Mumbai: The National Stock Exchange Ltd, or NSE, has submitted its restructuring plan to the capital markets regulator and proposed the creation of a subsidiary which will hold all the profit-making businesses before it goes in for a public listing, said two people familiar with the plan.

The move comes after the Securities and Exchange Board of India (Sebi) cleared amendments to the Stock Exchanges and Clearing Corporations, or SECC, regulations, which were eased to allow exchanges to list.

“NSE has proposed there will be a subsidiary which will hold all profit-making businesses of the exchange. Some portion of funds from the parent firm, NSE, will be diverted to the entity," said one of the persons quoted above on condition of anonymity.

The structure being proposed is aimed at creating a separate entity to keep the profit-making businesses separate from the regulated businesses as a prudent risk management and regulatory practice, said the second person. The plan will be to list the regulated entity, the person added.

An NSE spokesperson confirmed the developments.

“After our engagements with shareholders, and subsequent meetings of shareholders’ committee and the board of directors, a restructuring proposal was submitted to Sebi," said the spokesperson in an email response to Mint.

The plan, however, has irked investors who have been pushing NSE to list for some time now. Shareholders say they should have been consulted before the restructuring plan was filed with the regulator. This will also delay an initial public offering from the exchange, said an NSE investor on condition of anonymity.

“Investors have sent a letter to the NSE management saying that any restructuring plan that the management wants to put forth to the regulator should be done after seeking approval of the shareholders," said the investor.

A second NSE investor said shareholders are concerned about a possible delay in the listing, tax liabilities arising out of the proposed structure and loss of shareholder value due to the segregation of businesses. These concerns has been communicated in a letter sent to the chairman of NSE earlier this week, he said, adding that the letter has been signed by eight to 10 investors who hold 22% of the shareholding of the exchange.

On the specific issue of shareholders opposing the restructuring plan, NSE said it is in dialogue with stakeholders.

“Discussions with stakeholders, including NSE equity holders, are part of our processes. As such, the matter will be taken up in the next shareholders’ committee meeting. Meanwhile, we have already said the NSE board and the management are all for listing," said the NSE spokesperson.

Prominent shareholders of NSE include Life Insurance Corp. of India (LIC), State Bank of India (SBI), Goldman Sachs Inc., Tiger Global Holdings and Citigroup Strategic Holdings Mauritius. Many of these shareholders have been asking for NSE to list so they get a chance to exit their investment.

Following representations from shareholders, Sebi, at its 30 November board meeting, cleared amendments to SECC rules. The new rules allow every shareholder in an exchange to certify they are fit and proper to hold a stake in a bourse. Sebi, however, will maintain close scrutiny over investors who hold more than 5% in an exchange.

As per the SECC regulations, a fit and proper person should have financial integrity, good reputation and shouldn’t have been convicted by any court or the recipient of a regulatory order.

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