BSE plans an IPO next year ~ appoints 14 Investment Bankers for the Issue ! Phew !

BSE plans an IPO next year ~ appoints 14 Investment Bankers for the Issue ! Phew ! 

Valuation of BSE Shares has been a pet subject of mine right from 2008  when I actually began this Blog and I have updated my valuation views several times on my blog since then

I fact  few years ago a High Networth Friend & Client was approached by a Leading Broking House and was being strongly propositioned to buy BSE Shares from them at a high Price ~ He simply confronted them with my Valuation which was at half the price they were asking for !  My Friend tells me this broking house admired me at the same time while cursing me !

Have a look at my earlier BSE Shares Valuation blogs

George Soros Bets on BSE…Picks up 4% of its Equity for US $ 35 M => Rs 380/share…Let’s Update BSE Value

Sunday, August 22nd, 2010

Updated Valuation of BSE Ltd

Tuesday, December 8th, 2009

SHARES OF BSE LTD LOSING VALUE

Tuesday, August 5th, 2008

The latest Consolidated Results of BSE Ltd as on September 30,2012 show a  worrying picture of falling profits and contingent liabilities

• The Networth is marginally gone up to Rs 2265 crs with Equity Component at Rs 10.37 crs (FV Rs 1) giving a Book Value of Rs 218 per share
• The Profit has dropped to just under Rs 35 crs for the hy FY 13 while the full year FY 12 the profit was Rs 178 crs
• Thus the EPS for the half year is Rs 3.35 and for the full year should be a simple extrapolation to Rs 7.It was Rs 17 for FY 12
• The Half Year Profit has been impacted  significantly by the reversal of Rs 10.27 crs Prior Period Items of  Net Income and the Rs 65.28 crs for Liquidity Enhancement Incentive Programmes (LEIPS) for the revival  of  the Derivatives Segment.LEIP was  launched in September end 2011 and  the Full Year FY 12 debit was Rs 60.49 crs though the effective period was second half
• Rs 134.50 crs has been treated as Contingent Liabilities for the demand raised by the Department of Telecommunication ,Government of India for revised VSAT Network License Fees and Royalty etc.BSE is challenging this claim 
• The Consolidated Results include the performance of BSE Ltd and it’s seven subsidiaries ,one jv and one associate
• The Operating Segments are Stock Exchange Activity and Depository Activity 
• The Depository Activity contributed nearly Rs 120 crs Revenue in FY 12 in an Operating Income of Rs 538 crs ~ that’s a strong over 22% contribution
• The Segment Profit shown in FY 12 from Depository Activity is a strong Rs 95 crs from an overall Rs 285 crs ~that’s a huge 33%

If SEBI has it’s way then BSE may lose control of the Investor Protection Funds and the Depository and therefore also Profitability from this~ This will affect Earnings and therefore Valuation !

A Voluntary Retirement Scheme has been implemented.

What does catch my eye in the FY 12 Annual Report is three Interesting facts:

1. At March 31,2012 there were 6367 shareholders of which 431 held 50001 and more shares each comprising nearly 91% of the Equity of Rs 10.35 crs
2. The high proportion of Top Management Salary & Perquisites level to  the Total Employee Expenses ~Just 7 of Top Management from an Employee Strength of 500 + earned a Total Remuneration of nearly Rs 9 crs ~ that’s nearly 12% of Total Employee Expenses Debit of Rs 77 crs
3. BSE Training Institute or BTI Ltd contributed Rs 8 crs ~ This was a result of launching MBA Programs in Financial Markets at Rs 4 to Rs 6 lakhs per student ~ The First Batch has  a strength of 140 while the second has dramatically dropped to just 70 and I believe this  Program is no longer being extended  ~ There have been some operational hurdles with IGNOU ~ Thus there is a question mark on sustainability of such quantum of fees        

The Competition from the soon to commence equity trading operations,MCX Stock Exchange and the boost it  will give to it’s  Training Wing FTKMC will only compound the  operational challenges that BSE faces

In light of all this ,that many believe ,threatens the very survival of BSE, it would be interesting to see what the IPO Pricing will be as to be decided by the Investment Bankers just appointed,states BSE

Cannot be less than Book of Rs 218 as on September 30,2012 !~ and remember George Soros paid Rs 380 two years ago in 2010 for 4015544 shares  ! for a 3.88% stake