NSE Looks to SEBI’s Approval for IPO Amidst Pressure from Shareholders

The National Stock Exchange has once again approached SEBI (Securities and Exchange Board of India), asking if it can file its red herring prospectus. NSE has been under constant pressure from its shareholders lately, who want the largest bourse of the country to go public.

Many of these shareholders are looking to liquidate their holdings for more than a decade now. The major shareholders had already approached NSE’s management multiple times in the past, asking to fast-track its listing process.

As per NSE annual report, the exchange has asked SEBI for a no-objection so that it can move forward with its IPO plans. However, SEBI is yet to respond.

Top Shareholders of NSE

NSE has several domestic and international entities in its long list of shareholders. Here is a list of some of the major NSE shareholders, along with their percentage of shares:

• Life Insurance Corporation of India (12.51%)
• Veracity Investments (5%)
• Aranda Investments (5%)
• SBI Capital Markets (4.33%)
• Stock Holding Corp (4.44%)
• GAGIL FDI (3.79%)
• SAIF II SE (3.55%)
• State Bank of India (3.63%)
• Morgan Stanley (3.0%)
• Goldman Sachs (3.0%)

What Happened to NSE’s 2016 DRHP Filing?

NSE had previously filed its red herring prospectus in 2016 for a Rs. 10,000 crores IPO. Some of the largest selling shareholders of the IPO included Tiger Global, SAIF Partners and Aranda Investments.

However, the delay with the IPO compelled some investors like IDBI Bank and IFCI to sell off their shares beforehand. This significantly altered the capital structure. As a result, the market regulator had to return NSE’s red herring prospectus. Moreover, SEBI had banned NSE from accessing capital markets for 6 months in April 2019 due to issues with its co-location facility.

The ban ended in October 2019. In addition, SEBI had also instructed NSE to pay Rs. 625 crores with 12% interest from the period of April 2019. However, NSE filed an appeal before SAT (Securities Appellate Tribunal) against this order from SEBI. The SAT is yet to pass a verdict.

That’s not all!

According to NSE, in January 2021, SEBI had issued an adjudication show-cause notice to the exchange. This was in relation to the default by Karvy Stock Broking. Anugrah Stock is another broker who had defaulted. The clients of Anugrah Stock have also filed a criminal writ petition to the Bombay High Court demanding a special investigating team. They have alleged financial wrongdoings by Anugrah and its executives and the NSE.

The CBI has been investigating this matter and has asked for more information from SEBI.

Final Words

There are various critical issues that need to be resolved before SEBI provides approval for NSE’s IPO.

According to a regulatory official, approving the IPO right now might send a wrong signal to the SAT. The official adds that issues like brokers’ default, CBI investigation, trading outage of more than 4 hours in February are yet to be resolved appropriately.

To stay updated with more such interesting news and tidbits about the financial world and the stock market, make sure to go through the Angel One blogs.

Frequently Asked Questions

1. How many shareholders planned to sell their shares through the NSE IPO in 2016?

About 27 major shareholders of the exchange planned to dilute their stakes in 2016.

2. How many shares were planned to be sold in 2016?

There were plans to sell 111.4 million shares which account for 22.5% of the total stake.

3. Will NSE DRHP be approved?

SEBI is yet to respond.