The 137-year-old startup

The 137-year-old startup

Ashish Kumar Chauhan, Managing Director and CEO, BSE Ltd., wants to reinvent Asia’s oldest stock exchange. He is focusing on five key aspects – product mix, distribution, process, people and technology – with the mindset of building a startup all over again


When you get into a dialogue with Ashish Kumar Chauhan, managing director and CEO, BSE Ltd. (formerly Bombay Stock Exchange), you’re likely to realise that the conversation is simultaneously, on two parallel tracks. On one, he’ll talk about BSE’s rich history spanning over 137 years, the role the stock exchange has played in creating wealth for several entrepreneurs and investors and the pride of being the world’s No. 1 exchange in terms of number of listed members (over 5,000 companies’ stocks are listed in the BSE). In the next breath, he’ll shift gears and talk about why the exchange has to be reinvented all over again, his strategies to counter competition from NSE (of which he was part of the founding team from 1993 to 2000) and MCX-SX (the new stock exchange) and why one of his main focus areas is to expand BSE’s membership base across the country. Through the conversation, he often emphasises, “Whatever be our strategy, we will never forget our primary role – that of maintaining fair, transparent and orderly markets.”

Personal journey

Chauhan is no stranger to the world of capital markets. An alumnus of IIT-Bombay and IIM- Calcutta, he joined the founding team of National Stock Exchange (NSE) in 1993 after a brief stint with IDBI Bank. At NSE, Chauhan played a crucial role in setting up India’s first screen-based trading platform for equities and creating the framework for Nifty, the benchmark share index and now one of the largest traded indices globally.

“Whatever be our strategy, we will never forget our primary role – that of maintaining fair, transparent and orderly markets.”

In 2000, he was handpicked by Mukesh Ambani to become the CIO of Reliance Infocomm (now Reliance Communication which is led by Anil Ambani). At the time, the company was selling mobile phones for between Rs. 500 and Rs. 1,000 to lower-income consumers and several of them were defaulting on their bills. Chauhan is credited with modifying the technology and process around billing that played a crucial role in turning around the company. Both at NSE and Reliance Infocomm, Chauhan was acknowledged for his ability to mix technology and business to solve various problems.

Chauhan says, “The stint at Reliance taught me two things – that being a business leader means that one has to be alert 24*7 and that establishing scale can do wonders for a business model.” Chauhan continued his stint with the Reliance Group, first as CIO for Reliance Industries and then, in a unique role, as CEO of Mumbai Indians. He joined the BSE in 2009 (in between, he started a software company for the broking industry and this was bought over by the BSE for an undisclosed sum) and was promoted to become CEO in November 2012.

Demutualisation of the BSE

In 2005, the government mandated all stock exchanges in the country to demutualise, a strategy to end brokers’ control over stock exchanges. In essence, the government wanted all stock exchanges to make the transition from a non-profit, broker-owned entity to a limited liability, for-profit company, accountable to shareholders. As part of this mandate, BSE completed its demutualisation process by May 2007. 19 investors including SBI, LIC and Aditya Birla Group, besides Deutsche Borse and Singapore Exchange, then owned over 51 per cent of the exchange. According to a paper published by the International Monetary Fund in 2002, the key benefits of demutualisation would include streamlined operations and decision-making, in addition to access to capital to grow the business. In BSE’s case, all these factors were relevant but there was one other aspect that needed attention – a senior management team that could spearhead a corporatised exchange.

“BSE’s SME platform is an aspirational platform for businesses in upcoming industries, with newer, untested business models.”

Thus, Chauhan and his predecessor, Madhu Kannan (who came from the New York Stock Exchange) entered the scene. Through the transition, the duo kept in mind the basics – extremely clean price signaling without manipulation, fair and transparent trading framework and adherence to regulatory rules. An advisory committee led by Tata Consultancy Services’ S. Ramadorai was setup to advice the management through the journey. While critics always questioned the smaller volumes traded on the BSE as compared to NSE, the Kannan-Chauhan duo kept in mind that their primary role was to build the foundation for a transparent, fair, orderly exchange. Chauhan says, “I often tell people that our role is to be measured by the quality of services we offer to our members, listed companies, investors and all stakeholders. The race for volumes comes later. The most important job function of an exchange is price signaling.”

He goes on to explain that the 137-year old BSE has followed the highs and lows that India, as a country, has been through. “The BSE brand is not to be taken lightly. The story of BSE goes hand-in-hand with India’s journey as a nation. We’ve shared the country’s pride and sorrow, equally, and even as we go about reinventing the brand, we cannot forget the history behind a great institution.” Today, BSE’s brand message (under its logo) reads ‘experience the new’ while retaining touches of the old logo to remind its customers about its rich legacy.

The reinvention process

Going forward, one focus area for Chauhan is to enhance the exchange’s penetration across India and into the hinterland. Today, most of its members come from Mumbai and Gujarat. To enable this, Chauhan is positioning the exchange as the lowest cost exchange in India. He has also brought down the membership fee from Rs. 1 crore to a refundable deposit of Rs. 10 lakh. “With this, we’ve attracted over 490 new members into the exchange. We’re also cutting down on transaction costs in line with our low-cost strategy.”

Almost all of BSE’s tactics, including the positioning as a low-cost exchange, are being adopted to tackle competition – from the NSE, which has stolen volumes from the BSE for about 18 years and from the new exchange, MCX-SX. In addition to greater distribution and penetration, the other focus has been on restoring its derivates market. Chauhan believes that the liquidity created from futures and options, thanks to its strategy of giving incentives to brokers, will drive volumes. He says, “Today, our volume in derivatives has touched Rs. 25,000 crore from almost negligible volumes in 2011. This is just the beginning. Additionally, we’re also present in many new segments including e-IPOs, offer for sale, mutual fund distribution, trading in small and medium enterprises and retail debt and expect these to grow significantly.”

Recently, Chauhan roped in Standard & Poor’s (S&P) as a partner for all BSE indices including the Sensex, BSE 200 and BSE 100. Interestingly, this deal was clinched within a week after the licensing arrangement between India Index Services & Products (IISL), a joint venture of NSE and S&P-owned Crisil, had expired. This partnership is expected to help grow the Sensex in the index derivatives space and possibly, achieve leadership position. This potentially allows the Sensex (now called S&P BSE Sensex) to join the league of the world’s leading indices including S&P 500 and the Dow Jones Industrial Average.

In line with its corporatisation strategy, BSE is slated to come out with an IPO in 2013. As slated by the regulators, it will list on any of other exchanges and BSE has pooled in a team of 14 investment bankers to deliver on the IPO. “BSE has over 6,000 shareholders and about 40 per cent is owned by brokers. The IPO, in any case, is in line with what was suggested by the regulators when we transitioned from a broker-owned institution to a corporate entity,” says Chauhan. As of fiscal 2012, BSE’s consolidated net revenue stood at Rs. 578.42 crore, up 7.5 per cent from the previous fiscal. Its profits fell from Rs. 215.64 crore to Rs. 178.13 crore in FY 2012.

However, a closer look reveals that a significant portion of its revenues came from investments and deposits in high-rated bonds, in addition to income from rent and the training institutes. The worrying factor, a decline in income from transaction charges from Rs. 60.35 crore to Rs. 37.63 crore in FY 2012, is something Chauhan is focused on tackling. To deal with this, he will largely rely on a renewed focus on the derivatives market, the low-cost strategy for greater penetration and picking up of revenue from newer products.

In addition to the IPO, Chauhan is also closely overseeing the progress in three areas close to his heart – innovations in technology (to efficiently deliver on a low-cost exchange strategy), a new SME platform (to help smaller companies raise money from capital markets) and financial literacy (to increase the penetration of retail investors, a number that has been dwindling over the last decade).

Chauhan describes the BSE SME platform as an aspirational platform for businesses in upcoming industries, with newer, untested business models. Since launching in March last year, the platform has seen the listing of over 11 companies. “Some of these have the potential to become large businesses and that is when we will see the value of the SME platform,” says Chauhan. As a company’s issued capital touches Rs. 25 crore, it will automatically graduate to trading on the main exchange. As per SEBI regulations, there are several checks in place to protect both the listed company as well as investors’ interests in this platform. The platform also ensures that only informed investors who’re willing to invest a minimum of Rs. 1 lakh in a stock will be allowed to invest in companies trading in the SME platform.

In line with a strategy of using technology to deliver on a low-cost strategy, Chauhan has spearheaded efforts to deploy new IT systems for trading, clearing, settlement and risk management. As of November 2012, the bourse’s latency (the time taken for a stock price to reach a broker’s terminal from BSE’s IT system) was 10 milliseconds as opposed to 300 milliseconds three years back. BSE is also gearing up to process over one-lakh orders a second – one that will create the technology backbone to establish scale.

To tackle the problem of financial literacy, BSE has setup a wholly owned subsidiary, BSE Institute, which conducts both short-term and long-term courses on finance, capital markets and investments. Chauhan says, “In school, we learn physics and chemistry, but for some reason we don’t learn the basics of personal finance. I think it is a crucial area we need to fix at the societal level.” Going forward, the BSE Institute also has the potential to be a cash cow for the exchange.

With his Reliance Infocomm background, Chauhan often uses examples from the telecom industry to explain the advantages of building scale. He says, “Look at the telecom industry and the kind of penetration it has reached. It happened because of better technology and distribution.” Chauhan’s task of reinventing a 137-year old institution is certainly not easy but the man is equipped to give it a good shot. The NSE experience gave him the domain knowledge and the Reliance stint taught him how to build scale and deliver on complex projects. It is these kinds of challenges that excite Chauhan and every second of his 18-hour workday is spent on making sure his strategies are working.


  • Build the technology required to deliver on a low-cost strategy
  • Increase penetration and distribution across the country by offering better value to its members and roping in more members
  • Increase trading volumes for the Sensex (through the partnership with S&P)
  • Continue to do a stellar job of performing a stock market’s primary role – price signaling
  • Build the framework for an SME exchange that can help small and mid-size entrepreneurs take advantage of the market
  • Lead BSE to a successful IPO


S. Ramadorai – Chairman of the BSE Advisory committee

Rs. 578.42 – Net consolidated revenue in FY 2012

Rs. 178.13 crore – Net profit for FY 2012 

14 – No. of investment bankers appointed for the IPO

Mid 2013 – Timeline for the slated IPO


Ashish Kumar Chauhan, CEO and MD, BSE Limited 

Work experience: Group CIO, Reliance Industries Limited Core team, National Stock Exchange 

Education: IIT-Bombay and IIM-Calcutta

Credited with: Key role in turning around Reliance Infocomm by modifying the technology and process around billing to ensure lower-income customers paid their bills on time

Key role in launching NSE, India’s first screen-based trading platform and ensuring the underlying technology worked without glitches

Best lessons from the past:

  • Leading a business is a 24*7 game. One has to be alert all the time
  • Building scale can create widespread impact and the challenges of pursuing scale are worth it
  • No matter what industry you are in, usage of technology to work to your advantage is crucial

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