Market Watch

Bombay Stock Exchange eager to buy Nepse stock

Published by Octron on January 10, 2010

Bombay Stock Exchange (BSE), a leading stock exchange in South Asia, has approached Nepal Stock Exchange (Nepse), expressing interest in investing in as much as a 10 percent stake and working as a strategic partner.

Such a proposal from BSE comes at a time when the Ministry of Finance (MoF) is debating the model for privatizing the country´s sole stock market. Officials concerned said it could be one good option to go with. “BSE has repeatedly approached us to partner in Nepse. But because we are yet to finalize the modality, we have remained silent on it so far,” said Tanka Paneru, chairman of the Nepali stock exchange.

Paneru told myrepublica.com that BSE had first raised the issue with keen interest when senior Nepse officials visited Mumbai last year. BSE raised the issue again when its officials visited Kathmandu in December. During the talks, BSE officials had referred to the induction of two of the world´s best exchanges, Deutsche Börse and Singapore Exchange, as strategic partners in BSE, and said the stock exchange was interested in jumping into a similar partnership in Nepal.

They had even said that BSE could instantly invest 5 to 10 percent of capital in Nepse. Officials at Nepse believed that induction of a modern and competent strategic partner like BSE would greatly raise capacity and efficiency in the secondary market in Nepal. Nepse has proposed to MoF induction of a strategic partner as one of the options among privatization models. “Our only worry on this is; it could take a longer time to formalize the deal,” Paneru said.

Given the delay Nepse has seen in its privatization, policymakers are currently in a mood to hasten the process. For its privatization, Nepse has suggested to the government to either divest its shares through competitive bidding under the Privatization Act or follow the initial public offering (IPO) model, as was done in case of Nepal Telecom, but without tagging a minimum price.

MoF officials stated that following the Privatization Act would yield better returns for the government. But they are worried that the protracted process could cost privatization dear, especially given the instability on the political front. Under the IPO model, Nepse has proposed to issue 30 percent share to the general public and auction off another 20 percent to institutional investors. “If MoF wants, we can even set aside a portion of shares for inducting strategic partners like BSE,” said Paneru.

For executing this process, Nepse has said it will raise its paid up capital to Rs 200 million, from less than Rs 40 million now, by issuing bonus shares to its present shareholders — the government, Nepal Rastra Bank and Nepal Industrial Development Corporation.

Source: Republica

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