The Bombay Stock Exchange is in the limelight after the government hiked the FDI limit for foreign investors in an exchange, from 5 to 15 per cent. The BSE has already started talks with Germany’s Deutsche Börse to offer an additional 10-per cent stake. Also, the country’s oldest bourse is gearing up to list itself in exchanges. Speaking to BTVI , BSE MD and CEO Ashishkumar Chauhan says the perception that foreign debt markets have infinite liquidity and Indian markets don’t is a myth.
After the government announced the hike in individual foreign investment limit in stock exchanges, are you in talks with Deutsche Börse for raising their stake?
We always were in talks with our partner Deutsche Börse, which already has 5-per cent stake. The regulations have been there for 10 years. Somewhere along the line it is important to understand that these are the signals the government is giving.
It is not going to happen overnight as it was the case for insurance or defence. First, the announcement happens and then the thing catches up. Similarly, in this case, there are hardly 3-4 exchanges including that for commodities. So, effectively, it is a small catch pool for foreigners to come in.
We have a very good relation with Deutsche Börse. Currently, they are in the process of taking over the London Stock Exchange (LSE). So a large transaction is underway and there are so many regulatory issues that are coming up because of Brexit.
The government is signalling that it is liberalising.
Are other shareholders, including foreign players, eager to hike their stake, too?
Currently, we are in conversation only with them (Deutsche Börse). They are on our board and we use their technology. Recently, we had tied up with them for the GIFT City technology and various other things. Effectively, the partnership is very strong and we want to continue with them because continuity and stability is what markets have to offer everyone. We have to be a little conservative with our partners.
Has Deutsche Börse shared any timeline for hiking the FDI limit?
The earliest they can look itnto our opportunity is post their approval for Deutsche Börse-LSE merger, which is probably 7-8 months or a year away.
As the government has allowed listing of exchanges, what’s the plan now for listing BSE?
We had appointed merchant bankers and went through the process of AGM to get it approved. We also asked shareholders to deposit the shares because we did not want to raise fresh funds and wanted to come from existing shareholders through offer for sale. So we are moving in that direction. We are trying our best to do it in the fastest possible way.
Can you tell us about the new bond platform? What are your plans for further leveraging it?
We have kind of kept it under the covers because it is a new market and the private placement of bonds is a new phenomenon through the exchanges. On Tuesday, we helped placed ₹4,500 crore of a PSU bond issue within half an hour. So there is huge latent demand for what I call low-risk instruments, which we or regulators have not realised.
After the bank (NPA) issues that came up, the banks are not able to lend money to many corporates; the companies are now coming to the market and even their private placement of bonds are being done through BSE.
In the last five years, 90 per cent or more of corporate bonds were sold through BSE. So, we have a huge legacy because we are basically connected to institutions and retail investors. We are primarily into investment exchange. We are not much into speculations.
Whereas, people who are interested more in transaction charges and volumes, they have a different take. We are more into mutual funds and bonds. Those are traditional instruments and more of investment. That’s why most people trust us more and all companies in the country are listed at BSE. Of course, our technology has played a great role. The new regulations allow companies to go for various formats for raising funds from the bond market. So, we have to offer various permutations and combinations. Our technology is new as we implemented it two-and-half-years ago.
What’s the turnover in the bond market?
Basically, raising funds is absolutely important. Of course, the secondary market is required. But in India, the secondary market is not very liquid because people buy and hold. In fact, if you look at the Masala bonds that got listed at the LSE, there is not much liquidity because people buy and hold. There is a perception that foreign markets have infinite liquidity and Indian markets don’t have liquidity — that is a myth. Also, people have to understand that it is a function of the company’s own characteristics. Somewhere down the line, I expect the bond market is slowly picking up. I would have been surprised even a week back if somebody said ₹4,500 crore will be raised within half an hour.