Mumbai: Market regulator SEBI has de-recognised Hyderabad Stock Exchange (HSE) as the stock exchange failed to dilute 51 per cent stake to non-brokers by August 28 as mandated by law.

In a release, SEBI said, “The recognition granted to HSE stands withdrawn with effect from August 29, 2007.”

According to the Securities Contracts (Regulation) Act, 1956, every accredited securities market has to sell 51 per cent of its stake to non-brokers, a move known as demutualisation, within a predetermined time after such a system has been permitted by SEBI.

The specified time is within 24 months from the publication date of the scheme.
In case of HSE it was August 28 this year. SEBI had notified The Hyderabad Stock Exchange Ltd Scheme, 2005 on August 29, 2005.

As part of demutualization, the HSE was planning to transfer 51% of its equity stake to the public, but there were no customers.

“The HSE has failed to dilute 51% of its equity share capital to public, other than shareholders having trading rights on or before August 28, 2007. Consequently, in terms of Section 5(2) of the Securities Contracts (Regulation) Act, 1956, the recognition granted to HSE stands withdrawn with effect from August 29,” said SEBI in a statement.

The HSE has Rs 340 crore worth of possessions under its control that includes a 1.59 lakh sq ft at Somajiguda and about 10,800 sq ft of land at Himayatnagar. But, a large part of it is under judicial proceeding.

The bourse was, actually, considering unification with BSE, but this option is precluded now with the exchange mislaying its recognition. About 700 stocks were listed on the HSE, but daily trading is insignificant.

In financial year 2006-07, the total income was pegged at Rs 91.92 crore, with the market capitalisation at Rs 16,338.46 crore.

However, HSE’s subsidiary - HSE Securities is continuing operations. The subsidiary was floated by SEBI to get rank of NSE and BSE.