NSE is back in race to buy 25% stake in the Dhaka Stock Exchange

A man walks past the NSE building in Mumbai | Photo: Reuters
The National Stock Exchange (NSE) is back in the race to buy 25 per cent stake in the Dhaka Stock Exchange (DSE), after the Bangladesh Securities and Exchange Commission (BSEC) rejected an application by a consortium of Chinese exchanges.

Sources say the NSE plans to participate in a new bidding process.

The Chinese consortium had offered to pay $119 million for the 25 per cent stake in the DSE, against the NSE’s bid of $87 million.

Besides higher bid value, the Indian exchange also lost out on China’s offer of free technical support to the DSE for 10 years, which could cost $36 million.

The NSE made no such offers. Sources say the NSE could approach the Indian government to get more relaxations for the deal. For instance, legal experts say, the Chinese government offers several tax sops for the deal, considered of high diplomatic importance. The Indian policy framework is comparatively rigid.

“We are waiting for official intimation from the DSE. Once we receive it, we will consider reviewing the offer. We will also seek the government’s help to make our bid more competitive. However, the deal is far from over, as the Chinese consortium can drop the clauses from the agreement which go against the domestic laws of Bangladesh, and rebid,” said a source.

The Chinese consortium consisted of the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange. The NSE partnered with US stock exchange Nasdaq to bid for the DSE stake.

Earlier this week, BSEC had returned the application sent by the DSE, seeking permission to sell the stake to the consortium of Chinese exchanges. This was after the DSE’s board approved the bid unanimously and forwarded the agreement to the BSEC.

One reason behind the rejection was a clause in the consortium’s proposal to implement the agreement under UK law, and settle any dispute under international arbitration law.This was a breach of local law, ruled the regulator.

Further, the SSE-led consortium demanded two director positions on the DSE board. The demutualisation rules in Bangladesh allow only one board position for foreign players owning 25 per cent stake.

India and China have been in a contest deepening ties with Bangladesh. In 2016-17, China overtook India to become the largest trading partner of Bangladesh. In 2016, China also offered Bangladesh a loan of $25 billion to fund around 35 projects. 

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