BSE ( Bombay Stock Exchange ) - Important Update by Satyakam Mishra

The Bombay Stock Exchange's (BSE) prospects of returning to its past glory as the nation's top exchange dimmed further, with its only bright spot - volumes in cash trading - plunging 45% in the past 16 months as retail investors cut trading and speculators preferred derivatives bets. Average daily trading in the spot market at Asia's oldest exchange fell to Rs 3,391 crore in April, from Rs 6,162 crore in January 2010, data show.
Earlier, Deutsche Börse AG had picked up a 5 per cent stake in BSE for Rs 189 crore. This values the second largest stock exchange in the country at Rs 3,777 crore ($854 million).

Earlier this year, NYSE picked up a 5 per cent stake in NSE for $115 million, valuing the exchange at $2.3 billion. The fact that BSE’s valuation is less than 40 per cent that of NSE’s is not surprising, since its profit, too, has a similar ratio with that of NSE. In fact, BSE has been valued at a price-earnings multiple of 42 times, slightly higher than NSE’s valuation of 36 times consolidated profit. From a broker-member’s point of view, the BSE card now translates into a value of Rs 5.2 crore. At its peak, BSE cards were purchased for about Rs 4 crore, which means that all brokers would have made some return on their investment. However, not all brokers appear pleased with the valuation, citing that the price-earnings multiple may not be the right parameter. As on March 2006, BSE had investments (own funds) worth Rs 1,800 crore. In comparison, NSE had liquid investments worth Rs 450 crore. Adjusted for cash, BSE’s valuation is less than Rs 2,000 crore. Brokers also point to the prime real estate property in the exchange’s books.

MCX-SX, however, has not been allowed to start equity trading for not adhering to proper shareholding norms, which it has challenged in a court. While the Bombay Stock Exchange (BSE) and MCX have been in favour of listing, NSE has not shown much interest. Both BSE and MCX-SX had strongly opposed the Bimal Jalan committee recommendations of not allowing the listing of stock exchanges.

BSE stock was traded at over 320-340 a year is now available at less then 240. What a fall from grace. It’s the NSE and MCX which has gained market share at BSE’s expense.

Satyakam Mishra