Sebi-appointed Bimal Jalan committee?s recommendation against listing of stock exchanges is making regional stock exchanges (RSEs) rethink their future course of action.
RSEs were hoping to use the listing route to provide an exit opportunity to their investors. This is now likely to get derailed. RSEs of Cochin, Bangalore, Madras, Uttar Pradesh, Madhya Pradesh, Guwahati, Jaipur, Coimbatore, among others, are meeting on December 9.
Apart from creating major concerns among the existing shareholders of these exchanges, experts say the committee recommendations will also negatively impact fund-raising plans going forward.
?These recommendations have come as a major hindrance for our fund-raising plans, said P J Mathew, MD of Inter-connected Stock Exchange of India (ISE), formed in 1998 by 14 RSEs. ISE is planning to launch live trading in equity shares currently traded on NSE, BSE and RSEs under the ?permitted to trade category? from February 2011, subject to regulatory approval.
?Going forward, we were planning to raise additional funds by way of either preferential issue, rights issue or fresh issue of equity shares. The committee proposal will have a negative impact on our plans,? said Mathew. ISE, which currently has a paid-up equity capital of Rs 60 crore, needs to do a further equity issuance of Rs 40 crore, to become eligible for introducing new derivatives products.
As part of the ?demutualisation? process, it had issued equity shares to new investors on the promise that they would be provided with an exit opportunity through listing of its shares. ?Listing will only bring more transparency and accountability in its operations which will benefit larger investor community and companies listed on the exchange platform,? said a senior executive of a regional stock exchange.
?These recommendations, if implemented, along with capping on profits will scare away prospective investors, impacting our revival plans,? he said.
Under the demutualisation process, exchanges were required to bring down the the aggregate share holding of broker shareholders by up to 49% of the exchange?s equity with the rest to be held by public share holders.
The Jalan committee, which recommended against listing of exchanges, stated that a market infrastructure institution (MII) should not become a vehicle for attracting speculative investments. ?MIIs being public institutions, any downward movement in its share prices may lead to a loss of credibility and this may be detrimental to the market as a whole.?