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BSE Ltd IPO review (Subscribe)

After demonetization, the market went for tail spin with standstill activities in the primary market. However, the long waited IPO of BSE is taking a lead to break the ice for CY 2017 as well as final quarter of FY16-17 as the first main board IPO.

BSE LTD (erstwhile known as The Bombay Stock Exchange) is the premier and the oldest stock exchange of Asia (established on 9th July 1875) and has become the most trustworthy brand as far as stock market is concerned and has become the synonyms with its Sensex and Dalal Street.

Today BSE is the world’s largest exchange by number of listed companies (5,329), India’s largest and world’s 10th largest exchange by way of market capitalization, with US$ 1.7 trillion in total market capitalization of all listed companies and the world’s fastest stock exchange. It has now also become the first stock exchange to go public in India and has thus become the first mover. BSE has diversified products for trading is also providing IT services and solutions, listing business, marketing business, data business etc.

To explore valuations of its stakeholders and listing benefits, BSE is coming out with its maiden IPO of 15427197 equity share of Rs. 2 each through offer for sale by existing stakeholders via book building route with a price band of Rs. 805-806. BSE will mobilize Rs. 1241.89 to Rs. 1243.43 crore (based on lower and upper price band). Issue opens for subscription on 23.01.17 and will close on 25.01.17. Minimum application is to be made for 18 shares and in multiples thereon, thereafter. Post allotment shares will be listed on NSE only. Hence investors who are not having registration for NSE brokers will need to go for NSE registration process for trading and/or investing in this share post listing. The offer shall constitute up to 28.26% of the fully diluted post-offer issued share capital of BSE.

BSE has issued shares at a price of Rs. 5200 per share in May 2007 and April 2008 and at Rs. 383.30 per share in June 2015 (for Re. 1 paid up) to foreign investors/strategic partners and has also issued bonus shares in the ratio of 12 shares for every 1 share held. For FY 16 it has paid dividend of 750% and hopes to maintain similar dividend policy post listing.

On performance front, (on consolidation basis) BSE has posted total revenue / net profit of Rs. 529.82 cr. / Rs. 159.44 cr. (FY14), Rs. 624.75 cr. / Rs. 151.35 cr. (FY15) and Rs. 658.27 cr. / Rs. 159.15 cr.(FY16). For H1 of current fiscal it has posted net profit of Rs. 124.75 cr. on total revenue of Rs. 383.47 cr. As this offer is secondary one, equity stands at Rs. 10.74 cr. If we annualize latest earnings and attribute it on the equity, asking price is at a P/E of around 17 plus. As there is no peers to compare with and this being the first mover listing candidate in the segment , it will generate fancy going forward post listing.

Global coordinators and BRLMs to this offer are Edelweiss Financial Services Ltd, Axis Capital Ltd., Jefferies India Pvt Ltd, Nimura Financial Advisory and Securities (India) Pvt Ltd., Motilal Oswal Investment Advisors Pvt Ltd., SBI Capital Markets Ltd, SMC Capital Ltd., Co-BRLM is Spart Capital Advisors (India) Pvt Ltd. Karvy Computershare Pvt Ltd is the registrar to the issue.

On BRLM’s front, eight merchant bankers associated with the offer have handled 34 issues in past three years out of which 10 issues closed below the issue price on listing day.

Note: As the issue will be listed only on NSE post allotment, those keen in trading and or buying/selling this issue have to opt for NSE broker registration.

Conclusion: Investors may consider medium to long term investment in this first mover premier stock exchange offer.

Conclusion / Investment Strategy

Investors may consider medium to long term investment in this first mover premier stock exchange offer.

By Dilip Davda on Jan 17, 2017

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).

About Dilip Davda

Dilip Davda (SEBI registered Research Analyst-Mumbai), a freelance journalist for more than 25 years, is a stock market analyst and news article writer. Since 1985, he has contributed to print media, electronic media and often appears on TV channels as visiting stock analyst. His articles are regularly publishes in Smart Investment (English and Gujarati weekly published from Ahmedabad), Free Press Journal and many other news papers & magazines. He is also a visiting stock analyst on DD News TV Channel.



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