THE FINAL COUNTDOWN - Shareholders lukewarm to reinventing Madras bourse
Sandhya Ravishankar
Many Keen On Liquidating Assets, Some Pine For Local Exchange. AGM To Decide Fate
Since the curtains came down on the 76-year-old Madras Stock Exchange last year, members of the bourse have tried to revive it in many ways. While some in the business community have a sentimental attachment to it and argue that a local stock exchange would be a boost for local firms, others say in the age of internet and interconnected economies, local exchanges offer no real advantage. If not revival, a resuscitation would work just as well, feel many on the MSE board.
Since it could no longer function as a stock exchange, the Madras Stock Exchange required a change of name as well as a change in its documents detailing what business the company is involved in. In May 2015, a postal ballot was initiated for changing the name of the Madras Stock Exchange to MSE Securities Limited. Another idea was to turn the MSE Securities Limited into a financial services firm, while its subsidiary , the existing MSE Financial Services, would continue its business as a trading platform, a sub-broker for the Bombay Stock Exchange and the National Stock Exchange.
The postal ballot was returned in July -70% of shareholders opposed the name change as well as the change in documents of the new company . Sources within the MSE though say meetings are on between shareholders and the MSE board. Shareholders are keen on liquidating the Madras Stock Exchange's assets like buildings and its shares of the BSE. The idea of turning the MSE into a financial services company does not seem to have many takers. Even the name could undergo a change from the proposed MSE Securities Limited to MSE Securities Enterprises. An annual general meeting likely to be held next month, will decide MSE's final fate.
In the imbroglio, experts feel closure of MSE would hurt small and medium-sized local businesses the most. “In bigger exchanges like the National Stock Exchange and the Bombay Stock Exchange companies cannot raise less than `50 crore. The money required by small companies can be raised in Tamil Nadu. They don't need to go pan India,“ argued V Nagappan, former member of the Madras Stock Exchange. While close to 400 stocks were traded exclusively on the Madras Stock Exchange before it wound up, most of these companies did not head for listing on any of the larger exchanges. For owners of these small firms, the obstacle was practical they did business in the region and spoke only Tamil.“The fees involved in listing with a larger bourse and compliance are exorbitant which is not viable,“ said Nagappan. “There is an SME Exchange but small companies have no liquidity and that means no investors. Also SEBI itself says this SME Exchange is being misused to launder money .So where do they go?“ he asked.
Detractors though, like D Balasundaram, founder director of the erstwhile Coimbatore Stock Exchange, cite examples of stocks which have done better after moving to larger bourses. “Good companies will always get recognised,“ said Balasundaram.“Take for example, Shanthi Gears, Ambika Mills and LG Equipment -companies which did not do very well until they got national attention,“ he said.
Balasundaram feels with the advent of technology , smaller exchanges are a regulatory burden. “Since the late 1990s the regional stock exchanges lost all reason to exist. Except NSE no other exchange has the financial viability to survive. The BSE continues to work because it has huge interest income,“ he said.
Balasundaram argues that 90% of volume on the NSE are those of shares of the Nifty 50, the top 50 companies on the exchange. Smaller companies, he says, are simply not traded. “This is a problem with our national mindset,“ he said. “How do you create interest in small businesses? They always have to look for alternate sources of funding. It is similar to the movie industry -a `Baahubali' will do well due to sheer scale. It is rare for a `Kaaka Muttai' to do well even though it's a great film,“ he said.
The death knell for MSE was sounded in 2012 when market regulator SEBI issued an ultimatum to regional stock exchanges, asking them to ensure an annual turnover of `1,000 crore and a net worth of `100 crore or ship out with exit options. But TN's businessmen are big on sentiment, and a number of industry leaders feel shortchanged. They feel unfairly penalised for the flouting of rules by the Uttar Pradesh and Kolkata stock exchanges.
