DSE, BSEC at loggerheads over strategic partner

Dhaka Stock Exchange is bothered by the Bangladesh Securities and Exchange Commission's push for an Indian bidder as the strategic investor for the premier bourse even though a more desirable offer from China is on the table.

The Daily Star correspondent yesterday saw dozens of anxious DSE members gather at the DSE headquarters after trading hours to discuss their next plan of action.

Earlier on Saturday, the DSE board unanimously chose a consortium of the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE) as the strategic partner of the premier bourse.

The consortium has proposed to purchase 45 crore shares of the DSE for Tk 22 each. It also offered technical support worth $37 million (about Tk 300 crore). In exchange, it sought for a seat at the DSE board and assured that it will not ask for any return on its investment for 10 years.

The proposal trumped the other on the table from a consortium led by the National Stock Exchange of India, which offered to purchase the same number of shares but for Tk 15 each. It also offered technical support but it did not give a monetary value.

In exchange, it wanted two seats at the DSE board.

As per rules, DSE was then supposed to forward its chosen offer to the stock market regulator for the final go-ahead.

Upon sensing that their offer will not be selected, Vikram Limaye, managing director and chief executive of the NSE, rushed in to Dhaka on Sunday and jumped in to a meeting with BSEC officials.

Soon after the meeting, BSEC called the DSE's Chairman Abul Hashem and Managing Director KAM Majedur Rahman and asked them to further scrutinise both the proposals, in a move that can be viewed as the stock market regulator doing the bidding for the Indian party.

“There is no chance of accepting the Indian party's proposal as the consortium failed to meet the requirements,” a DSE member told The Daily Star on the spot yesterday. Other than the matter of quoting a 47 percent lower price than the Chinese consortium, the Indian group wanted 25.01 percent stakes in the DSE.

As pert the Demutualisation Act 2013, the DSE can sell 25 percent stakes and allocate one seat at the board for strategic partnership. “Moreover, the Indian party is using the name of Nasdaq, but their proposal did not specify how much stake the American stock exchange will take,” he added.

In terms of market capitalisation, SSE comes in at fourth position, SZSE at number eight and NSE at number 10, as of October 31 last year. The Daily Star attempted to contact BSEC Chairman M Khairul Hossain several times over phone but he did not respond.

“We did not get any formal proposal yet,” said Saifur Rahman, executive director of the BSEC, adding that the approval can only be given once the proposal is received from the DSE. DSE will hold another board meeting on February 18 to formally discuss the BSEC's desire, said a senior executive of the exchange.

The country's premier bourse's hunt for a strategic partner comes as part of its conditions for demutualisation in 2013, which transformed it from an entity owned by mostly brokerage-owning members into a for-profit company owned by shareholders.

The move separated the bourse's management from ownership, and was a major recommendation of the stock market probe conducted by a government panel in the aftermath of the market crash of 2011.

According to the Demutualisation Act 2013, 40 percent shares of the stock exchange's shares should be allocated to DSE members, 25 percent to international stock exchange and 35 percent to the public.

On December 9, 2015, the BSEC under the Demutualisation Act 2013 directed the DSE to get a strategic investor within a year.

The commission later extended the deadline to June 30, 2017 following a plea from the DSE.