BSE new Kid on the block. NSE could demand higher premium

Shares of BSE made a strong debut on the bourses, closing at ~1,069.2 apiece, 32.6 per cent higher than the issue price of ~806 a share. In contrast, the benchmark Nifty closed flat on Friday. About 15.7 million shares of BSE changed hands during the session. BSE is the first Indian stock exchange to go public. Market participants said such a debut was expected based on the response its initial public offering (IPO) received. The offering was subscribed over 50 times with strong demand from both institutional and retail investors. Expressing satisfaction at the stellar debut, BSE Chief Executive Officer Ashish Chauhan said, “We are basically in the business of compliance and that will remain our mainstay going forward.” He said the exchange had been a consistent dividend payer and would continue to do that. BSE now offers close to 85 per cent of its net profits as dividends to investors. Market participants said a key reason behind the success of the IPO was its pricing, which was moderate. BSE issued shares at a price to earnings (P/E) multiple of 20.6 times its 2016-17 earnings. MCX, which is a listed commodity exchange, trades at around 40 times its P/E. Pricing played a very important role in the success of the IPO along with the reputation of BSE being a high-quality institution. We had kept the valuations at reasonable levels so that the new investors feel comfortable investing. The Mumbai-based stock exchange has listed on rival National Stock Exchange (NSE), which too is in the process of listing and is currently awaiting the regulatory nod for its IPO. Market participants said BSE’s strong listing could be a positive sign for NSE’s proposed ~10,000- crore IPO. The response for the BSE IPO is certainly a positive sign for NSE & could command even higher valuations, given its superior market position. BSE raised ~1,243 crore through the initial share sale. The issue was a complete offer for-sale in which existing investors sold 15.4 million shares, or 28.2 per cent of BSE’s pre-issue capital.