2tier 3 & tier 4 cities BSE IPF has used services of national level TV channelsincluding leading Business channels and Doordarshan for spreading financial literacyprograms related to capital market education financial planning etc. BSE IPF hasunderstanding with following TV channels in order to spread capital market awareness amongmasses:
1) CNBC TV18 and CNBC Awaaz
2) ZEE Business
3) Doordarshan ("DD") Prasar Bharati
4) ET Now
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGEEARNINGS AND OUTGO
Conservation of Energy
(i) The steps taken and their impact on conservation of energy:
The Company uses electricity to run its electronics and the offices.During the year we have regularly replaced the induction ballasts with electronic ballastsand also replaced the _uorescent lights with LED lights where feasible. We conserve energyby switching off lights & other equipment when they are not required. We prefer to uselighter and brighter colors in our offices to maximize efficiency of lighting. Whereverpossible we have coated the glass windows to reduce the heat entering the building whichreduces the air-conditioning load. The Company continuously strives to optimize its energyusage and efficiency.
(ii) The steps taken by the Company for utilising alternate sources ofenergy: Since our building has a large surface covered by glass windows we also use theambient light for lighting purposes as much as possible. This reduces the electricityconsumption due to lesser need of lighting during the day.
(iii) The capital investment on energy conservation equipment: Nil
Big Data Implementation and expanding its scope
Data at the Company is growing at an exponential rate and is expectedto grow many-fold as we may start new lines of business. Data volume is doubling every twoyears. As per Statutory & Legal compliance mandates most of the data had to be madeavailable for a number of years to provide historical information to authorities. Ourbusiness demands complex on-demand analysis & reporting on terabytes of data. This iscoupled with real time surveillance and fraud detection models which was challenging withour legacy technologies.
Our previous investment in a proprietary system was almost fullyutilized and required significant ongoing investments every year to keep pace with ourcomplex analytics requirement and data growth. This would necessitate upgrade to newerreleases of hardware and software every few years incurring significant investments.
To address this the Company has migrated its enterprise Data Warehouseproprietary system to open source Big Data HADOOP platform and has built a real timeanalytics framework on the same. This move has brought in efficiency and lower cost ofownership which would provide for our requirements at a fraction of cost. In the newplatform we have consolidated multiple systems that processes and provide informationinto an Enterprise Data Lake. Data from systems like Trading Risk Management Clearingand Settlement and Back-office is available in real time from Big Data platform.
Further to Big Data analytics the Company has also implemented SocialMedia analytics using Artificial Intelligence to predict rumors and verification of newsfloating in the market on BSE listed companies and its impact on the stock market. Suchreal time approach has resulted in prompt dissemination of information pertaining to thecompanies. The Company has deployed this technological innovation to mitigate thepotential risks of market manipulation and information asymmetry arising from it. Thiswould enhance market integrity orderly functioning and investor protection in the IndianCapital Markets.
As the first phase of the project the Company implemented a liveframework to monitor the news websites using data management and machine learning. In thesubsequent phases the framework for collecting data from Facebook and Twitter wasimplemented.
Social Media analytics has helped faster processing and disseminationof information. This was one of the primary criteria for success of this project. As thequantum of processing information increased the Company was able to monitor impact of acertain news on the prices. Employee involvement and productivity reached new highs asthe team involved were equipped with better and more information. Overall savings in costin terms of resources deployed for manual tracking and other indirect costs weredrastically reduced.
Adoption of Open source technologies for transaction processing workload
The Company is currently using proprietary relational databases forvarious transactional processing work loads of various systems. The proprietary relationaldatabases are cost intensive and the Company incurs huge costs on licenses and annualmaintenance contracts for the same. To have a control on this ever increasing license costand in line with its overall outlook of moving towards the Open Source technologies theCompany has taken steps in the direction to migrate its existing database to PostGreSQLfor majority of its systems which is also open source. This will result in substantialsavings in overall licensing costs.
It is expected that by end of FY 2017-18 majority of the migrationactivity to be completed.
Augmentation of Trading infrastructure
In the past year the Company has upgraded the trading systeminfrastructure to achieve an increased and improved performance. The latest hardwareincludes the Intel V4 series central processing units the use of which has improved theperformance of the system by around 15-20 microseconds. The hardware has been augmented bythe creation of additional partitions for providing enhanced parallelism in the matchingprocess. The product distribution on the various matching engines has been optimallyarranged to offer the best performance.
The trading system's internal network has been further augmentedby the additional switches to handle the Administrative messages flowing through thesystem. The additional switches enable segregation of the Order flows and Administrativemessage flows in the system.
Uni_ed Trading Interface BOLTPLus on Web
The Company provides BOLTPLus on Web ("BOW") the powerfulreal time trading solution free of cost to its members. As BOW is provided on a cloudmodel by the Company trading members do not have to invest and manage hardware softwareor incur any other license costs.
BOW comes with features like trade from anywhere anytime usinginternet daily charts portfolio views and other user based customisation. Riskmanagement is also an integral part of BOW it provides flexibility to trading members tomanage and control the risks pro_ling of clients monitoring and surveillance. Overallit's a complete package for all needs of trading members and their clients.
It has been a constant endeavor to innovate and provide high endtrading solutions to the market participants. This as a vision the following are the keydeliverables done to enhance market participation.
1. Portfolio based margin implemented with the real time Mark to Marketmargins.
2. Keeping pace with the digital transactions third party PaymentGateway solution has been integrated with the BOW Application which facilitates the userto do real time fund transfer.
3. BSE Mobile Based Trading Application now gives the user tradingfacility along with real time market data.
4. BOW now also supports new trading formats of NCDEX.
The BOW trading solution was also implemented for India's firstInternational Exchange India INX at GIFT City.
With continuous contribution from user experience and to enhancecustomer satisfaction our focus is towards product enhancements with newer cost effectivetechnologies and platforms. Performance Scalability and Robustness are the key drivers ofBOW platform. Trading users will be aided with enhanced GUI coupled with a new FlexibleRisk Management system.
Uni_ed Experience Identity and Access Management
The Company has a series of application on variety of platforms. Eachapplications had its own work-flow management. In order to do away with inconvenience ofmanageability and simplify the process the Company implemented its home grown solution ofIdentity and Access Management ("IAM") using open source technologies whichhelps to achieve Single-Sign On ("SSO") with Two Factor Authentication.
SSO solution was based on open source technology integrated with itsinternal domain authentication mechanism. SSO facilitated uni_cation of work-flow andaccess methodology. It reduces the overhead of maintaining multiple interfaces reducescost simpli_es process and vastly reduces non-compliance related issues.
To highlight a few of the benefits:
1. Control the implementation of password policy across allapplications
2. Have single credentials for all applications
3. New user provisioning and de-provisioning encompassing allapplications and services
4. Reduction in user management calls at IT help desk
5. One portal for all available applications
Launch of India INX
BSE world's fastest exchange with the speed of 6 microseconds isthe first and only exchange to setup the country's first International Exchange atthe International Financial Services Centre ("IFSC") Gujarat InternationalFinance-Tec City ("GIFT") Gandhinagar.
The Company signed an agreement with GIFT Special Economic Zone("SEZ") Ltd. in January 2015 to set up International Exchange and InternationalClearing Corporation at the GIFT IFSC. Built over an area of 880 acres the GIFT City isenvisaged as an International hub for capital market trade.
India INX and India ICC are wholly owned subsidiaries of the Company.
BSE IT team had been instrumental in setting up the India INX DataCentre. The Data Centre setup was completed in a record time of 2 months. This includedthe design build provisioning of power and cooling infrastructure setup. It alsoprovides for colocation services facilitating high frequency trading. Variants of datadissemination streams are provided to choose from such as Full order book tick-by-tickand snapshot based. Correspondingly solution team too was engaged in applicationdevelopment and deployments of about 20+ applications with multiple dry runs.
One of the notable and important IT contributions was applicationdevelopment to cater to 22 hours trading. The application architecture has been designedto be robust as well as flexible enough to meet international requirements facilitatingease of con_guring new products and its underline business rules.
The trading and the peripheral systems have been setup in a highavailability mode and is designed to run 22 hours a day. The daily beginning and end ofday operations activities have been automated.
India INX was inaugurated by the Hon'ble Prime Minister ShriNarendra Modi on January 9 2017 and further the trading activities commenced on January16 2017.
India INX provides the BOW terminals to enable its Members to trade. Inaddition Exchange also provides API's in the form of Intermediate Message Layer("IML") or Enhanced Trading Interface ("ETI") to Trading Members orIndependent Software Vendors ("ISV") for development of their OmniLink MerchantServices ("OMS").
Upgradation of the Security Operations Center (SOC)
The Company lays special emphasis on improvement in its cyber-securityframework and information security management systems. It was identified as a NationalCritical Information Infrastructure by National Critical Information InfrastructureProtection Centre ("NCIIPC").
There is an ongoing process to strengthen cyber security under theguidance from NCIIPC and other national agencies like Indian Computer Emergency ResponseTeam ("CERT-In") National Security Council Secretariat ("NSCS")Ministry of Home Affairs ("MHA") and SEBI. With the increase in cyber threatsand attacks cyber security is becoming more and more established in the corporatestructure. Constant enhancement in the Cyber Security Framework and Information SecurityManagement System has been our top priority. Moreover the Company's performance isdependent upon the volume and value of trades executed on its trading platform. Thisimplies high availability and no compromise on security around trading and peripheralsystems or its underlying processes.
To address this challenge the Company envisaged transforming itscurrent information security posture to next generation security analytics and operations.The Company has embarked on a monumental task of creating the Next Generation securityoperations center ("SOC") to provide increased resilience and rapid response toevents throughout its IT landscape.
The year 2016-17 witnessed hectic groundwork to build the foundationfor SOC. After due diligence and assessment of current posture technologies and solutionswere identified for fortifying existing security infrastructure and adapting newstrategies to combat advanced threats. SOC Team con_gurations and required skill sets wereanalysed. IT Team was revamped with resources with a focus area in cyber security.
Prime responsibility of SOC is to perform 24x7 monitoring detectingand isolating incidents which indicate compromise in confidentiality integrity andavailability of these critical systems. Management of the organization's securityproducts devices and systems are evident activities of SOC maintenance and operationsscheme. The Next-Generation SOC will not only enable the Company to strategize againstadvanced cyber threats but also enhance its efforts as an organization to safeguardagainst informational reputational and financial losses arising from cyber securitybreaches.
To build maintain and operate Next-Generation SOC in integration withthe existing security infrastructure the Company has evaluated and appointed team ofconsultants and awarded contract to implement various security solutions. The fullyoperational SOC will be ready by end of 2017.
FOREIGN EXCHANGE EARNING AND OUTGO
The particulars of Foreign Exchange Earnings and Outgo during the yearunder review are furnished hereunder:
Foreign Exchange Earning: ` 2168 Lakh (Previous Year ` 1999 Lakh)
Foreign Exchange Outgo: ` 585 Lakh (Previous Year ` 663 Lakh)
Organizations that invest in human capital invest in the future. AtBSE the focus has been on making the right investments in human capital to take theCompany and all its employees to the next level of competence and expertise. The Companyhas always believed that motivated employees are the core source of competitive advantageand these is continuous investments in training and development programs along withvarious other Human Resource ("HR") initiatives.
The Company has aligned the compensation packages of management andsuccessfully revamped many outdated HR policies to make benefits and compensation moretransparent and employee-friendly.
Also the organizational structure of the Company has undergonesignificant restructuring to enhance accountability and efficiency with a view to aligningperformance management and reward strategies.
As of March 31 2017 the Company had 369 officers and 121 staff levelemployees.
Material Developments in Human Resources/Industrial Relations Frontincluding number of people employed
The Company has been hiring talent both experienced as well as freshpost graduates from leading Business Schools in the recent years with a focus on matchingskills and expertise to the relevant roles to enhance employee satisfaction. The EmployeeRelations scenario has also been satisfactory during the year. The clerical and sub staffare represented by an internal union.
Particulars of Employees
Pursuant to Section 197 (12) of the Act read with Rule 5 of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 every listedcompany shall disclose in the Board's report the ratio of the remuneration of eachdirector to the median employee's remuneration and other particulars of the employeesdrawing remuneration in excess of the limits prescribed in the above rules. Accordinglysuch information pertaining to the Company is provided as an Annexure E.
The Company has not accepted any public deposits during FY 2016-17 andas such no amount on account of principal or interest on public deposits was outstandingas on the date of the balance sheet.
DETAILS OF DEPOSITS NOT IN COMPLIANCE WITH THE REQUIREMENTS OF THE ACT
Since the Company has not accepted any deposits during FY 2016-17there has been no non-compliance with the requirements of the Act.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to sub-section (5) of Section 134 of the Act with respect tothe Directors' Responsibility Statement it is hereby confirmed that:-
a. in the preparation of the annual accounts the applicable accountingstandards had been followed along with proper explanation relating to material departures;
b. the directors had selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the profit of the Company for that period; c. the directors hadtaken proper and sufficient care for the maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting fraud and other irregularities;
d. the directors had prepared the annual accounts on a going concernbasis;
e. the directors had laid down internal financial controls to befollowed by the Company and that such internal financial controls are adequate and wereoperating effectively; and
f. the directors had devised proper systems to ensure compliance withthe provisions of all applicable laws and that such systems were adequate and operatingeffectively.
OTHER DISCLOSURES Extract of Annual Return
The details forming part of the extract of the Annual Return in formMGT 9 is enclosed herewith as per Annexure F.
Management Discussion & Analysis
The Management Discussion & Analysis Report forms part of thisAnnual Report.
Material Changes and Commitments Affecting the Financial Position ofthe Company
There have been no material changes and commitments affecting thefinancial position of the Company which have occurred between the end of the financialyear to which the financial statements relate and the date of the report.
Change in the Nature of Business
Your Company has not undergone any changes in the nature of thebusiness during the financial year.
The details of Significant and Material Orders passed by the Regulatorsor Courts or Tribunals impacting the going concern status and the Company's operationin future
There are no significant and material orders passed by the regulatorsor courts or tribunals impacting the going concern status and the Company's operationin future.
No Fraud has been reported by the Auditors to the Audit Committee orthe Board.
Pursuant to the SECC Regulations Listing Regulations and the Actreport on Corporate Governance as at March 31 2017 forms part of this Annual Report. ACertificate from Practicing Company Secretary Mumbai confirming status of compliances ofthe conditions of Corporate Governance is annexed to this report.
The Board thanks the Government of India SEBI RBI the Government ofMaharashtra and other State Governments and various government agencies for theircontinued support cooperation and advice.
The Board is grateful to the members of various committees constitutedduring the year.
The Board also acknowledges the support extended by trading membersissuers investors in the capital market and other market intermediaries and associates.
The Board expresses sincere thanks to all its business associatesconsultants bankers auditors solicitors and lawyers for their continued partnership andconfidence in the Company.
The Board wishes to thank all the employees for the exemplarydedication and excellence displayed in discharge of their duties for the Company.
Further the Board expresses its gratitude to you as shareholders forthe confidence reposed in the management of the Company.
| ||For and on behalf of the Board of Directors |
|Place: Mumbai ||Dhirendra Swarup |
|Date: August 3 2017 ||Chairman |