Now defunct, VSE board nays merger with ASE

The dreams and plans for revival of the country’s second oldest stock exchange, Ahmedabad Stock Exchange (ASE) are in for a toss once again. With the motive of creating a net worth of over Rs100 crore, ASE had proposed a merger with the Vadodara Stock Exchange (VSE), which was rejected last week.

ASE is now left with no other choice but to sell off its real estate property in Ellisbridge. As per Sebi’s guidelines, to operate, an exchange should have a net worth of at least Rs100 crore, while ASE currently has Rs56 crore. It had planned to merge with VSE so as to raise the net worth by Rs70 crore, taking the combined figure to nearly Rs126 crore.

In addition to rejecting ASE’s merger proposal, the Parimal Nathwani-led board of VSE is now defunct as it failed to form a full quorum. As per the market regulator’s three-month-old guidelines, which had a September 19 deadline, the board of a stock exchange cannot have trading members and should have an equal number of public interest directors (PIDs) and shareholders.

In the case of the 12-member VSE board, it only has two members – one PID and a shareholder respectively. To form quorum, VSE is required to have at least three members.

VSE chairman, Parimal Nathwani has lost his charge with the board now defunct. The Vadodara bourse has to wait for Sebi’s notice on appointment of a new chairman, five new PIDs and approval of the sole existing elected shareholder.

An official from VSE, who lost his seat as a trading member, said on condition of anonymity that in the stock exchange’s AGM last week, the board rejected the proposal for merger with ASE.

“It seems that some VSE shareholders have received offers for merger from Delhi Stock Exchange, Kolkata Stock Exchange, MCX-SX and others. Hence, to keep its options open, the board has decided to reject ASE’s approval,” the official said.

He further said that the 100% subsidiary of exchange, VSE Stock Services will continue to function as a retail broking firm, with trading members as shareholders.

“The terminals of BSE and NSE in the subsidiary will continue to function. Sebi guidelines do not cover this subsidiary,” the official added.

With the rejection, the regional bourse of Ahmedabad is now considering calling for a board meeting to receive approval for selling its real estate property.

“The VSE board has not given a positive response to our proposal. So we have decided to fight it out on our own. For the bourse’s revival, we will have to sell our piece of land in Ellisbridge, from which we expect to raise at least Rs50 crore to fulfill the pre-requisite net worth of Rs100 crore,” said former chairman of ASE, Hemantsinh Jhala.

Although the ASE has managed to form a new board, it is without a chairman as of now. “We succeeded in forming the full quorum and hence have a new board. But we are awaiting Sebi’s letter with the name of the new chairman,” said Jhala.

The new board of the stock exchange consists of one managing director, KC Mishra, who was appointed by Sebi as well as four PID members and four shareholders respectively.

“As of now, we have two PID members in the board — PK Ghosh and HN Mishra. The four shareholders in the board include me, Keyur Mehta, Kush Shah and Apurva Hathi,” said Jhala and added that the ASE is still awaiting the names of two more PID members.