Taking Bull by the Horns: BSE through the sands of time

The book, BSE: Journey of an Aspiring Nation, authored by Sameer Kochhar, was released by Maneka Sanjay Gandhi, Union Minister for Women & Child Development in presence of S Ramadorai, an industry veteran and Chairman, BSE Ltd at a glittering ceremony that was attended by more than 500 CEOs and heads of organisations from across banking and financial services. Ramadorai is also Chairman, CEO’s Association for Inclusive India (CAII). Others present included Rana Kapoor, MD & CEO, YES BANK; Ashishkumar Chauhan, MD & CEO, BSE Ltd; Deenaben Mehta, MD, Asit C Mehta Investment Intermediates; and, D B Phatak, IIT-B, Mumbai and Director, SKOCH Development Foundation.

BSE has since inception offered an incredible and efficient platform for raising capital, to various companies in India. “The 140^th years of unique and remarkable sojourn of BSE, the institution has more or less shaped the capital markets starting from 1875,” said Ramadorai while speaking at the occasion. “We work on the principal of inclusive growth and equitable wealth creation. BSE as an institution is under continuous transformation. The journey of BSE is as illustrious as the history of the Indian capital markets,” he added. 

“If banking is about 3^rd generation, the stock markets are about 5^th generation or so. The purpose of any stock exchange is to mobilise household savings, through the market to the industry and I am happy that BSE has gone on this path, which is well documented in the book,” said Mehta. The next progression for the stock market is to retain investors into buying government securities.
BSE is only 10 years older than the Indian National Congress. “$1.6 trillion worth of wealth has been created during the last 14 decades. Sameer has written an important book on BSE and the Indian economic history,” commented Chauhan.

“I am deeply privileged to be part of this institution that is 140 years old as I also complete 10 years of listing. The history of BSE that has been put together by Sameer is a living testimony of an institution that has withstood several seasons of ups and downs,” concluded Kapoor.

Excerpts…

1. It was in the late 1840s, that a few stockbrokers started trading in bullion, exchange, stocks and shares under the Banyan tree. These brokers, however, had no formal organisation. As the volume of business transacted and number of traders grew rapidly, a group of around 25 brokers formed, each contributing Re 1, an Association to protect the character, status and interest of native share and stockbrokers. Their association, called the Native Share and Stock Brokers’ Association, hired a trading hall at Dalal Street.
2. The grounds occupied in 1874 at Dalal Street on a monthly rent of ₹ 130 were given up when a building situated in the same street- the old Bombay Stock Exchange building- was purchased in 1895 for ₹ 97,000 and inaugurated in 1899 by James McLean, MP and former Editor of the Bombay Gazette. Later the new building came up as a result of Phiroze Jeejebhoy’s efforts called the PJ Towers, where trading took place.
3. In 1973, BSE began the construction of the iconic BSE Towers. However, difficulties beset the construction. Kampani credits Jeejeebhoy for building it. “He was tenacious and how he negotiated the stumbling blocks during its construction gave us a peek to his fortitude,” he said. “The stock exchange building was built during crisis time. I remember that he called me once and said: ‘I am telling you privately that the Exchange needs money because the building work has to be completed and if we get stuck in-between, then we are in trouble.’ I sensed that the support from the banks was not forthcoming. So, we organised some short-term funding for the Exchange in order to complete that building.”
4. India is now a $2 trillion economy and it saves 30 per cent. So, India is effectively saving $600 billion a year and over the next seven years, it would save close to $4.2 trillion at current level even if the economy does not grow at all. But, if it grows, which is very much likely, the savings would be over $5 trillion. So, out of that $5 trillion savings, getting $750 billion won’t be difficult. Around 10 per cent of savings go into financial instruments, so on a $5 trillion base we would be able to bring in at least $500 billion and the remaining $250 billion can come from foreign investors.
5. Therefore, the $20 trillion economy is certainly doable and with all the rest joining hands, it may be possible during our lifetime itself. 
6. Indian markets have the potential. As far back as the great Tata Steel IPO of 1908, has been considered as one of the most sophisticated transaction in the world. As a convertible instrument, attracted a large number of people waiting to subscribe to it. 
7. After that, the second phase when general public came in a big way to participate in the stock market was due to the indefatigable Dhirubhai Ambani. It was a blessing in disguise when apparently banks refused to fund his enterprise. So he decided to collect ₹1,000 each from each investor for an issue size of 2.8 million. For the first time, first time investors got convinced by him whom he addressed personally. A ₹10 share in 1978 today has climbed incredible heights. I remember he had said, instead of asking banks if I ask a million people to give me ₹1000 each, all my needs will be taken care of. He then sat and personally signed all certificates and also in many cases personally handed over to investors saying, you are now part of my enterprise. 
8. But not everyone was as lucky as Dhirubhai Ambani’s Reliance in IPO. Infosys, the software services bellwether was instrumental in putting Indian IT prowess on the global map, had a disappointing start when it launched its IPO in 1993. Infosys IPO was undersubscribed but Morgan Stanley bailed it out by picking up 13 per cent of equity at the offer price of ₹95 per share. The trading opened at ₹145 a share, almost a 60 per cent premium on the day of listing.
9. Deena A Mehta was one of the first few woman members of the BSE and eventually went on to become its first woman President in March 2001. She recalled the days when she first entered the trading hall in Part of the problem, of course, was gender. She says: “I happen to be the first woman to enter the trading ring in that period because no women were allowed to enter the trading ring. Actually, I was not aware that there were no women traders, I just went for the interview. They thoroughly dissuaded me from joining BSE. They said there were all men, how will you take care of this? I said nothing doing and I want to be a part of it. Their last argument was that there were no women’s toilets. I said ‘you don’t worry about it, I will take care of myself’. That is how I landed up.”
10. Deena A Mehta, who was a Board Member from 1996 to 2002 and became President for a couple of months when the then President Anand Rathi resigned in 2001, said, “I personally appeared in all the JPCs and Committees and made several representations. It was not easy, as I had to spend days with the JPC showing them and going through account-by account, paper-by-paper as to what happened in the scam. It was a room full of documents. The result of this labour was that we were able to convert them from BSE negative to BSE positive.
11. Blast happened on a Friday. A day after BSE was targeted, the Chief Minister of Maharashtra, Sharad Pawar, visited the Exchange building and promised all help to restore facilities by the next trading day. BSE started functioning on the next working day after the blast that was Monday.
12. She further tells, she was in the trading ring when the bomb blast occurred. “I was in the trading ring and I was seven months pregnant. The bomb blast happened at 1.30 pm, but had it happened at 2 pm, at least 1,000 people would have died because all those people in the ring would have come out on the street during the break. The top glass facade shattered and fell. Many hid under the staircase and when the whole stampede was over, I slowly came back. There were hundreds of phone calls, staff was not traceable, there were bodies lying all over the place, it was terrible So, we started working with MTNL, restored all the lines by Monday morning. I remember giving interview to BBC that day, and said that we will not be scared. I did not go home on Friday and returned home only by Sunday morning,” recount several BSE employees who were witness to the blast. The intensity of the blast was earth shattering. I have my office half-a-kilometre away from the BSE. A portion of my building collapsed three days later as an aftershock.
13. Technology was primitive, LIC had one supercomputer where every evening all the Sauda Sheets were sent for punching and matching. It would come back the next day and there were more than 35 per cent mismatches. The first computer that was bought by BSE was for nearly ₹20 lakhs and there was resistance all around. Today, it has all changed and that too fast enough. Screen based trading, from T+15 to T+7 to T+1. We have definitely come a long way.
14. A trade happens in 200 microseconds, the target is to go to 20 microseconds making it 10,000 times faster than the current speed. Naturally, the capacity of 5,000 orders a second; it is 5 lakh orders a second.
15. Financial literacy, Financial Education and Investor Awareness and Investor Protection, BSE has pioneered it all. It has certified more than half a million people since 1989. In sync with the “National Strategy for Financial Education” of RBI, the BSE Institute has even taken on vocational programmes at the school level and has covered 6,000 school students, 4,500 postgraduate students and most importantly more than 5000 self employed women. Its Investor Awareness Programmes have reached over half a million people till date.
16. BSE has played formidable role in nation building. When it comes to capital formation, BSE’s SME Platform has enabled 93 companies to enlist on SME exchange with a total market cap of over ₹83 billion. This has helped these companies to expand and more importantly create additional employment opportunities for the youth. 
17. In some sense, the Indian markets are among the most sophisticated and most spread-out markets in the world. Today, BSE is available in 2,000 cities and towns, or even more where its members are doing investment activity on behalf of their customers. Everything is automated in markets and today even an investor can execute trades through online portals including screens and mobiles.