BSE CEO Madhu Kannan leaving to join Tatas

[1]

Madhu Kannan, the youngest CEO of Asia's oldest bourse, is leaving Bombay Stock Exchange operator BSE Ltd to join Tata Sons, which controls India's largest corporate house, where he will report to the executive in line to become group chairman at the end of this year.

Kannan, who is 38, joined the BSE, formerly known as the Bombay Stock Exchange, in 2009 after stints at Merrill Lynch and the New York Stock Exchange.

An outsider charged with reviving what had become a moribund operation, he was unable to reverse an erosion in market share to the National Stock Exchange.

He joins a youth movement at Tata, where Cyrus Mistry, 43, is due to become chairman when Ratan Tata retires at the end of this year. Tata Sons, which controls the salt-to-software Tata Group, said Kannan will be group head of business development, reporting to Mistry, who is now deputy chairman.

Kannan had a tough task at the BSE, market watchers said. The older bourse was outgunned by the more technologically-advanced NSE, which is especially dominant in derivatives.

"When he came, BSE was sinking very rapidly. In terms of business, market share, new ideas - there was a dearth of it," said Arun Kejriwal, who heads research firm KRIS. Kannan was not immediately available for comment.

At Tata, he joins the leadership of a conglomerate in the midst of generational change after Mistry's appointment as chairman designate late last year.

The Tata Group includes Tata Motors, owner of the Jaguar Land Rover brands and maker of the Nano, the world's cheapest car, as well as Tata Consultancy Services (TCS), Tata Steel and dozens of other companies.

The BSE's non-executive chairman, S. Ramadorai, is vice-chairman of TCS, India's largest software services exporter.

At the New York Stock Exchange and Merrill Lynch, Kannan worked closely with John Thain, who headed both.

Frankfurt-based Deutsche Boerse and the Singapore Exchange each hold 5 per cent stakes in the BSE, which has long considered an initial public offering. This week, India's securities regulator said it will allow domestic stock exchanges to list, in a long awaited move.

The BSE, whose Sensex index remains a benchmark alongside its rival's Nifty, said in a statement that Kannan had indicated he did not intend to seek a new term when his term ends in May.

Founded in 1875, the BSE has been eclipsed in market share by the NSE, which was founded in 1993.

Average daily equity turnover at the BSE was Rs 34.81 billion in February, or roughly one-fifth the 163.9 billion rupee average at the NSE. In December 2009, the BSE's equity turnover was about one-third the level at the NSE.

In February, the BSE saw a spurt in derivatives turnover, fueled by an incentive programme to attract brokers.

"He tried his level best to activate the derivatives segment, because of late derivatives have become the major key focus area for the markets," said Jagannadham Thunuguntla, strategist and head of research at SMC Global Securities Ltd in New Delhi.

"But considering the fact that everybody is familiar with the NSE, BSE was not able to take off in F&O (futures and options)," he said.