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BSE to appoint valuers soon

Sangita Shah

The Bombay Stock Exchange will shortly appoint valuers for the exchange to arrive at the valuation, as part of the corporatisation and demutualisation process.

The general body of the exchange gave, in principle, sanction to the appointment of valuers last week, sources said. The bourse, in a bid to expedite the procedure of corporatisation and to adhere to best international practices, will also appoint consultants of international experience in dealing with, and advising stock exchanges which have demutualised. It will also appoint solicitors and chartered accountants for the purpose.

The valuation becomes essential, especially after an amendment to the Income Tax Act exempting capital gains and transfer of assets. The valuers will also take into account the issue of stamp duty.

Valuation will also deal with unlocking the asset of ownership of the exchange as members of the exchange while purchasing membership pays for the right to trade as well as a right to ownership. Valuation of the exchange will also include its capital assets as well as the brand value, sources said.

The exchange will split the existing membership into two parts, namely ownership and trading rights, in a proportion to be decided after the report of valuers. This proportion could be 25 per cent trading rights and 75 per cent ownership rights or in any other similar proportions.

The net assets of the exchange at book value would be the value of the shares to be issued to the members. These shares would be given to the members at a nominal price in the ratio as decided above. These shares may be listed on the exchange and traded regularly without making an IPO like the Hong Kong Stock Exchange, which has permitted direct listing of shares.

In the country, the exchanges have been treated as non-profit organisations, in the lines of co-operative societies, for the purpose of payment of taxation. However, the assets of the exchanges have been built by the contributions from members through issue of new memberships, contributions to building fund or as transaction charges. Hence, members have a right to the asset of the exchange if not to distribution of profits due to tax exemption and the valuers will also look into these issues.

Worldwide, 15 exchanges have already demutualised, (almost all in the last two years), 14 have member approval and 15 are actively contemplating the same.

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