NSE files draft prospectus for IPO

Exit avenue:Many large shareholders were seeking the public listing of the exchange for quite sometime now.— FILE PHOTO  

The National Stock Exchange of India (NSE), the country’s largest bourse in terms of market share, has filed a draft prospectus for its proposed initial public offer (IPO).

According to the draft prospectus, the exchange intends to offer 111.42 million shares representing 22.5 per cent of the post-offer paid up equity capital of the company. Media reports suggest that the issue size could be as large as Rs. 10,000 crore.

This assumes significance as many large shareholders of NSE, including the State Bank of India and other public sector banks, were seeking the public listing of the exchange for quite some time now.

In the past, shareholders have even written to the board and senior management of the exchange to expedite the listing process so that there would be greater transparency in pricing of shares and exits could be facilitated on the stock exchange platform.

Interestingly, the development comes close on the heels of the exit of its high-profile chief executive officer (CEO) Chitra Ramakrishna, who was also a part of the founding team of the exchange.

According to the draft document, some of the bigger shareholders including Tiger Global, Aranda Investments, Citigroup Strategic Holdings, IDBI Bank, SBI, SAIF Investments, GS Strategic Investments and Norwest Venture Partners would offer their shares for sale as part of the public issue.

Global ranking

In a report released on Tuesday, HDFC Securities highlighted the fact that Indian exchanges were ranked among the top 15 globally in terms of cash and derivatives turnover. It had cited a report by Oliver Wyman, an international consulting firm.

According to the report, NSE was ranked fourth by the World Federation of Exchanges (WFE) in 2015 in terms of equity trading volume. Within the equity segment in India, NSE commanded a substantial 85 per cent share in fiscal 2016, as per the Oliver Wyman report, according to the note by HDFC Securities.

“There is always a premium attached to the valuation of an exchange, which can be called a shadow to the overall economy,” said Deven Choksey, managing director, K R Choksey Securities.

“If the economy is doing well than exchanges also do well. But a lot depends on how NSE plans its business going ahead. It has grown a lot through the derivative segment. If the other exchanges are able to take a more balanced approach, then there would be more premium attached,” Mr. Choksey said.

Incidentally, it was widely reported that NSE was not comfortable to list on its rival exchange BSE and wanted the regulator to allow self-listing — or listing the shares on its own platform. Current regulations do not allow self-listing of exchanges in India.

Rival’s filing

NSE’s competitor BSE, which is Asia’s oldest stock exchange, has already filed its draft document with SEBI and is in the process to list its shares. Currently, Multi Commodity Exchange of India (MCX) is the only listed bourse in the country.

BSE and NSE compete with each other in almost all the segments of capital markets, including equity & equity derivatives, currency derivatives and a trading platform for small and medium enterprises (SMEs).

While NSE is the leader in most segments, BSE has managed to corner a larger share in the SME space.

The investment bankers managing the NSE IPO are Citi, JM Financial, Kotak Mahindra Capital, Morgan Stanley, HDFC Bank, ICICI Securities, IDFC and IIFL.

Overseas listing

At a meeting held on June 23, the NSE board had expressed its desire to file the draft red herring prospectus by January 2017. The board had also advised the management to file for overseas listing by April 2017.

Interestingly, current regulatory guidelines do not allow overseas listing of Indian exchanges.

At a recent capital market summit, SEBI Chairman U.K. Sinha had highlighted the issue when his views were sought on whether Indian exchanges should look at listing overseas as well.