THE LISTING OF BSE - IT HAS COME A LONG, LONG WAY

By Ruma Dubey

Today is a historic day in many ways.  The oldest stock exchange of India, 142 years old to be more precise, the bourse which ushered in the culture of “equity” in India is finally going to get listed. The IPO has opened today and we can expect it to get listed on the NSE next week.

The process of getting the BSE listed has been going on for 10 years now and it has ultimately seen the light of the day. We have heard the “listing of BSE” so many times that we are probably desensitized to it by now but it’s a big deal. An equity bourse getting listed on another is indeed historic; it is in many ways a “coming of age” of the Indian markets.

We are not discussing the merits or demerits of the IPO here; it has been explained in the most lucid and excellent way in our New Issue Analysis section. Here, we just reminiscence about the way BSE has come to become what it is today.

It is very hard to imagine that the stock exchange began its operations on 9th July, 1875, formally, for first time in a building. But before that, the operations actually began in 1835 under a banyan tree – for some days they operated under a tree in Horniman Circle and then shifted under another tree on Meadows Street. But as the popularity of trading grew, roads along the banyan tree started getting jammed and that is what prompted them to move into a building in 1874.

This banyan tree still stands in the Horniman Circle Park, Mumbai. In 1860, the exchange flourished with 60 brokers. The equity culture took off in India when the American Civil War broke out and the cotton supply from the US to Europe stopped. Soon the number of brokers increased to 250. The informal group of stockbrokers organized themselves as the Native Share and Stockbrokers Association which, in 1875, was formally organized as the Bombay Stock Exchange (BSE).

Some 25 brokers put in Re.1 each in the Association. They worked from a rented out office on Dalal Street, the ground floor of the Advocate of India building. The rent was huge – Rs.100 per month. Soon paying up the rent became a struggle and it was Dinshaw Maneckji Petit, founder of India’s first textile mill, who saved it from obscurity. Dinshaw owed money to some of the brokers and he struck a deal – he gave them 25 shares of his company, Victoria Manufacturing Company, in exchange for the debt and gave an advance of some Rs.23,000.

The brokers sold those later at Rs.690/share and raised Rs.17,250. The Association first repaid Dinshaw’s money and the balance money – Rs.14,857 is what it used as “initial capital” to begin work.

The business of equity picked up slowly and 25 years later, in 1899, Dinshaw was once again at the centerstage – the Association moved into a new building – Sir Dinshaw Petit Native Brokers Hall.

In 1928, the plot of land on which the BSE building now stands was acquired, and a building was constructed and occupied in 1930. Premchand Roychand was a leading stockbroker of that time, and he assisted in setting out traditions, conventions, and procedures for the trading of stocks at Bombay Stock Exchange and they are still being followed.

D.S. Prabhudas & Company (now known as DSP, and a joint venture partner with Merrill Lynch), Jamnadas Morarjee (now known as JM), Champaklal Devidas (now called Cifco Finance)  and Brijmohan Laxminarayan are some of the of the initial members of the exchange, and who are still running their respective business!

Sir Phiroze Jeejeebhoy was another person who dominated the stock market scene from 1946 to 1980. His word was law and he had a great deal of influence over both brokers and the government. He was a good regulator and many crises were averted due to his wisdom and practicality. The BSE building, icon of the Indian capital markets, is called P.J. Tower in his memory.

It was only in 1956, that the Government of India recognized the Bombay Stock Exchange as the first stock exchange in the country under the Securities Contracts (Regulation) Act.

The BSE has come a long, long way ahead. It has lost out to NSE but it continues to remain an icon when it comes to equity.

The BSE listing will give the much needed exit route to many brokers but if one removes the haze of it being the oldest bourse in Asia, and one looks at it purely from a financial perspective, it does not paint a very attractive picture. The brand equity of BSE is what will probably create some fancy, the notion that we hold a piece of history in your portfolio, probably the oldest company in India.