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THE 132-year-old Bombay Stock Exchange (BSE) took its first step towards demutualisation on Wednesday when it offered a 5% stake to Deutsche Boerse—the world’s largest bourse by revenue and market capitalisation—for Rs 189 crore. The deal—through a fresh issue of 3.6 lakh shares at Rs 5,200 per share—pegs the enterprise value of BSE at around $910, million based on the post-issue equity capital of Rs 77.2 lakh. The stake sale is subject to regulatory and shareholder approval.

BSE’s rival, NSE, was valued at over $2.5 billion last month when NYSE Group and three other institutional investors took 5% each for a total of $490 million. The alliance with Deutsche Boerse will provide BSE much-needed support in terms of technology and new product offerings, as it tries to wrest market share from NSE. NSE’s market share in the cash segment is almost twice that of BSE while it has a near monopoly in the derivatives segment.

The valuation of BSE shares (Rs 5,200) works out to a price earning ratio of 41.8 based on earnings for 2005-06. BSE recorded a net profit of Rs 93 crore in the year ended March 31, 2006, up 22% year on year while total income grew 29% to Rs 220 crore.

“The alliance is of long-term strategic importance and is aimed at achieving several objectives in multiple asset classes in which we found Deutsche Boerse to be very strong. This is an important step for BSE towards realising its mission to emerge as the premier Indian stock exchange by establishing global benchmarks,” said BSE MD & CEO Rajnikant Patel.

The two exchanges will extend cooperation in various areas like trading (equity and derivatives), clearing, settlement and technology, Mr Patel added.

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