Deutsche B÷rse buys 5% of India's BSE

The 5% stake in the Bombay Stock Exchange values the Indian exchange at $854 million.
Deutsche B÷rse will buy a 5% stake in the Bombay Stock Exchange for Rs1.89 billion ($42.7 million) representing a value of Rs37.8 billion ($854 million) for the Indian bourse.

BSE, which was established in 1875, is the oldest stock exchange in Asia. It is a corporatised entity and is presently in the process of demutualisation. The BSE has a network across 417 cities and towns of India. Companies listed on the BSE have a total market capitalisation of $850 billion.

Deutsche B÷rse is the largest exchange organisation worldwide with the Frankfurt Stock Exchange and the world's leading derivatives exchange Eurex among its major markets. Deutsche B÷rse is itself listed on the Frankfurt Stock Exchange. Other exchanges said to have been interested in the BSE stake include the London Stock Exchange, NASDAQ and Singapore Exchange. It has not yet been clarified whether the BSE wil be inducting further strategic and financial investors.

BSE managing director and CEO, Rajnikant Patel, says: ôThis transaction is an important step for BSE and a firm beginning towards bringing the global markets to India.ö

For Deutsche B÷rse the investment expands its presence in Asia in a market it sees as a ôkey growth areaö.

The transaction follows an announcement in January this year that the New York Stock Exchange will take a 5% stake in IndiaÆs younger exchange, the National Stock Exchange (NSE), for $115 million in a deal which valued the NSE at $2.5 billion.

Specialists commented that the differential between the NSE and BSE captures the fact that the 1994 founded NSE is widely perceived as more efficient and, in just over a decade of existence, has been successful in taking away a great deal of market share from the much older BSE. The NSE's success was derived from the fact that it managed to move the market away from intermediaries and closer to investors; this was a long overdue change which made stock trading far more transparent.

Both deals follow close on the heels of IndiaÆs central bank, the Reserve Bank of India, in December permitting foreign investments in IndiaÆs stock exchanges with some restrictions - up to 26% of an exchange can be held by foreign investors but no single investor can hold more then 5%

The world's leading exchanges seem in synch with other financial services businesses in recognising that emerging markets like India are crucial to future growth rather then the mature western markets in which they have traditionally operated. While the Indian exchanges are today quite small compared to their global partners, the size also reflects the potential.
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