Aditya Trading Solutions recommend to 'Stay Away' from the BSE IPO
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Initial Public Offering of upto 15,427,197 Equity Shares of face value of Rs.2 each for cash at the price band of Rs.805-Rs.806 per Equity Share including a share premium of Rs.[●] per Equity Share, aggregating to Rs.[●] million by way of an Offer for Sale. This Issue would constitute up to 28.26% of the fully diluted post-Offer issued paid-up capital of the Exchange.
BSE was incorporated as a public limited company at Mumbai, under the name of “Bombay Stock Exchange Limited” under the Companies Act, 1956 and received a certificate of incorporation dated August 8, 2005. The name of BSE was subsequently changed to “BSE Limited” and BSE received a fresh certificate of incorporation pursuant to change of name dated July 8, 2011. It owns and operates the BSE exchange platform, the first stock exchange in Asia, which was formed on July 9, 1875. As of June 30, 2016, the BSE was the world's largest exchange by number of listed companies, and India's largest and the world's 11th largest exchange by market capitalization, with US$ 1.52 trillion in total market capitalization of listed companies.
The public offer of BSE is entirely an offer for sale (OFS) by the existing shareholders. That means the Exchange will not receive any proceeds of the Offer and all the proceeds of the Offer will go to the Selling Shareholders in the proportion of the Equity Shares offered by them. Exchange expects that listing of the Equity Shares will enhance its visibility and brand image. None of its Directors, Key Management Personnel or Group Companies will receive any proceeds from the Offer.BSE will be listing its shares on the National Stock Exchange (NSE). This is because Securities and Exchange Board of India (SEBI) doesn't allow self-listing of shares.
The exchange has been reporting YoY decline in its mainstay cash equities business. Even after spending over Rs.270 crores to revive its equity derivatives segment, it has not yielded any result, volumes have also dried up in this segment. This when compared to its competitor, the NSE where derivatives segment is the main cash cow. Even after maintaining a market share of 40% in currency derivatives, this segment does not contribute meaningfully to its topline or bottomline as the fees charged by the exchange is fractional compared to NSE. Nearly all of BSE’s profit comes from investment and other income. At the higher band of Rs.806,the stock is available at a P/E multiple of 20.5x FY17E annualized earnings, so on the valuation front it is attractive compared to the only listed player, the MCX. But, if we consider the shrinking revenue and margins over the years, we recommend sensible investors who wish to invest in exchanges should Stay Away from the upcoming BSE IPO and wait to see the valuations of its competitor NSE
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Aditya Trading Solutions (ATS) is a full spectrum INVESTMENT MANAGEMENT house specializing in equity and commodity trading. We are one of the earliest members of MCX and pioneers of online commodity broking in Tamilnadu. Services offered include trading in Equity, Commodity, Currency, PMS and SIP. ATS is promoted by young and dynamic entrepreneurs who have years of proven experience in international derivative markets like NYMEX and worked with several FORTUNE 500 companies. ATS is the largest online commodity trading company in Tamilnadu. Its client base consists of a long list of satisfied institutional and retail client base broking. Headed by Mr. Rethish Varma S, who has several years of experience in Equity Research after having worked with COPAL AMBA a Moody's Analytics Company, HDFC Securities Ltd and Doha Brokerage and Financial Services Ltd. ATS possess an experienced and qualified team of research professionals offering unbiased advice on investment decisions. ATS can be accessed at http://www.adityatrading.in/.
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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.
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