Modi's Tax to Spur 1,000 New Listings, BSE Bourse Head Says

BSE is focusing on cash equities after failing to gain market share in equity derivatives.
Modi's Tax to Spur 1,000 New Listings, BSE Bourse Head Says
Advanced Enzyme Technologies management at the listing ceremony at Bombay Stock Exchange. (Photographer/Source: Shruti Menon/ BloombergQuint) 

(Bloomberg) -- India’s introduction of a single nationwide goods and services tax may have an unexpected consequence: prompting more companies to sell shares to the public.

That’s the view of Ashishkumar Chauhan, chief executive officer of BSE Ltd., the operator of the Bombay Stock Exchange. He says smaller firms that become tax-compliant due to the levy, scheduled for implementation on July 1, will be more inclined to go public because they’ll no longer have anything to hide. Some 1,000 companies will list on his bourse over the next four years, he estimates.

“We have only scratched the surface,” the head of the Deutsche Boerse AG-backed BSE said in an interview in the old business district of Mumbai. Some 74 companies raised 276 billion rupees ($4.3 billion) through first-time share sales on the BSE in the year ended March, the highest since 2010, according to the exchange. “We expect a huge spurt in listings.”

Investors and analysts have been debating how the country’s biggest tax overhaul since independence in 1947 will impact the country’s markets, with some predicting that the GST will face teething problems. While the levy is widely projected to boost government revenue and increase the ease of doing business in the world’s largest democracy, attention is also focusing on less obvious outcomes of Prime Minister Narendra Modi’s policy.

“A lot of things are going to happen -- we don’t know what,” Raamdeo Agrawal, joint managing director at Motilal Oswal Financial Services Ltd., said in an interview in Mumbai. “But it is a huge positive development. It will have short-term hiccups for six months or so. But once it is done and people have accepted it, then the control of the economy will become far better.” The company’s money-management unit has $3.6 billion in assets.

Digital Trail

Once the landmark tax takes effect, an estimated 51 million smaller firms that currently do much of their business in cash will have to keep digital records, making it harder for them to under-report revenue. That means there will no longer be an incentive for them to avoid listing, Chauhan said.

BSE aims to help companies raise $100 billion annually over the next four years from initial and secondary offerings of stocks and bonds, up from the present $30 billion a year, Chauhan, 49, said. The exchange, which traces its roots to the 1850s, is also seeking to increase its registered investor base to 100 million people in five years from the present 34 million, he said.

Mumbai-based BSE is focusing on cash equities after failing to gain market share in equity derivatives. BSE has a market share of about 15 percent in cash equities trading, compared with about 85 percent for the National Stock Exchange of India Ltd.

Equity Derivatives

India charges higher taxes on cash equities compared with derivatives, Chauhan said. That, along with the rise of high-frequency trading and co-location, is encouraging speculative trading over capital formation, he said. NSE spokesperson declined to comment.

BSE, which itself went public in February, gets about 20 percent of its revenue from listings, according to the exchange. Its shares have risen 33 percent since their debut, and traded at 1,069.8 rupees at 9:42 a.m. in Mumbai. The benchmark S&P BSE Sensex was little changed after posting a fresh record on Tuesday.

For Chauhan, who’s led BSE since 2012, the positive side-effect he expects from the sales tax will support the bourse in a market dominated by its larger peer.

“We want to be the exchange that helps companies raise funds for commercially viable projects and to create jobs,” he said. “We are not here just for trading.”

--With assistance from P R Sanjai Shruti Srivastava and Archana Chaudhary

To contact the reporters on this story: Santanu Chakraborty in Mumbai at, Tom Redmond in Tokyo at

To contact the editors responsible for this story: Divya Balji at, Arijit Ghosh at, Ravil Shirodkar

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