Palak Shah at the Business Standard :

“US micro hedge fund legend George Soros and the world’s third biggest philanthropist George Kaiser are in the race to acquire close to 4 per cent in the Bombay Stock Exchange (BSE), Asia’s oldest stock exchange.

Soros has bid for the BSE stake, held by the embattled Dubai Financial Group LLC, through Soros Fund Management LLC, and Kaiser has done so through private equity fund, Argonaut.

Other investors who have bid for BSE stake include New York-based private equity majors J C Flowers and Caldwell Investment, promoted by Toronto investment broker Thomas Caldwell. Caldwell is a specialist investor in stock exchanges and bought 4.3 million shares of the New York Stock Exchange in 2006. Sources added that a private equity fund has bid Rs 370 for each share, valuing BSE at over Rs 3,800 crore. Avendus Capital is advisor to the deal.

Dubai Financial, part of sovereign fund Dubai Holding, holds 3.92 per cent stake in BSE, which it bought when the exchange was demutualised in 2007. BSE was then valued at Rs 3,780 crore. While BSE and Avendus could not be reached for comment, sources familiar with the developments said Dubai Financial felt the exchange deserved a higher valuation in the current situation.

In the recent past, the valuation of the exchange saw a sudden spurt after a new management team took over in 2009.

While some stock brokers sold BSE shares at around Rs 180 a piece some six months ago, a bank auctioned 0.27 million shares at Rs 320 a couple of months ago.

Under the new management, BSE changed its derivative trading cycle to compete with the National Stock Exchange, launched a mutual fund trading platform and is upgrading its technology platform. BSE currently has a near 28 per cent share of the equity spot market in the country and has been making efforts to develop its derivative trading segment, where National Stock Exchange is a monopoly player. BSE will launch currency derivatives in May and is also in the process of increasing its stake in Central Depository Services Ltd to 51 per cent.

Currently, six foreign investors hold 25.65 per cent of BSE and five Indian institutions hold 12 per cent.

A little under 62 per cent of BSE’s shares are widely held. Among the key Indian shareholders are firms such as Bajaj Holdings and Investment, which owns 2.94 per cent, Infosys Technologies CEO and MD S. Gopalakrishnan, who owns 1.04 per cent and media major Bennett, Coleman and Co, which owns 1.04 per cent.

BSE recently announced 12 bonus shares for every share held and the exchange currently has around Rs 2,000 crore of cash reserves, which translates into cash per share of at least Rs 190.

BSE posted a net profit of Rs 55.42 crore on revenue of Rs119.21 crore for the quarter ended December 2009.”

The launching of the mutual fund platform and the upgrading of the technology and expansion of derivative trading is exactly what Goldman Sachs introduced into the New York Stock Exchange in the 1990s. And we saw what happened in the 15 years following. And Goldman is in India, currently seeking a commercial banking license to operate there.

With the same players around (Soros, Goldman Sachs etc. ), there’s no reason to believe that what’s coming up for the Bombay Stock Exchange won’t take the same direction. Before the financial crisis, the Indians had little exposure to the highly levered derivatives and toxic debt that blew up the system elsewhere. Let’s see whether this upcoming round they’ll be as lucky. With economies stagnant elsewhere, Asia and some select African countries are the only places where there’s actual economic growth occurring.

I’m afraid the same handful of corrupt players will game the system there…

More here at The Economic Times:

“His hedge fund Quantum, which was reported to have posted earnings of over 30% last year, went on a buying- spree at a time, when most funds were dumping stocks in a sliding market. On July 4, Quantum Fund bought a 3.8% equity in Jain Irrigation Systems, and close to 1% of the holding of Jai Corp for a value consideration of Rs 167 crore. Since February, the fund has made investments valued at close to Rs 600 crore, or $ 140 million, in various companies, including Indiabulls Financial Services, Indiabulls Real Estate and Kalindee Rail Nirman. Quantum’s selective stock picking comes at a time, when institutional investors have been pulling out a large chunk of money amid concerns over a combination of factors such as weak global markets, soaring global oil prices and spiraling inflation in India. “Hedge funds normally are active, when there is some momentum in the market. Quantum may be trying to do some value-buying, but one has to see how long the fund stays invested, given the prevailing uncertain market conditions,” said a stock-broker..”

Remember Formula K (or, the First Law of Kleptocracy) :

s(B) + s(G) + s(S) v. EE where ‘s’ is always a positive integer

Some (s) of the big banks (B – eg. JP Morgan, Goldman Sachs, Citi etc.)

+

Some parts of government (G – eg. parts of the SEC/Treasury/Fed Reserve Chairman, IMF, World Bank etc.)

+

Some hedge-funds and speculators (S – eg. Soros, Paulson (?), Loeb, Cohen and others reportedly involved in manipulation and collusion with government)

Versus

Every one else (EE)