PART I: CONTEXTUALITZACIÓ DE LA RECERCA
2. MARC CONCEPTUAL
2.8. Reflexivitat: la recerca sempre és situada
NSE plays an important role in helping Indian companies access equity capital, by providing a liquid and well-regulated market. NSE has 1,381 (as on 31s t March 2008) companies listed representing the length, breadth and diversity of the Indian economy which includes from hi-tech to heavy industry, software, refinery, public sector units, infrastructure, and financial services. Listing on NSE raises a company’s profile among investors in India and abroad. Trade data is distributed worldwide through various news-vending agencies. More importantly, each and every NSE listed company is required to satisfy stringent financial, public distribution and management requirements. High listing standards foster investor confidence and also bring credibility into the markets.
NSE lists securities in its Capital Market (Equities) segment and its Wholesale Debt Market segment. NSE trading terminals are now situated in 245 cities across the length and breadth of India. Securities listed on the Exchange are required to fulfill the eligibility criteria for listing. Various types of securities of a company are traded under a unique symbol and different series.
Benefits of Listing on NSE
Listing on NSE provides qualifying companies with the broadest access to investors, the greatest market depth and liquidity, cost-effective access to capital, the highest visibility, the fairest pricing, and investor benefits.
(a) A premier marketplace: The sheer volume of trading activity ensures that the impact cost is lower on the Exchange which in turn reduces the cost of trading to the investor. NSE’s automated trading system ensures consistency and transparency in the trade matching which enhances investors confidence and visibility of our market.
(b) Visibility: The trading system provides unparallel level of trade and post-trade information. The best 5 buy and sell orders are displayed on the trading system and the total number of securities available for buying and selling is also dis played. This helps the investor to know the depth of the market. Further, corporate announcements, results, corporate actions etc are also available on the trading system.
(c) Largest exchange: NSE is the largest exchange in the county in terms of trading volumes. The Equity segment of the NSE witnessed an average daily turnover of Rs. 14,056 crore in March 2008. During the year 2007-2008, NSE reported a turnover of Rs. 35,51,038 crore in the equities segment accounting for nearly 70 % of the total Indian securities market.
(d) Unprecedented reach: NSE provides a trading platform that extends across the length and breadth of the country. Investors from around 245 cities as on 31s t March 2008 can avail of trading facilities on the NSE
Trading Network. The Exchange uses the latest communication technology to give instant access from every location.
(e) Modern infrastructure: NSE introduced for the first time in India, fully automated screen based trading. The Exchange uses a sophisticated telecommunication network with trading terminals connected through 2,956 VSATs (Very Small Aperture Terminals) at the end of March 2008.
(f) Transaction speed: The speed at which the Exchange processes orders, results in liquidity and best available prices. The Exchange's trading system on an average processes 100,062 orders per minute. The highest number of trades in a day of 68,12,991 was recorded on January 3, 2008 in the equity segment while 14,20,967 trades were recorded in the F&O Segment on October 18, 2007.
(g) Short settlement cycles: The Exchange has successfully completed around 2032 settlements as on 31st March 2008 without any delays.
(h) Broadcast facility for corporate announcements: The NSE network is used to disseminate information and company announcements across the country. Important information regarding the company is announced to the market through the Broadcast Mode on the NEAT System as well as disseminated through the NSE website. Corporate developments such as financial results, book closure, announcements of bonus, rights, takeover, mergers etc. are disseminated across the country thus minimizing scope for price manipulation or misuse.
(i) Trade statistics for listed companies: Listed companies are provided with monthly trade statistics for all the securities of the company listed on the Exchange.
(j) Investor service centers: Six investor-service centers opened by NSE across the country cater to the needs of investors.
Listing criteria:
The Exchange has laid down criteria for listing of new issues by companies through IPOs, companies listed on other exchanges in conformity with the Securities Contracts (Regulation) Rules, 1957 and directions of the Central Government and the Securities and Exchange Board of India (SEBI). The criteria include minimum paid-up capital and market capitalisation, company/promoter's track record, etc. The listing criteria for companies in the CM Segment are presented in Table 3.4. The issuers of securities are required to adhere to provisions of the Securities Contracts (Regulation) Act, 1956, the Companies Act, 1956, the Securities and Exchange Board of India Act, 1992, and the rules, circulars, notifications, guidelines, etc. prescribed there under.
Table 3.4: Listing Criteria for Companies on the CM Segment of NSE
Criteria Initial Public Offerings
(IPOs) Companies listed on other
exchanges
The company shall have a net worth of not less than Rs.50 crores in each of the preceding financial years.
Company/Promoter's
Track Record Atleast 3 years track record of either
a) the applicant seeking listing OR Company not in existence as a Company for three years and approaches the Exchange for listing. The Company
subsequently formed would be considered for listing only on fulfillment of conditions stipulated by SEBI in this regard.
Atleast three years track record of either
a) the applicant seeking listing; OR b) the promoters/promoting the last 3 financial years
immediately preceding the year in which the application has been made OR The networth of the applicants atleast Rs.50 crores OR The applicant has distributable profits in at least two out of the last three financial years.
Listing -- Listed on any other recognized stock exchange for at least last three years OR listed on the exchange having nationwide trading terminals for at least one year.
Criteria Initial Public Offerings
(IPOs) Companies listed on other
exchanges Other Requirements (a) No disciplinary action by
other stock
exchanges/regulatory authority in past 3 yrs.
(b) Satisfactory redressal mechanism for investor grievances,
(c ) distribution of shareholding and
(d) details of litigation record in past 3 years
(e) Track record of Directors of the Company
(a) No disciplinary action by other stock exchanges/regulatory authority in past 3 yrs.
(b) Satisfactory redressal mechanism for investor grievances,
(c ) distribution of shareholding and
(d) details of litigation record in past 3 years.
(e) Track record of Directors of the Company
(f) Change in control of a Company/Utilisation of funds raised from public
Note:
1.(a) In case of IPOs, Paid up Equity Capital means post issue paid up equity capital.
(b) In case of Existing companies listed on other exchanges, the existing paid up equity capital as well as the paid up equity capital after the proposed issue for which listing is sought shall be taken into account.
2. (a) In case of IPOs, market capitalisation is the product of the issue price and the post-issue number of equity shares.
(b) In case of case of Existing companies listed on other stock exchanges the market capitalisation shall be calculated by using a 12 month moving average of the market capitalisation over a period of six months immediately preceding the date of application. For the purpose of calculating the market capitalisation over a 12 month period, the average of the weekly high and low of the closing prices of the shares as quoted on the National Stock Exchange during the last twelve months and if the shares are not traded on the National Stock Exchange such average price on any of the recognised Stock Exchanges where those shares are frequently traded shall be taken into account while determining market capitalisation after making necessary adjustments for Corporate Action such as Rights / Bonus Issue/Split.
3. In case of Existing companies listed on other stock exchanges, the requirement of Rs.25 crores market capitalisation shall not be applicable to listing of securities issued by
Government Companies, Public Sector Undertakings, Financial Institutions, Nationalised Banks, Statutory Corporations and Banking Companies who are otherwise bound to adhere to all the relevant statutes, guidelines, circulars, clarifications etc. that may be issued by various regulatory authorities from time to time
4. Net worth means paid-up equity capital + reserves excluding revaluation reserve - miscellaneous expenses not written off - negative balance in profit and loss account to the extent not set off.
5. Promoters mean one or more persons with minimum 3 years of experience of each of them in the same line of business and shall be holding at least 20 % of the post issue equity share capital individually or severally.
6. In case a company approaches the Exchange for listing within six months of an IPO, the securities may be considered as eligible for listing if they were otherwise eligible for listing at the time of the IPO. If the company approaches the Exchange for listing after six months of an IPO, the norms for existing listed companies may be applied and market capitalisation be computed based on the period from the IPO to the time of listing.
3.2.6 Dematerialisation
Traditionally, settlement system on Indian stock exchanges gave rise to settlement risk due to the time that elapsed before trades were settled.
Trades were settled by physical movement of certificates. This had two aspects: First related to settlement of trade in stock exchanges by delivery of shares by the seller and payment by the buyer. The stock exchange aggregated trades over a period of time and carried out net settlement through the physical delivery of securities. The process of physically moving the securities from the seller to his broker to Clearing Corporation to the buyer’s broker and finally to the buyer took time with the risk of delay somewhere along the chain. The second aspect related to transfer of shares in favour of the purchaser by the issuer. This system of transfer of ownership was grossly inefficient as every transfer involved the physical movement of paper securities to the issuer for registration, with the change of ownership being evidenced by an endorsement on the security certificate. In many cases the process of transfer took much longer than the two months as stipulated in the Companies Act, and a significant proportion of transactions ended up as bad delivery due to faulty compliance of paper work. Theft, forgery, mutilation of certificates and other irregularities were rampant, and in addition the issuer had the right to refuse the transfer of a security. Thus, the buyer did not get good title of the securities after parting with good money.
All this added to costs and delays in settlement, restricted liquidity and made investor grievance redressal time-consuming and at times intractable.
To obviate these problems, the Depositories Act, 1996 was passed to provide for the establishment of depositories in securities with the objective of ensuring free transferability of securities with speed, accuracy and security by
• making securities of public limited companies freely transferable subject to certain exceptions;
• dematerialising the securities in the depository mode; and
• Providing for maintenance of ownership records in a book entry form.
In order to streamline both the stages of settlement process, the Depositories Act envisages transfer of ownership of securities electronically by book entry without making the securities move from person to person. The Act has made the securities of all public limited companies freely transferable by restricting the company’s right to use discretion in effecting the transfer of securities, and dispensing with the transfer deed and other procedural requirements under the Companies Act.
A depository holds securities in dematerialised form. It maintains ownership records of securities and effects transfer of ownership through book entry. By fiction of law, it is the registered owner of the securities held with it with the limited purpose of effecting transfer of ownership at the behest of the owner.
The name of the depository appears in the records of the issuer as registered owner of securities. The name of actual owner appears in the records of the depository as beneficial owner. The beneficial owner has all the rights and liabilities associated with the securities. The owner of securities intending to avail of depository services opens an account with a depository through a
depository participant (DP). The securities are transferred from one account to another through book entry only on the instructions of the beneficial owner.
In order to promote dematerialisation of securities, NSE joined hands with leading financial institutions to establish the National Securities Depository Ltd. (NSDL), the first depository in the country, with the objective of enhancing the efficiency in settlement systems as also to reduce the menace of fake/forged and stolen securities. This has ushered in an era of dematerialised trading and settlement. SEBI has made dematerialised settlement mandatory in an ever-increasing number of securities in a phased manner, thus bringing about an increase in the proportion of shares delivered in dematerialised form. This was initially introduced for institutional investors and was later extended to all investors. Starting with twelve scrips on January 15, 1998, all investors were required to mandatorily trade in dematerialised form in respect of 2,335 securities as at end-June 2001. By November 2001, 3811 companies were under demat mode and the rest of the companies were brought under compulsory demat mode by January 02, 2002. At the end of March 2008, 7,364 and 5,943 companies were connected to NSDL and CDSL respectively. The number of dematerialised securities together at NSDL &
CDSL increased from 39 billion at the end of March 2001 to 287 billion at the end of March 2008.
Pursuant to the SEBI directive on providing facility for small investors holding physical shares in the securities mandated for compulsory demat, the Exchange has provided such facility for trading in physical shares not exceeding 500 shares in the Limited Physical (LP) market segment.
Primarily all trades are now settled in dematerialized form. The share of demat delivery in total delivery at NSE increased to almost 100% in value terms.