Mumbai: National Stock Exchange of India Ltd (NSE), the operator of India’s largest bourse, said on Monday that it would file documents in January for an initial public offering (IPO) that would given an exit opportunity to its institutional investors.

The exchange, which is valued at 17,500–18,000 crore (according to recent trades), will also seek an overseas listing by April 2017, said NSE.

“For domestic listing, the board of directors of the exchange—subject to shareholders’ approval—has expressed desire to file the DRHP (draft red herring prospectus) latest by January 2017, after addressing restructuring needs of the exchange and the regulatory requirements for listing," it said.

The development comes after sustained pressure from shareholder institutions, led by State Bank of India (SBI), on NSE to seek an IPO. SBI holds a 10.19% stake in NSE; other shareholders include Life Insurance Corporation of India (10.51%), Goldman Sachs (5%), Tiger Global (3%) and Citigroup Strategic Holdings Mauritius (2%).

“All these decisions were taken during the last meeting of (the) board of directors on 23 June 2016," NSE’s statement said.

The Securities and Exchange Board of India (Sebi) had notified amendments to the Stock Exchange and Clearing Corporations Regulations on 1 January, paving the way for the listing of stock exchanges. BSE Ltd has already secured in-principle approval from Sebi for an IPO.

“It is a positive development for the investors as the exchange has committed to taking the process forward and they have committed to a timeline of filing the DRHP by January 2017. Investors wanted a timeline and a process to be out in place and so the announcement is more or less in line with what the investors were looking for," said Sohil Chand, managing director at Norwest Venture Partners, an investor in NSE.

In an interview to CNBC-TV18, NSE managing director and chief executive Chitra Ramkrishna said an overseas listing will give the exchange greater visibility. “We have an option of an American Depository Receipt (ADR) and a full-fledged listing," said Ramkrishna to CNBC TV 18.

Experts say an overseas listing will help the NSE become an international brand. “An overseas listing helps a company when it is seeking to raise funds from a more savvy audience..." said Prithvi Haldea, founder-chairman of data research firm Prime Database. “Additionally, I think this would be a space that investors would be interested in, as there has never been any Indian exchange that has listed overseas."

Sebi is not comfortable with NSE’s proposal for an overseas listing, said two people directly familiar with the regulator’s thinking, both of whom spoke on condition of anonymity.

“Quality of shareholders is of prime importance for exchanges as the exchanges are the first-line regulator. In case of an overseas listing, monitoring of the shareholders and (possible) manipulation through opaque instruments such as depository receipts becomes difficult. The regulator wants to rule out the possibility of any manipulation in exchanges that could be the case in an overseas listing," one of the two people said.

“The regulator will wait for the proposal to come to their table to take a final call; however, Sebi is not in favour of an overseas listing of an exchange," said the second person.

An NSE spokesperson said the exchange had no comments to offer beyond the press statement. A specific query emailed to a Sebi spokesperson on whether the regulator would be comfortable allowing NSE to list overseas was not answered.

“For listing abroad, NSE will probably engage with the regulator to get its blessings. It would also be important for the proposed overseas listing to be in International Organization of Securities Commissions and Financial Action Task Force-compliant jurisdiction, with which Sebi is comfortable," said Vaneesa Agrawal, a securities lawyer and ex-Sebi official.

According to Girish Nadkarni, managing director of investment banking at Motilal Oswal Investment Advisors, a foreign listing will likely allow better price discovery, as the NSE stock would be expected to be well traded overseas as well as in India.

However, he added that an overseas listing won’t provide much in terms of better valuations. “Even if they list in India or overseas, the valuations will more or less converge since the stock would be very liquid in both markets and the global investors would also be significant investors in the Indian listing, so there is likely to be no valuation arbitrage in overseas listing," he said

In a bid to speed up the listing process and the regulatory filings, the NSE board has also reconstituted its listing committee as an empowered subcommittee of the board. The committee will take decisions within a stipulated time.

The NSE on 26 February formed the listing committee to kick-start the process of going public and to step up engagement with shareholders on its share sale plan.

The committee, after three rounds of deliberations, recommended filing for in-principle approval from Sebi, said two people directly familiar with the developments, both of whom also declined to be identified.

“The listing committee has recommended that NSE secure an in-principle approval from Sebi in the next month," said the first person.

The second person said the committee has also recommended that NSE hire an investment banker at the earliest.

Interestingly, the statement has no mention of a “self listing". NSE has said in the past that it prefers to have its shares traded on its own platform rather than on that of a rival, such as BSE, on concerns that it could lead to leakage of trade-related data and information. Sebi norms do not permit a self listing.

Sebi’s notification said that “... a recognized stock exchange may apply for listing of its securities on any recognized stock exchange, other than itself and its associated stock exchanges."

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