11 Nov 09 BSE and NSE: Do they care for ordinary investors?

Stock exchanges exist because people like you and me buy and sell shares. And there are millions of us, who soldier on, despite corrupt managements, ineffectual regulators, scams, misinformation and much more. Whether trader or investor, it is we, the “public” that ensure that all this works. Ultimately, institutional money too, has been collected largely from individuals.

It is we, the ordinary public, the common man and woman – who support IPOs, NFOs and indeed the stock exchanges themselves. We are the customers!

So it is not only baffling, but extremely saddening, that the two premier Indian stock exchanges, the BSE and the NSE, don’t give a hoot about us.

Consider this: ever since the path to de-mutualisation of exchanges was announced, both the exchanges have offloaded equity to a pretty large number of investors. However, not one share has been offered to the Indian public! Do they think that addicts like us will not subscribe? Or is it that they don’t want to put themselves under the same scrutiny as their listed companies? Or is it some other reason that I cannot fathom?

As of July 2009, the Bombay Stock Exchange (BSE) had a so-called “public” shareholding of 52.709% as per their own disclosure. See DISCLOSURE AND DECLARATION FORM and shareholding pattern http://www.bseindia.com/downloads/Attdisclosure.zip.

I haven’t been able to find a list on the bseindia site, giving a breakdown of shareholders (call this corporate governance?). But Business World has compiled a list (Jan 2008). In January 2009, the Economic Times reported that BSE offered fresh equity to SGX and Deutsche Borse: link

Various stock exchanges, companies, investment firms and individuals have got equity in the BSE. So why have I been left out?

The NSE is no better. Read Sucheta Dalal’s recent article. In fact, her longer article (in the physical copy of Moneylife) details how the NSE has been trying its best not to disclose the list of shareholders!!

Here too, apart from the so-called “strategic” investors, various random individuals have been favoured, including Mr. Tulsi Tanti’s mother (!!), Gopalakrishnan of Infosys and various other corporate and financial honchos. A story in BusinessWeek on September 21, 2009, said that NSE “seeks investors”, which means they will sell some more stock.

But despite the obvious demand (and attraction) for their stocks, the exchanges refuse to go public. An article in the Economic Timesreported, ‘However, a highly-placed NSE official denied any plans of a public issue. “No such proposal is under consideration,” he said.’

The same article says, ‘“A listing would help institutional investors to pare their holding at better valuations and at the same time broaden the investor base for the exchange,” said an institutional investor with a large holding.’

This one line should make it all clear! Early (and lower-priced) equity issuance will enrich the fat-cats, who will then offload their shares to a gullible public (you and me). That’s clearly the plan!

And who cares about the ordinary investor? From the looks of it, definitely not the National Stock Exchange or the Bombay Stock Exchange. If they did, they would first sell shares to the (real) public, and then let the institutions pick it up at a premium.

Arun Jethmalani

Arun is one of the founders of ValueNotes. Apart from trying to build a high-quality research business, he has spent the last 27 years researching, analyzing, and dissecting companies and industries. He has worked with clients of all shapes and sizes, from all parts of the world – in providing them insights that make a difference to their business.
Prior to ValueNotes, he was an equity analyst/advisor, and wrote extensively on investing – including a column titled “Value for Money” which ran for 10 years in the Sunday edition of the Economic Times. To this day, he remains an avid “value” investor.
He has also been published in several other publications, and is a regular speaker at events related to technology, investing, competitive intelligence, business process management, Internet, etc. See: Valuenotes Events
He has been instrumental in developing a community of research and intelligence professionals in India, and is the founder and current chairman of the SCIP (India) Chapter. Arun holds a B Tech from IIT, Bombay and an MS from Duke University, NC, USA. LinkedIn Profile

  • Bhavik
    Posted at 14:41h, 13 November Reply

    Very Valid point…We need to file RTIs and try to get information about the same..There are various investor’s association. We should approach them and try to get answers from them.

  • Andrew
    Posted at 11:52h, 13 November Reply

    Everybody wants to make easy money, and when large investors are bending over backward, why should they bother with servicing thousands of painful shareholders?

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