NSE IPO finally gets wings as Sebi gives no-objection certificate

Putting an end to nine years of waiting, the National Stock Exchange of India Ltd (NSE) received a no-objection certificate (NoC) for its public listing from the Securities and Exchange Board of India (Sebi) on Friday.

In January, chief Sebi Tuhin Kanta Pandey said the capital markets regulator was poised to give the exchange the go-ahead by the month end.

“We are delighted to receive Sebi approval for our IPO, a significant milestone in our growth journey,” Srinivas Injeti, chairperson of India’s largest exchange, said in a statement. “With Sebi's approval, we embark on a new chapter of value creation for all our stakeholders. This approval also reinforces confidence in NSE being an integral part of the Indian economy and beacon of Indian capital markets.”

The IPO will be an offer-for-sale, with existing shareholders offering parts of their stakes to the public, said an NSE official on the condition of anonymity.

“The exchange is likely to file the DRHP within three months,” said another person familiar with the matter.

A market expert said banker pitches are likely to start next month, and the entire process could take another six months.

Unlike regular listed entities, market infrastructure institutions, such as stock exchanges, depositories, and clearing corporations, must secure a no-objection certificate from Sebi before filing their draft red herring prospectus.

NSE’s IPO ran into hurdles following the dark fibre case, which centred on allegations that some high-frequency traders were given preferential access to the exchange’s co-location servers between 2010 and 2014. The use of faster private communication lines allegedly enabled these traders to execute orders before others. In April 2019, Sebi ordered the exchange to disgorge ₹62.58 crore in purported unlawful gains and prohibited certain senior officials from holding market-related positions.

In 2022, Sebi also levied a ₹7 crore penalty on the exchange, but this was later overturned by Securities Appellate Tribunal (SAT). The regulator appealed against the tribunal ruling before the Supreme Court in September 2023 and again in February 2024.

NSE's current valuation is ₹5.2 trillion, based on its unlisted share price of ₹2,105, according to InCred Money. According to Sebi's new rules on minimum public shareholding, a company with a post-issue market cap of over ₹5 trillion can sell a minimum of 2.5% of the paid-up share capital initially.

Based on the unlisted share price, a 2.5% stake divestment by public shareholders—NSE doesn't have a promoter—amounts to ₹13,025 crore. NSE is almost five times the size of rival BSE, whose market cap was at ₹1.13 trillion. NSE's market share in the equities cash segment was 93.4% and in the lucrative equities options segment, it was 77.1% as of December, per exchange data.

Queries emailed to Sebi were not answered.

"NSE has not yet settled the case with Sebi. The proceedings are still going on. The matter has also not reached the high-powered advisory committee (HPAC) for its approval," said one of the people quoted above. "Sebi and NSE have not yet withdrawn the case pending with the Supreme Court. Sebi is of the opinion that NSE can disclose the pending case in the draft red herring prospectus (DRHP) if required," the person added.

It was earlier expected that after a deliberation of an internal committee of Sebi members, the matter would be passed on to HPAC, following which the no-objection certificate would be issued.

"The formal banker pitches will start next month. From appointment to getting Sebi approval will take another six months," said an equity capital markets banker on the condition of anonymity. According to him, NSE will take advantage of the new provision of selling only 2.5% stake, given the whopping ₹7 trillion valuation the company is aiming to fetch through the public listing.

Ram Sahgal contributed to this story.