NSE revives IPO plans as colocation ban ends

The National Stock Exchange (NSE) has revived its listing plans which were stalled due to litigation against the exchange in the colocation matter. The

NSE

has reached out to the finance ministry and Securities and Exchange Board of India (Sebi) seeking their opinion about its plan to restart the IPO process and complete it sometime next year, three people with direct knowledge of the matter told ET.

NSE and Sebi did not reply to ET’s email query. Its institutional investors could not be contacted immediately.

The IPO plans of country’s largest exchange have been on the backburner for almost three years following investigations by the Sebi against NSE and some of its top officials.

The market regulator had alleged that the exchange officials in collusion with a few traders and brokers misused the colocation facility, giving some market participants preferential access to its servers for a fee. In April, the regulator passed an order against the NSE and the officials, barring the exchange from accessing the

capital market

for six months. The ban ended on October 31.

“The finance ministry seems to be keen on NSE’s IPO as it will release funds for

State Bank of India

(SBI) and LIC,” said one of the persons cited above. NSE will have to file afresh for the IPO as the earlier one has lapsed, said an investment banker, who was appointed then to manage the listing. It’s not clear whether Citi,

Morgan Stanley

, Kotak and JM Financial that were appointed earlier will be assigned the job again.

“Most of the due diligence processes have been carried out previously. So only the material developments from January 2017 need to be updated,” said a senior executive of a consulting firm, familiar with the exchange’s IPO plans. “If the exchange obtains a go-ahead from the regulator, it would take two quarters to launch the share sale as it needs the full financial year earnings for FY20.”

NSE aims to raise about Rs 10,000 crore from the IPO which would result in existing promoters selling 22-24% of their stakes. LIC of India,

SBI Group

, IDBI,

Norwest Venture Partners

and GS Strategic Investments Ltd (Mauritius) are among the shareholders that may sell a portion of their stake through the public offering.

The exchange could seek a total valuation of Rs 44,000-46,000 crore in the share sale. Back of the envelope calculations showed that the stock would be sold at 28 times the price to earnings (P/E) ratio — a widely-tracked valuation matrix. This valuation would be a premium to its peer BSE, which is trading at 14 times. Singapore’s SGX is trading at 24 times.

In the cash equity segment, NSE has a market share of around 70-75% while in the equity derivatives, the bourse has a near monopoly with over 99% market share.

The colocation case is pending before Securities Appellate Tribunal. NSE had contested the penalty imposed by the market regulator but did not challenge the ban period and curbs on launching new products.

“Both the restrictions now stand nullified after the expiry of six months,” said another executive familiar with the matter.

IPO

via https://www.AiUpNow.com

December 12, 2019 at 09:52PM by , Khareem Sudlow