A sudden steep rise in listing fee by BSE has taken aback the companies looking to migrate from regional stock exchanges (RSEs), and their shareholders.
Last week, BSE wrote to several companies that had already applied for direct listing, saying the processing fee for direct listing was revised with immediate effect to Rs 25 lakh. And, from January 1, further to Rs 50 lakh. In comparison, the processing fee of rivals Metropolitan Stock Exchange of India (MSEI) and National Stock Exchange (NSE) is Rs 3.5 lakh and Rs 1 lakh, respectively.
BSE gave the applicants an option — either pay the differential fee or withdraw the application and get a refund of what was already paid. Then came the killer. “The BSE should be in receipt of your request for withdrawal of application or payment of differential fee within two weeks of receipt of this intimation, failing which your application would be treated as closed and no request for refund of fees will be entertained,” stated a BSE letter dated December 7.
In an e-mail, responding to questions from this newspaper, a BSE spokesperson said they’d listed many more companies as compared to both rivals but had begun to have reservations about the quality of companies coming out of these regional bourses.
Of 244 such companies listed on BSE, eight have since been suspended and a little over half are under investigation. Approximately 30 per cent have issued preferential shares and a little over 15 per cent have seen their stock prices increase by about 500 per cent since their direct listing on BSE. The total market cap of these companies increased by Rs 4,930 crore.
“Given the heightened surveillance activities to avoid manipulative and tax avoidance practices using stock markets, Sebi (the Securities and Exchange Board of India) and other agencies have raised several questions on the lack of corporate governance in such companies. In view of the same, BSE has recently tightened its direct listing criterion, including increasing the initial listing fees, to avoid frivolous companies from listing and using (our) platform for price manipulation and tax avoidance schemes," the spokesperson added.
However, many professionals feel a increase in fee might not necessarily result in an improvement of quality and people coming with an intention to manipulate might be more prepared to pay it than the genuine ones. “If the (genuine) companies will not get listed, the ultimate sufferer will be the investors,” Anang Shandilya, a practising company secretary, said in a letter to the finance ministry.
BSE said it was also changing several other aspects of its framework, to avoid frivolous companies from coming on its board. And, to have better regulations to ensure their platform was not used for any sharp practices. These include price bands ranging from daily to annual and risk-based sub-segments.
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