Canada’s Caldwell Investment Management is looking to pick up upto 5% stake in privately held National Stock Exchange of India (NSE) for around $130 million (Rs 625 crore) valuing the equity bourse at $2.55 billion. The deal would partly be funded through share sale by one of Caldwell’s arms-- Urbana Corp.
Toronto-based Urbana plans to sell as much as C$60 million ($53 million) in equity to part finance the transaction and has filed a prospectus with Canadian regulators to sell stock and warrants. It would use the funds raised to buy 5% in NSE from the Indian bourse’s existing members.
The investment firm’s head Thomas Caldwell is bullish on the Indian economy. “This is a fantastic exchange in a very, very good market environment. We’re buying at, we believe, terms that are attractive and it gives us a wonderful participation in the Indian economy,” news agency Bloomberg quoted Thomas Caldwell on the transaction.
This deal will value NSE slightly ahead of its valuation struck by Norwest Venture Partners. The VC firm had early this month announced that it will buy 2.11% of NSE for Rs 250 crore ($53 million) from IL&FS Securities Services, valuing NSE at $2.5 billion.
NSE, an electronic national bourse which started in 1992, has two times the trading volume of 134 years old cousin the Bombay Stock Exchange, despite having lower number of firms listed compared to BSE. NSE has more than half the market share in equity trading but simply dominates derivatives trading in the country due to heavy trading by institutional investors.
Incidentally, Caldwell also owns a 4% stake in BSE through an arm Urbana. In a separate interview with Dow Jones Newswires, Caldwell said, “India's growing very fast, and it's not as dependent on other economies. As the economy grows, the capital market will grow and that will benefit the exchanges." He added that his firm favours India among the BRIC countries (Brazil, Russia, India and China) because its legal and regulatory framework is better established.
Through an Indian intermediary, Caldwell Investment Management has the option to buy up to 5% of NSE. The Canadian asset-management firm is looking to finance a little less than half of the transaction value in the form of non-voting class stocks and warrants. "We would never do a financing at these levels were it not for the opportunity," Dow Jones quoted Caldwell as saying.
NSE’s investors includes NYSE Euronext, which bought a 5% equity stake for $115 million in 2007, besides Goldman Sachs and Citigroup.