Market regulator Securities & Exchange Board of India (Sebi) has proposed to increase the shareholding cap for strategic invesors in stock exchanges and commodity bourses from the present 5% to 15%. This comes in the backdrop of shareholders who have stakes of more than 5% trying to pare down their holdings as per SEBI norms.
The new rules are said to be applicable to only five categories of investors - stock exchanges, depositories, clearing corporation, banks and insurance companies. This announcement means that foreign bourses like NYSE, which holds 5% stake in the NSE, and Deutsche Borse and Singapore Exchange, which hold 5% each in the BSE, can up their stake.
The decision comes as the exchanges have informed the SEBI that the cap of 5% does attract long-term investments and interests from investors. Also some of the investors like LIC and SUUTI are having problems in cutting their stake in NSE and Over The Counter Exchange Of India (OTCEI). Also State Bank of India, Infrastructure Development Finance Corporation and SHCIL have more than 5% stake in the exchange and have been given a deadline of September to pare it down. In July, SBI had appointed SBI Caps for selling its excess shares in the NSE. LIC has already sold some of its stake.
Only last month IFCI and Stock Holding Corporation of India (SHCIL) had offloded some of their stake in NSE to Hero Group and Srei Infrastructure Finance. The deal pegged the valuation of NSE at $4 billion. According to a report, some of the investors of NSE were also pushing it to go for an IPO so that they can bring down their holding.
In December 2006, foreign investment in stock exchanges was allowed upto 49%. The limit for foreign direct investment is 26% and for foreign institutional investors it is 23%. NYSE, Goldman Sachs, General Atlantic and Softbank Asian Infrastructure Fund (SAIF) hold 5% each in NSE. Others like Morgan Stanley, Citigroup and Actis collectively have a 6% stake in NSE.