The National Stock Exchange is one step closer to an IPO. Here’s why.

The board of directors of the National Stock Exchange (NSE) approved a proposal to seek a no-objection certificate (NOC) from the Securities and Exchange Board of India (Sebi) at the bourse’s annual general meeting (AGM) held on Tuesday, marking a significant step towards an initial public offering (IPO).

“This application for an NOC is just a step in the direction of an IPO,” said Suvajit Ray, head of product and distribution at IIFL Securities.

“High net-worth individuals (HNIs), family offices and even institutions can look at investing in NSE’s IPO from a long-term, say, 5-10-year horizon,” he added. However, Ray also advised caution, recommending against getting overly excited or heavily investing in the stock.

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Recently, the exchange secured Sebi’s approval to increase its share capital through the issuance of bonus shares in a 4:1 ratio. With shareholder approval now in place, the company is set to proceed with the bonus share issuance.

Interest in the unlisted shares of NSE is extremely high, according to market participants. The stock is currently trading at around ₹5,400, up sharply from about ₹3,200 in February, primarily due to limited supply and a scarcity of sellers, they added.

If the current pricing range in the unlisted segment were reliably indicative, the post-bonus share issuance price would be in the range of ₹1,200-1,400 per share, according to Nirav Karkera, head of research at Fisdom. This also factors in some uptick on account of a spike in demand for the shares as the price per share reduces and there’s more visibility on the IPO timelines, he said.

“The impending litigation on the co-location case and uncertainty around the regulatory stance on the F&O (futures and options) segment are key risks to the pricing today. Notably, NSE’s position as a dominant exchange versus the listed counterpart can strengthen the case for it to trade at a premium to peer,” Nirav explained.

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Ray of IIFL Securities said the stock is fairly valued in the unlisted market and estimates the issue price could exceed ₹1,600 post-split.

The IPO comes at a time when there has been a surge in F&O volumes, as Sebi intensifies efforts to rein in speculative trading activities.

In August, Ashishkumar Chauhan, managing director and chief executive officer of NSE, said during a concall after its June quarter earnings that Sebi’s proposals to tighten regulations on the equity index derivatives segment could have a “very significant impact” on exchange volumes if they are implemented in totality.

So, the regulator’s proposed measures to curb speculative trading could impact NSE’s volumes and potentially affect the IPO pricing.