It is indeed a paradox that even while the country’s much maligned demutualised exchange like MCX, which has less than 14-year track, commands a market-cap of more than Rs 6000 cr, Asia’s oldest exchange that boasts a history of 140-plus years is valued at Rs 4326 cr. This may, perhaps, explain what’s in store for the IPO investors.
|
OFFER AT A GLANCE |
|
|
Name |
BSE Ltd |
|
Public Offer |
Offer for Sale of 154.27 lakh shares |
|
Post-IPO Promoter Stake |
Not Applicable |
|
Offer Price |
Rs 805-806 (FV 2) |
|
Offer Amount |
Rs 1241.89 cr to Rs 1243.43 cr |
|
Application Quantity |
18 & Multiples of 18 |
|
Bid/Offer Opens |
January 23, 2017 |
|
Bid/Offer Closes |
January 25, 2017 |
|
Share Allotment |
January 31, 2017 |
|
Refund Process |
February 1, 2017 |
|
Demat Credit |
February 2, 2017 |
|
Share Trading |
February 3, 2017 |
|
Listing at |
NSE |
|
IPO Rating |
Nil |
|
Book Running Lead Managers |
Edelweiss, Axis Cap, Jefferies, Nomura, Motilal Oswal, SBI Cap, SMC Cap |
|
Registrars |
Karvy Computershare |
The Offer
The present issue of 154.27 lakh shares Rs 2 each, which constitutes 28.26% of the equity capital, is an ‘offer for sale’ by as many as 302 existing shareholders of BSE. Having a narrow price band Rs 805-806 a share, the offer is valued about Rs 1243 cr. Applicants should apply for a minimum quantity of 18 shares (Rs 14,490). The entire non-IPO equity (382.51 lakh shares) is under lock-in for a period of one year from the date of allotment.
Background
There is no identifiable promoter for the fourteen decade-old BSE. The 1875-established Asia’s oldest stock exchange was demutualised in accordance with a `Demutualization Scheme’, and was incorporated as Bombay Stock Exchange Ltd in August 2005. The name was changed to BSE Ltd in July 2011. Immediately after the demutualization many a trading member (broker) started selling his holdings in the unofficial market as the shares commanded huge premiums in the `kerb’ deals. Thus the shareholder base was expanded to over 9500 over a period of time.
As on January 6, 2017, BSE had 535 Trading Members, consisting of corporate, individuals and banks, holding 190.16 lakh shares (35.4%). It had 689 Associate Trading Members (individuals, corporates, HUFs, financial institutions/banks controlling 43.63 lakh (8.1%). Under the public category there were 8318 shareholders, consisting of individuals, corporates, HUFs, trusts, financial institutions, banks, FDIs (foreign direct investments), FIIs, insurance company and NRIs who collectively held 302.98 lakh shares (56.4%). More than 41% of BSE’s equity is held by top 10 shareholders, single largest stake being 4.75% each by Deutsche Borse, Singapore Exchange and State Bank of India.
Among the largest shareholders, Singapore Exchange is diluting its entire stake of 25.49 lakh shares, Atticus Mauritius & Quantum (M) too are offering their entire holding of 20.08 lakh each. GKFF Ventures sells 12.28 lakh (out of 24.57 lakh), Acacia Banyan Partners offers 10 lakh (out of 20.08 lakh), Caldwell India is offloading 8.34 lakh shares (out of 20.08 lakh), Bajaj Holdings is offering 7.52 lakh shares (out of 15.03 lakh), Nadathur Estates is selling its entire stake of 5.65 lakh shares and Isheta Realty is liquidating 1.59 lakh shares (out of 5.31 lakh). As a matter of fact, as many as 139 shareholders have opted to sell their entire holding in BSE. Post-IPO, Germany’s Deutsche Borse (4.75%), State Bank of India (4.75%) and Life Insurance Corporation of India (4.68%) are expected to remain as the major shareholders of BSE.
Financial Track
The fortune of any stock exchange is directly linked to the economic conditions in general and corporate performance in particular. BSE’s consolidated revenue, which stood at Rs 579 cr in FY12 declined to Rs 553 cr in FY13 and dropped further to Rs 530 cr in FY14. Nevertheless, since FY15 revenue is showing a firm uptrend and has reached Rs 767 cr on an annualized basis in the current fiscal. While the recent growth is commendable, BSE’s revenue vis-à-vis its age as compared to NSE or MCX is far from impressive.
Whereas BSE has reached Rs 658 cr revenue after 141 long years, NSE has achieved Rs 2359 cr that is more than three and a half times of BSE’s revenue in 23 years. In just 10 years MCX annual revenue was close to Rs 500 cr which dropped drastically after the exchange’s commodity derivatives debacle.
Even while revenue grew significantly in the last couple of years, BSE’s EBITDA is yet to reach its FY12 level (close to Rs 300 cr). EBITDA margin, which was at 48% in FY12, fluctuated between 33% and 37% during the last four years. On the eve of the IPO, in September 2016, the margin has leapt from 34.4% to 40.2%. BSE’s bottom line, which was at Rs 172 cr in 2012, slumped to Rs 119 cr in the very next year. It recouped to Rs 135 cr in 2014 but sloped to Rs 130 cr and Rs 123 cr in FY15 and FY16 respectively. In the first six months of current fiscal net profit jumped to Rs 105 cr. As compared to BSE’s equity base of less than Rs 11 cr, the bottom line is indeed impressive. The most attractive feature of BSE is its net worth. As against the equity capital of Rs 10.74 cr, the exchange’s reserves amounted to more than 2500 cr at the end of September 2016 which gives a book value of around Rs 476 per share.
|
BSE CONSOLIDATED FINANCIAL PERFORMANCE |
||||||
|
PERIOD ENDED |
Sep-16 |
Mar-16 |
Mar-15 |
Mar-14 |
Mar-13 |
Mar-12 |
|
REVENUE |
38,347 |
65,827 |
62,475 |
52,982 |
55,294 |
57,866 |
|
EBITDA |
17,232 |
25,391 |
25,456 |
22,616 |
21,296 |
29,935 |
|
OPM% |
40.2 |
34.4 |
36.6 |
37.4 |
33.3 |
48.1 |
|
INTEREST |
60 |
67 |
66 |
38 |
245 |
136 |
|
DEPRECIATION |
2,461 |
6,168 |
5,877 |
3,235 |
2,831 |
3,407 |
|
TAX |
3,053 |
4,344 |
5,063 |
3,141 |
3,996 |
6,262 |
|
NET PROFIT |
10,493 |
12,253 |
12,974 |
13,519 |
11,884 |
17,244 |
|
EQUITY |
1,074 |
1,074 |
1,073 |
1,038 |
1,037 |
1,035 |
|
RESERVES |
254,347 |
243,854 |
245,016 |
236,039 |
227,857 |
220,938 |
|
EPS (Annualized) |
43.42 |
29.84 |
29.9 |
33.34 |
35.04 |
40.34 |
Valuation
The offer document of BSE claims that there was no listed exchange in India with which BSE can be compared, though the fact is MCX which emerged as a major threat to BSE in 2012 is currently commanding a much higher market capitalization on BSE!. Besides the home grown MCX, there are many other exchange stocks listed across the globe. A close look at the valuation these exchange stocks do give a mixed feeling.
Many a global exchange stock is priced between 20 and 25 times its earnings and only three viz. MCX, LSE and Hong Kong are enjoying a higher P/E than BSE. As a matter of fact, compared to MCX, BSE looks cheaper on three important parameters. Whereas MCX is discounted about 46 times its earnings, 23 times revenue and 5 times book value, BSE has priced the offer 36 times earnings, only 6.6 times revenue and just 1.8 times book value.
Interestingly, post-demutualization in 2007, BSE’s Re 1 paid-up shares were reportedly changed hands in `kerb deals’ between Rs 440 and Rs 500 which is equivalent to Rs 880 and Rs 1000 on the present face value. If this is any indication, notwithstanding BSE’s high intrinsic value of its share, investors may not find it attractive in the long run especially when the lock-in period for the entire non-IPO equity lapses after one year.
|
HOW BSE VALUATION COMPARES WITH SELECT LISTED EXCHANGES |
|||||
|
EXCHANGE NAME |
COUNTRY |
M-CAP* |
P/R |
P/BV |
P/E |
|
|
|
(Mln USD) |
(X) |
||
|
CME Group Inc |
USA |
39,259 |
11.2 |
1.8 |
27.0 |
|
ICE-NYSE |
USA |
33,631 |
5.9 |
2.2 |
23.1 |
|
Hong Kong Exch |
HK |
29,080 |
21.2 |
7.2 |
37.2 |
|
Deutsche Boerse |
Germany |
15,124 |
5.0 |
3.3 |
20.6 |
|
London Stock Exch |
UK |
12,453 |
6.9 |
3.6 |
43.5 |
|
Nasdaq Inc |
USA |
11,066 |
3.1 |
1.9 |
23.6 |
|
Japan Exchange |
Japan |
7,961 |
8.1 |
3.6 |
22.4 |
|
ASX |
Australia |
7,075 |
12.7 |
2.5 |
22.2 |
|
Singapore Exchange |
Singapore |
5,641 |
10.2 |
9.2 |
24.3 |
|
TMX Group |
Canada |
3,122 |
5.3 |
1.4 |
– |
|
Euronext |
Pan Europe |
2,979 |
5.7 |
5.8 |
15.4 |
|
Bolsas Mercados |
Spain |
2,458 |
7 |
5.3 |
14.4 |
|
JSE |
South Africa |
1,029 |
6.1 |
4.9 |
14.3 |
|
Bolsa Mexicana |
Mexico |
776 |
6.3 |
3.1 |
22.2 |
|
MCX |
India |
885 |
23.4 |
5.0 |
45.7 |
|
BSE |
India |
638 |
6.6 |
1.8 |
35.9 |
|
Source: Stock Exchanges |
* Approx value on 17-01-2017 |
||||
Concern
Even though BSE’s current valuation may not look very steep, will it prove to be a prudent investment for the long term? The manner in which the exchange is being governed does not exude much optimism. There are hordes of scrips break the circuit every day and they are invariably `buyer-packed’. A close scrutiny of stocks that consistently hit the upper circuit on BSE gives a feeling that manipulators are playing havoc and, for the reasons best known only to them, BSE authorities have not checkmated the culprits. On the contrary they harass endlessly genuine analysts who buy just one share for getting company information!
BSE may be more than 140 years old but, it does not seem to have expertise to vet the offer documents. For instance, many a Kolkata-registered SMEs that got listed on BSE in recent years have significant promoters’ stake from closely held corporate entities which are virtually `Khokha’ companies whose background is never disclosed in the offer document. Also, many an obscure company whose bottom line is not even Rs 1 lakh is commanding market cap even more than Rs 1000 cr! This clearly shows that the exchange has a poor surveillance mechanism and lacks professionalism in competing with other exchanges.
As regards prospects of BSE stock, the IPO price may hold in the first year when the entire non-IPO equity is under lock-in. Nevertheless, according to knowledgeable sources, the price of Re 1 paid-up shares which were traded around Rs 500 in 2007 fell to as low as Rs 140 three years ago and many a broker dumped the shares in the unofficial market. Holders of these shares may rush for selling no sooner the lock-in period expires as their cost of acquisition is only Rs 280.
Lead Manager’s Track
BSE has engaged seven investment bankers as its book running lead managers. The team leader Edelweiss has managed 25 IPOs since 2010 collecting and aggregate amount of Rs 29,948 cr which is worth Rs 27,672 cr today. In other words, Edelweiss-managed IPOs have collectively lost Rs 2,277 cr or 7.6% investment value. Of the 25 IPOs, 12 are currently quoting below their offer prices.
|
Performance of Edelweiss-associated IPOs since 2010 |
||||||
|
SL |
ISSUER NAME |
IPO |
IPO |
CURNT |
VALUE |
GAIN |
|
NO |
(Amount in Cr) |
DATE |
VALUE |
VALUE |
GAIN |
% |
|
1 |
Sheela Foam |
29-Nov-16 |
510 |
682 |
172 |
33.7 |
|
2 |
ICICI Prudential |
19-Sep-16 |
6057 |
6008 |
-49 |
-0.8 |
|
3 |
Thyrocare |
27-Apr-16 |
479 |
749 |
270 |
56.2 |
|
4 |
Equitas Holdings |
5-Apr-16 |
2177 |
3068 |
891 |
41 |
|
5 |
Healthcare Global |
16-Mar-16 |
650 |
721 |
72 |
11 |
|
6 |
Alkem Labs |
8-Dec-15 |
1350 |
2145 |
795 |
58.9 |
|
7 |
Coffee Day |
14-Oct-15 |
1150 |
698 |
-452 |
-39.3 |
|
8 |
Sadbhav Infra |
31-Aug-15 |
492 |
481 |
-10 |
-2.1 |
|
9 |
Prabhat Dairy |
28-Aug-15 |
365 |
346 |
-19 |
-5.2 |
|
10 |
Navkar Corp |
24-Aug-15 |
600 |
686 |
86 |
14.4 |
|
11 |
Inox Wind |
18-Mar-15 |
1037 |
598 |
-439 |
-42.3 |
|
12 |
Monte Carlo |
3-Dec-14 |
350 |
224 |
-127 |
-36.2 |
|
13 |
Sharda Crop |
5-Sep-14 |
352 |
1053 |
701 |
199.2 |
|
14 |
Wonderla |
21-Apr-14 |
181 |
510 |
328 |
181.2 |
|
15 |
Multi Commodity |
22-Feb-12 |
663 |
758 |
95 |
14.3 |
|
16 |
Future Consumer |
25-Apr-11 |
750 |
1646 |
896 |
119.5 |
|
17 |
MOIL |
26-Nov-10 |
1260 |
1330 |
70 |
5.6 |
|
18 |
Claris Life |
24-Nov-10 |
288 |
393 |
105 |
36.5 |
|
19 |
Commercial Eng |
30-Sep-10 |
172 |
19 |
-153 |
-88.8 |
|
20 |
Electrosteel Steel |
21-Sep-10 |
248 |
114 |
-134 |
-53.9 |
|
21 |
Hindustan Media |
5-Jul-10 |
270 |
437 |
167 |
61.8 |
|
22 |
Mandhana Ind |
27-Apr-10 |
108 |
27 |
-80 |
-74.6 |
|
23 |
NMDC |
10-Mar-10 |
9967 |
4754 |
-5213 |
-52.3 |
|
24 |
United Bank |
23-Feb-10 |
330 |
105 |
-225 |
-68.2 |
|
25 |
Man Infraconst |
18-Feb-10 |
142 |
117 |
-24 |
-17.3 |
|
|
COMPOSITE-25 |
|
29948 |
27672 |
-2277 |
-7.6 |
Axis has associated with 22 IPOs since 2010 and helped them to mop up Rs 18,289 cr which is worth Rs 18,945 cr. This has given a composite return of 3.6%. Of the 22 IPOs, 11 are currently languishing below the offer price. Whereas the recent IPOs managed by Axis have fared reasonably well, barring Varun Beverages, Axis’ pre-2015 IPO record is pathetic.
|
Performance of Axis-associated IPOs since 2010 |
||||||
|
SL |
ISSUER NAME |
IPO |
IPO |
CURNT |
VALUE |
GAIN |
|
NO |
(Amount in Cr) |
DATE |
VALUE |
VALUE |
GAIN |
% |
|
1 |
Varun Beverages |
26-Oct-16 |
1113 |
1030 |
-82 |
-7.4 |
|
2 |
Endurance Tech |
5-Oct-16 |
1162 |
1437 |
275 |
23.7 |
|
3 |
RBL Bank |
19-Aug-16 |
1213 |
2059 |
846 |
69.8 |
|
4 |
Dilip Buildcon |
1-Aug-16 |
654 |
720 |
66 |
10.2 |
|
5 |
Advanced Enzyme |
20-Jul-16 |
412 |
842 |
431 |
104.6 |
|
6 |
Quess Corp |
29-Jun-16 |
400 |
845 |
445 |
111.2 |
|
7 |
Ujjivan Financial |
28-Apr-16 |
883 |
1506 |
623 |
70.6 |
|
8 |
Equitas Holdings |
5-Apr-16 |
2177 |
3068 |
891 |
41 |
|
9 |
Narayana Hruday |
17-Dec-15 |
613 |
820 |
207 |
33.8 |
|
10 |
Alkem Labs |
8-Dec-15 |
1350 |
2145 |
795 |
58.9 |
|
11 |
Coffee Day |
14-Oct-15 |
1150 |
698 |
-452 |
-39.3 |
|
12 |
Pennar Engineer |
25-Aug-15 |
156 |
130 |
-26 |
-16.5 |
|
13 |
Navkar Corp |
24-Aug-15 |
600 |
686 |
86 |
14.4 |
|
14 |
Syngene |
27-Jul-15 |
550 |
1307 |
757 |
137.6 |
|
15 |
UFO Moviez |
28-Apr-15 |
600 |
398 |
-202 |
-33.7 |
|
16 |
Inox Wind |
18-Mar-15 |
1037 |
598 |
-439 |
-42.3 |
|
17 |
Monte Carlo |
3-Dec-14 |
350 |
224 |
-127 |
-36.2 |
|
18 |
Innoventive |
26-Apr-11 |
217 |
7.8 |
-210 |
-96.4 |
|
19 |
Orient Green |
21-Sep-10 |
900 |
211 |
-689 |
-76.6 |
|
20 |
Jaypee Infra |
29-Apr-10 |
2274 |
179 |
-2095 |
-92.1 |
|
21 |
Mandhana Ind |
27-Apr-10 |
108 |
27 |
-81 |
-75.4 |
|
22 |
Shree Gan Jewel |
19-Mar-10 |
371 |
6 |
-365 |
-98.4 |
|
|
COMPOSITE-22 |
|
18289 |
18945 |
656 |
3.6 |
The overall record of Jefferies India is appealing. In last two years, Jefferies lent their name to 4 IPOs valued Rs 2,955 cr which has appreciated more than 35% (Rs 1,041 cr). Barring Quick Heal, Jefferies-associated IPOs have done reasonably well, top performer being Biocon group company, Syngene International.
|
Performance of Jefferies India-associated IPOs |
||||||
|
SL |
ISSUER NAME |
IPO |
IPO |
CURNT |
VALUE |
GAIN |
|
NO |
(Amount in Cr) |
DATE |
VALUE |
VALUE |
GAIN |
% |
|
1 |
Laurus Labs |
6-Dec-16 |
1340 |
1494 |
154 |
11.5 |
|
2 |
Quick Heal |
8-Feb-16 |
451 |
374 |
-78 |
-17.2 |
|
3 |
Narayana Hruday |
17-Dec-15 |
613 |
820 |
207 |
33.8 |
|
4 |
Syngene |
27-Jul-15 |
550 |
1307 |
757 |
137.6 |
|
|
COMPOSITE-4 |
|
2955 |
3995 |
1041 |
35.2 |
In the case of Nomura Financial Advisory, while one IPO fetched 59% gain, the other IPO inflicted a loss of 56% though the overall gain amounted to 19.5%.
|
Performance of Nomura Financial Advisory-associated IPOs |
||||||
|
SL |
ISSUER NAME |
IPO |
IPO |
CURNT |
VALUE |
GAIN |
|
NO |
(Amount in Cr) |
DATE |
VALUE |
VALUE |
GAIN |
% |
|
1 |
Alkem Labs |
8-Dec-15 |
1350 |
2145 |
795 |
58.9 |
|
2 |
IL&FS Transport |
11-Mar-10 |
700 |
305 |
-395 |
-56.4 |
|
|
COMPOSITE-2 |
|
2050 |
2450 |
400 |
19.5 |
Of the six IPOs handled by Motilal Oswal Investment since 2010, three are quoting below the offer price though the overall gain is about 12.5%. The last two IPOs have done reasonably well.
|
Performance of Motilal Oswal Investment-associated IPOs |
||||||
|
SL |
ISSUER NAME |
IPO |
IPO |
CURNT |
VALUE |
GAIN |
|
NO |
(Amount in Cr) |
DATE |
VALUE |
VALUE |
GAIN |
% |
|
1 |
S.P. Apparels |
2-Aug-16 |
239 |
310 |
71 |
29.5 |
|
2 |
Parag Milk |
4-May-16 |
1179 |
1461 |
282 |
23.9 |
|
3 |
Pennar Engineer |
25-Aug-15 |
156 |
130 |
-26 |
-16.5 |
|
4 |
Power Mech |
7-Aug-15 |
273 |
193 |
-80 |
-29.4 |
|
5 |
Tree House |
10-Aug-11 |
114 |
19 |
-95 |
-83.3 |
|
6 |
Ashoka Buildcon |
24-Sep-10 |
225 |
346 |
121 |
54 |
|
|
COMPOSITE-6 |
|
2187 |
2459 |
273 |
12.5 |
SBI Cap had associated with 28 IPOs since 2010 and helped raising Rs 33,791 cr. This has appreciated 14.7% or Rs 4,961 cr. However, as many as 19 IPOs are currently languishing below the offer price. Of the 7 IPOs that were made in 2016, four are in red. In fact but for Power Grid, SBI Cap’s record would have been pathetic.
|
Performance of SBI Capital-associated IPOs since 2010 |
||||||
|
SL |
ISSUER NAME |
IPO |
IPO |
CURNT |
VALUE |
GAIN |
|
NO |
(Amount in Cr) |
DATE |
VALUE |
VALUE |
GAIN |
% |
|
1 |
Laurus Labs |
6-Dec-16 |
1340 |
1494 |
154 |
11.5 |
|
2 |
HPL Electric |
22-Sep-16 |
361 |
209 |
-152 |
-42.2 |
|
3 |
ICICI Prudential |
19-Sep-16 |
6057 |
6008 |
-49 |
-0.8 |
|
4 |
L&T Tech |
12-Sep-16 |
894 |
845 |
-49 |
-5.5 |
|
5 |
RBL Bank |
19-Aug-16 |
1213 |
2059 |
846 |
69.8 |
|
6 |
Infibeam Incorp |
21-Mar-16 |
450 |
1195 |
745 |
165.6 |
|
7 |
Precision Cams |
27-Jan-16 |
410 |
356 |
-55 |
-13.3 |
|
8 |
Prabhat Dairy |
28-Aug-15 |
365 |
346 |
-19 |
-5.2 |
|
9 |
Navkar Corp |
24-Aug-15 |
600 |
686 |
86 |
14.4 |
|
10 |
Monte Carlo |
3-Dec-14 |
350 |
224 |
-127 |
-36.2 |
|
11 |
Repco Home |
13-Mar-13 |
270 |
1047 |
777 |
287.2 |
|
12 |
PTC India Fin |
16-Mar-11 |
439 |
686 |
248 |
56.4 |
|
13 |
Tata Steel |
19-Jan-11 |
3477 |
2589 |
-888 |
-25.5 |
|
14 |
Punjab & Sind |
13-Dec-10 |
480 |
194 |
-286 |
-59.6 |
|
15 |
A2Z Infra Engg |
8-Dec-10 |
776 |
86 |
-690 |
-88.9 |
|
16 |
Shipping Corpn |
30-Nov-10 |
1186 |
558 |
-628 |
-53 |
|
17 |
Power Grid |
9-Nov-10 |
7576 |
16638 |
9062 |
119.6 |
|
18 |
Tecpro Systems |
23-Sep-10 |
268 |
3 |
-265 |
-98.7 |
|
19 |
Electrosteel Steel |
21-Sep-10 |
248 |
114 |
-134 |
-53.9 |
|
20 |
Microsec Fin |
17-Sep-10 |
148 |
91 |
-57 |
-38.5 |
|
21 |
Engineers India |
27-Jul-10 |
977 |
1033 |
56 |
5.8 |
|
22 |
Jaypee Infra |
29-Apr-10 |
2274 |
179 |
-2095 |
-92.1 |
|
23 |
SJVN |
29-Apr-10 |
1079 |
1309 |
230 |
21.3 |
|
24 |
Goenka Diamond |
23-Mar-10 |
135 |
8 |
-127 |
-94.4 |
|
25 |
IL&FS Transport |
11-Mar-10 |
700 |
305 |
-395 |
-56.4 |
|
26 |
DQ Entertainment |
8-Mar-10 |
1284 |
368 |
-916 |
-71.4 |
|
27 |
United Bank |
23-Feb-10 |
330 |
105 |
-225 |
-68.2 |
|
28 |
Arss Infra |
8-Feb-10 |
103 |
17 |
-86 |
-83.2 |
|
|
COMPOSITE-28 |
|
33791 |
38752 |
4961 |
14.7 |