Ten things to know about BSE share sale

BSE, India's largest stock exchange, goes public today. We look at 10 things to know about the issue.

• The exchange raised Rs 373 crore by allotting shares to anchor investors on Friday. BSE has allotted shares to anchor investors at the price of Rs 806 apiece, the higher end of its IPO price band of Rs 805-806.
• Among the anchor investors are Goldman Sachs Asset Management, ICICI Prudential Mutual Fund, Kotak Mutual Fund, Citigroup, IDFC Mutual Fund, DSP Blackrock, Capital World, Reliance Capital Trustee Company and Kuwait Investment Authority Fund. Anchor investors are institutional investors such as sovereign wealth funds, mutual funds and pension funds which subscribe to shares ahead of an IPO issue. The purchase of shares by anchor investors raises confidence of potential investors in the IPO. Sebi introduced the concept of anchor investor in 2009 in public issues.
• BSE shares will be listed on NSE as Sebi rules do not allow self-listing for an exchange.
• The exchange aims to raise up to Rs 1,243 crore from the IPO, which is priced at Rs 805-806 per share. BSE, which was founded in 1875, has for long been considering an IPO. However, a lack of clarity on the rules for listing stock exchanges had delayed the process.
• The exchange had filed draft papers with the Securities and Exchange Board of India (Sebi) in September to float an IPO. It received Sebi's 'observation' on December 30, which is necessary for any company to launch public offer, the latest update available with Sebi showed
• There are an estimated 9,000 shareholders in BSE, where originally mostly brokers held shares. However, a host of foreign investors and domestic financial institutions have acquired shares over the years and the IPO will provide some of them an exit opportunity to monetise their assets.
• Bids for the issue can be made for a minimum of 18 shares and in multiples of 18 thereafter.
• Among the existing shareholders are Bajaj Holdings Investment, Caldwell India Holdings, Acacia Banyan Partners, Singapore Exchange, Mauritius-based arm of American investor George Soros' Quantum Fund and foreign fund Atticus.
• In FY16, revenue from operations (comprised of revenue from securities services, services to corporate and data dissemination fees), income from investments and deposits and other income comprised 64.8%, 28.8% and 6.4% of total revenue, respectively. In Q1FY2016, revenue from operations, income from investments and deposits and other income comprised of 63.4%, 26.5% and 10.1% of total revenue, respectively.
• The exchange logged Rs 122-crore net profit in FY' 2016. Further, BSE's turnover from the interest rate derivatives market grew from Rs 2,600 crore in FY2014 to Rs 1.14 lakh crore in FY2016.
• The exchange is world's 11th largest by market capitalization, with $1.52 trillion in total market capitalization of listed companies. Investment advisor Equinomics says there is significant growth potential for BSE given - a) Government's efforts on increasing retail and EPFO participation in capital markets, b) New products and innovations such as REITs, commodity trading and infrastructure investment trusts and c) Information services segment which currently contributes 4% of revenue vis-a-vis global revenue contribution of 10-25%. At the upper end of the price band, the stock is available at PE of 28x based on annualized FY2017E earnings. It's nearest comparable MCX is trading at P/E of 39x based on FY2017E earnings. Equinomics recommends SUBSCRIBE to the issue with long-term perspective.