The Hindu Business Line : 51 pc public holding norm set for stock exchanges

Stock exchanges will have to ensure that at least 51 per cent of their equity is continuously held by the public, according to SEBI's new guidelines on corporatisation of exchanges.

The SEBI on Thursday cleared the decks for stock exchanges to go public, approving and notifying the demutualisation schemes of 19 stock exchanges in the country.

Stock exchanges may divest through a public offer, strategic investment, private placement or preferential allotment.

Individual investment, direct or indirect, has been capped at five per cent.

Additionally, persons (or persons acting in concert) must meet eligibility requirements to acquire more than one per cent of the paid-up equity capital of a recognised stock exchange, satisfying the SEBI requirements of being a "fit and proper person."

Mr V. Ramu Sharma, Chairman of the Federation of Indian Stock Exchanges, said: "While we are happy that the regulator has left the door open on all options for divestment, the five per cent cap may act as a deterrent to any large strategic investor."

He added: "We would have been happier with a larger cap. As such, regional exchanges may have to go to the public for sale of shares. However, the move may prove to be indirectly beneficial, as it would force exchanges to merge before they go public. Instead of 19-20 exchanges going public, one may see 4-5 exchanges going public."

The guidelines will lend impetus to the BSE's plans to divest its equity. The exchange will have to dilute brokers' stake in it to less than 51 per cent before the deadline of May 2007. (Each stock exchange has been allotted its individual deadline.)

As per an announcement made by the BSE in July this year, the exchange had planned a two-part divestment programme. In the first phase, 26 per cent stake would be placed with strategic investors (domestic or international), including banks, multinational agencies and stock exchanges.

The remaining 25 per cent would be divested through a public offer of shares.

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