Whistleblower Raises A Stink Over BSE's Sale Of Software Business At Lower Valuations
A whistleblower has written to market regulator Sebi and the BSE board regarding mismanagement in the sale of BSE's subsidiary company's business. The letter, a copy of which is with BW, states that BSE Technologies was sold to Rupeeseed Technologies for Rs 5 crore without any competitive bidding or approval of the board of directors or shareholders.
News reports suggest that in September 2023, BSE sold the software business of BSE Technologies to RTV Tech Systems, a wholly owned subsidiary of Rupeeseed Technology. The sale consisted of the company's CLASS Back Office software along with complementary products like Citru, Spark, and Class DP and also encompassed key employees of BSE Technologies, who were part of integral development and support of the software business.
According to BSE insiders, the exchange had purchased the back office software business, which was housed under Marketplace Technologies, in 2009 when Madhu Kannan was the MD and CEO of the exchange. Later, Marketplace Technologies was rechristened as BSE Technologies. Due to this back office software business, BSE was considered as a market leader in back office services, since large brokers had started using the software. In 2009, the BSE had paid between Rs40 crore to Rs50 crores for the deal to purchase the software business. Yet, nearly 15 years after further development and manifold growth, the same software business, along with its licensing and intellectual property, was sold for Rs 5 crore and this could have triggered the letter from the whistleblower, exchange insiders say.
The whistleblower letter states that even by most conservative Price-to-earnings (PE) estimates (considering a PE of 10), the valuation of BSE Technologies can likely go up to Rs 200 crore. This, considering that the company had earned a gross profit of Rs21.24 crore on a turnover of Rs96 crore and achieved a gross profit ratio of 22 percent during FY 2022-23, says the whistleblower.
When contacted and asked to comment on the contents of the letter, the BSE said, " It is not our practice to respond to baseless rumours."
Through the letter, the whistleblower has sought an inquiry into the dealings, since SEBI rules require board, regulatory and shareholder approvals for such sale. Sandeep Manoharan, who is currently the CEO of Rupeeseed Technologies, had earlier worked with the National Stock Exchange between 2008 and 2013. Like the BSE, Rupeeseed also has a Mutual Fund investment platform, making it a competitor to the exchange.
