NSE tells shareholders it has submitted restructuring proposal to Sebi

At its annual general meeting held in Mumbai on Friday, NSE officials also told investors that the process of listing the exchange has been initiated


National Stock Exchange of India, or NSE, officials that a formal time line on the IPO will be shared with investors following regulatory approvals. Photo: Hemant Mishra/Mint
National Stock Exchange of India, or NSE, officials that a formal time line on the IPO will be shared with investors following regulatory approvals. Photo: Hemant Mishra/Mint

Mumbai: The National Stock Exchange of India Ltd (NSE) informed shareholders that it has submitted a proposal to the capital markets regulator on restructuring its business to comply with listing norms for exchanges.

At its annual general meeting (AGM) held in Mumbai on Friday, NSE officials also told investors that the process of listing the exchange has been initiated, said two people who attended the meeting.

“The NSE management said it is working on the listing and has put forth a restructuring proposal to Sebi (Securities and Exchange Board of India) and is awaiting its approval. The regulated and non-regulated businesses have to be segregated as per Sebi guidelines,” said one of the two people cited above. He requested anonymity.

Once the approval comes through, the management will initiate both the restructuring and the initial public offer (IPO) process simultaneously, he said.

Exchange officials said that a formal time line on the IPO will be shared with investors following regulatory approvals.

Exchange officials expect the listing to happen in fiscal 2017, said the second person cited above.

An NSE spokesperson was not immediately available for comment. A mail sent to the exchange on Friday evening after the AGM remained unanswered.

Sebi set up a seven-member panel in February 2010, headed by former Reserve Bank of India (RBI) governor Bimal Jalan, to review ownership and governance norms for exchanges, depositories and clearing corporations.

The panel was against allowing bourses to list but Sebi, while approving most of the recommendations of the panel, said exchanges should be allowed to list. It, however, said that there should be a segregation between the regulatory and commercial functions of a stock exchange so that there is no conflict of interest.

In 2012, Sebi said stock exchanges could list when they put in place appropriate mechanisms to tackle any conflict of interest.

“The exchange is IPO-ready and once the approval comes through, the process should not take too much time. They have already hired a ‘big four’ consultancy firm for the restructuring,” said the second person.

The issue of NSE listing has been a bone of contention between the management of the exchange and its shareholders. Some of the prominent shareholders of NSE include Life Insurance Corporation of India (LIC), State Bank of India (SBI), Goldman Sachs, Tiger Global Holdings and Citigroup Strategic Holdings Mauritius.

Early this week, IFCI Ltd sold a part of its holdings in NSE for Rs.263.25 crore to US-based fund Deccan Value Investors Lp at a price of Rs.3,900 apiece. The transaction, the first such in NSE shares in the last two years, valued the exchange at Rs.17,550 crore.

Other financial institutions, including IDBI Bank Ltd, have also been looking to sell shares in the exchange as a way to unlock capital.

A senior official from IDBI Bank, speaking on condition of anonymity, said the lender had been in discussions with a few potential investors some time back. These talks have now petered out.

A listing of the exchange would make it easier for shareholders to exit their investment.

Patrick Young, executive director at DV Advisors, a Europe-based capital markets advisory firm, said NSE will clearly benefit if it becomes a publicly traded company. “It’s impossible to say at this distance when NSE may list. However, for-profit models exist at the heart of free markets and, in the rest of the world, publicly-listed exchanges are firmly established,” he said.

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