Demutualisation of the BSE is expected to fetch the income-tax department a Rs 200-crore windfall in long-term capital gains tax (LTCG). Member-brokers of the BSE, who will tender their shares in the offer for sale by the exchange, are expected to attract LTCG at the rate of around 33% on the consideration they receive by way of share transfer.
Assuming half of BSEs 750-odd members tender 50% of their total holdings (of 10,000 shares) at the rate of Rs 5,200 a share, as stated in the offer, each member may have to shell out around Rs 50-60 lakh as LTCG before adjustments.
BSE invited bids from shareholders (member-brokers) to participate in the offer for sale as a part of its endeavour to shore up public shareholding to 51% of its total equity.
The offer for acquiring 46.57 lakh shares, which opened on February 28, closes on March 9. According to informed sources, the offer has received encouraging response from the member-brokers and more than 300 are expected to tender half their holdings in the offer.
After the BSE was corporatised in August 2005, each of its 750 members were allotted 10,000 shares, with a face value of Re 1 each, in lieu of trading rights in the form of the BSE card.
Stock In Trade 300 brokers Expected to tender 50% of their holdings in the offer Rs 5,200 per share Shares will not be accepted below this price 750 members Allotted 10,000 shares, having face value of Re 1 each, in lieu of trading rights
The exchange recently sold 10% of its shares in two tranches of around 3.6 lakh shares each, to Deutsche Brse and Singapore Exchange Ltd (SGX) by way of fresh issuance of shares. Both transactions were at the rate of Rs 5,200 a share, which has become the de facto benchmark price for the offer for sale.
According to informed sources, the LTCG has been abolished for shareholders of listed companies but BSE being an unlisted company, any share transfer in its case will attract section 2 (42A) of the I-T Act, which clearly states that share transfer pertaining to an unlisted company would attract LTCG at the rate of 33%, in addition to the surcharge and education cess.
However, brokers say the incidence of LTCG may only average 15-20% as indexation is allowed when LTCG is imposed.