NSE IPO may get delayed: Sebi chief Ajay Tyagi

Mumbai: The initial public offering (IPO) of National Stock Exchange of India’s shares will likely be delayed till the bourse resolves the allegations of providing unfair access to certain brokers in its co-location platform and has a full-time chief executive officer in place.

“NSE doesn’t want to list before the allegations related to colo (co-location) are resolved. So the IPO may take some time,” said Ajay Tyagi, chairman of the Securities and Exchange Board of India (Sebi) while answering questions at a press conference.

Co-location refers to trading members locating their servers on the premises of the exchange. This reduces the time it takes for an order to travel to the exchange, giving them a speed advantage over those who are farther away.

Sebi’s technical advisory committee (TAC) examination and a forensic audit of the NSE trading systems showed that its algorithmic trading platform and co-location facility were “prone to manipulation” and allowed “potential preferential access” to some brokers, according to NSE’s draft prospectus.

In its IPO papers NSE, had disclosed the key findings of forensic audit done by Deloitte India and said that revenues from the co-location services since September 2016 are placed in a separate account.

“Sebi is not in favour of releasing the funds currently frozen in the escrow account till the Sebi investigation reaches a conclusion,” said a person aware of the development.

Sebi’s investigation on these allegations is still pending and the subsequent action may delay NSE’s share sale as it may need to restate its financials.

The exchange’s board had said last December it plans to go public via an offer for sale at the start of the April-June quarter after it resolves the unfair access allegations.

Separately, NSE is undergoing a second forensic audit of its information dissemination systems, but this time the examination is focused on cash, currency and equity markets.

“The audit being done by EY, will be completed by May end or the start of June,” said a second person, aware of the development.

The first person cited earlier said NSE will need to disclose the findings of the second forensic audit in the final prospectus.

NSE declined to comment.

Apart from the co-location issue, another impediment to a quick IPO is the lack of a CEO. Sebi is yet to clear Vikram Limaye’s appointment to the CEO post of NSE. Tyagi said the regulator had some concerns.

Vikram Limaye, current CEO and managing director of IDFC Ltd, was selected to succeed Chitra Ramkrishna, who left NSE owing to personal reasons on 2 December, a little more than a year before her tenure was to end. NSE shareholders had approved his appointment on 7 March, but a Sebi approval for his appointment is still pending.

“We had sought some additional information from NSE on his candidature. These were on three to four aspects. The exchange has replied to us a couple of days back and we would be able to take a call on it soon,” said Tyagi.

While Tyagi did not elaborate on the clarifications sought from NSE, the two people cited earlier said that these concerns related to Limaye’s role in the four-member committee formed by Supreme Court to manage the Board of Control for Cricket in India (BCCI).

“NSE will start roadshows for the IPO once it receives approval for its CEO and on its IPO documents. Limaye’s role at BCCI is non-executive and will not require his day-to-day attention,” said the second person.

NSE is currently being led by interim-CEO J. Ravichandran, who used to serve as group president of finance and legal and company secretary at NSE.