Deutsche may buy 5% in DSE

German multinational bank, Deutsche Bank, is likely to buy a 5% stake in the Delhi Stock Exchange (DSE). If the deal happens, this would be the fourth major foreign investment in DSE after US-based Lamb Company, New Vernon Private Equity and Passport Global Master Fund SPC (British Virgin Islands) picked up stakes in the stock exchange.

The DSE got de-mutualised in August 2007 and has around 2,800 companies listed on the exchange with 1,800 companies trading exclusively on it.Earlier, the Foreign Investment Promotion Board (FIPB) had approved four foreign investors — Wilmette Holdings, Mauritius, Noor Financial Investment Company, Kuwait, Ikarus Industrial Petroleum Company, Kuwait and Kuwait Privatisation Projects Holding Company, Kuwait to pick 5% stake in the DSE, but the deal didn’t work out. DSE executive director Harjit Singh Sidhu declined to comment on the developments.

After the government announced that it will allow up to 49% foreign stake (including both FII and FDI) in Indian exchanges, a list of foreign companies have bought stake in Indian stock exchanges. The latest expression of interest came from Nasdaq, the largest electronic equity securities trading market in the US, to partner with Ahmedabad Stock Exchange (ASE).

Earlier this year, NYSE Euronext bought 5% stake in the Multi Commodity Exchange (MCX) for $55 million. The government has, however, capped foreign ownership for a single investor in commodities exchanges at 5%.

At DSE, foreign stake holders hold 15% stake and 36% stake is with private investors such as Parsvnath, Omaxe, BCCL and NDTV. Analyst believe that investment from foreign partners will add value and help regional exchanges acquire advanced technology.

LS paves way for listing of securitised instruments

The Lok Sabha on Monday passed a crucial legislation which seeks to develop India’s securitisation market by facilitating listing and trading of securitised certificates or instruments on stock exchanges.

The Securities Contract (Regulation) Amendment Bill, 2007, to amend the Securities Contracts (Regulation) Act, 1956, was passed by a voice vote without discussion. This will allow banks and financial institutions to keep these securitised loans off their balance-sheet, thus reducing the need for additional capital along with giving them an alternative form of funding risk transfer, a new investor base and potential capital relief.

Securitisation is a form of financing, involving pooling of financial assets and the issuance of securities that are re-paid from the cash flows generated by the assets. This is generally accomplished by actual sale of the assets to a bankruptcy-remote vehicle, that is, a special purpose vehicle, which finances the purchase through the issuance of bonds. These bonds are backed by future cash flow of the asset pool. The assets for securitisation transactions include mortgages, credit cards, auto and consumer loans, student loans, corporate debt, export receivables and off-shore remittances.

Read more in The Economic Times article.