Domestic bourse Bombay Stock Exchange (BSE) is likely to buy out S&P Dow Jones Indices’ entire 50 per cent stake in the joint venture Asia Index Private Limited (AIPL), an index provider.
The move follows a long dispute between the two bourses over exiting the joint venture, which is responsible for compiling and maintaining popular Sensex and Bankex indices.
Last week, the bourse informed investors that the global firm was looking to divest its equity stake in the joint venture.
As per sources, following the exit by S&P Dow Jones Indices, AIPL will become a wholly-owned subsidiary of Bombay Stock Exchange. Sources said that the US-headquartered firm plans to monetise its stake as early as this month.
The deal will result in Bombay Stock Exchange having a similar structure like its bigger rival National Stock Exchange, where they fully own their index providing arms. The move also comes at a time when both the market regulator Securities and Exchange Board of India and banking regulator Reserve Bank of India plan to regulate index providers amid their growing significance.
Bombay Stock Exchange and S&P had set up the joint venture after the expiry of the licensing arrangement with National Stock Exchange and S&P-owned Crisil.
In 2018, Bombay Stock Exchange had planned to terminate the contract. However, in 2020, Singapore International Arbitration Centre (SIAC) had declared that the termination of the agreement with S&P Dow Jones Indices with respect to the joint venture was invalid. Bombay Stock Exchange’s termination of the joint venture was declared invalid.
Now the two have reached an amicable exit, as per sources.
The S&P Bombay Stock Exchange Sensex is one of the most widely tracked indices to gauge the performance of the Indian markets. The derivatives contracts based on Sensex have also gained popularity over the past few months.
The index is also used as a benchmark by several exchange-traded funds and index funds. As per data on Value Research, nearly two dozen passive funds are benchmarked to Sensex with an asset under management (AUM) of Rs 1.62 trillion.
Besides paying S&P, industry players said Bombay Stock Exchange will also require to hire more staff and invest in the company to better compete with NSE Indices, whose Nifty indices are more popular. Nifty indices are tracked by assets worth nearly Rs 6 trillion and command nearly three-fourths of AUM market share in the passive category.
Further, the joint venture also manages other indices like those on healthcare, housing, and finance.
The shares of Bombay Stock Exchange have rallied nearly five times in the last one year. However, in March so far, the stock has corrected over 3 per cent.
First Published: Mar 05 2024 | 6:37 PM IST