SEBI Allowed Increase of Share Capital in NSE by 10x

The Securities and Exchange Board of India (SEBI) has given its nod to a significant amendment in the National Stock Exchange (NSE)’s memorandum of association. The move, which allows a 10-fold increase in the bourse’s authorised share capital to ₹500 crore, paves the way for its long-awaited bonus issue and potential public offering.

NSE’s proposed bonus issue, approved by shareholders in June, involves a four-for-one ratio, meaning that for every four existing shares, shareholders will receive one additional share. This will increase the exchange’s share capital from ₹49.50 crore to ₹247.50 crore. The amendment to the memorandum of association provides the necessary flexibility to accommodate this increase and any potential future share issuances, particularly if NSE decides to proceed with its initial public offering (IPO).

While the bonus issue requires NSE to have at least ₹162.50 crore in free reserves, the exchange had a substantial surplus of ₹10,691 crore as of March 31, 2024. The amendment will take effect upon publication in the Government Gazette, for which NSE has already submitted applications. The record date for the bonus issue will be determined 49 days after the Gazette publication.

In addition to the bonus issue, NSE has also sought a no-objection certificate (NOC) from SEBI to proceed with its IPO, which has been delayed due to ongoing regulatory matters, including the co-location case. The exchange initially filed its draft red herring prospectus (DRHP) in 2016, but it was returned by SEBI in 2019 due to the co-location investigation. The matter is currently pending before the Supreme Court.

Once NSE obtains the NOC from SEBI, it can refile the DRHP with updated financial information. The exchange’s unlisted shares have seen a significant surge in value, trading at around ₹6,200 apiece, representing a 72% increase from a year ago. This valuation suggests a high level of investor interest in NSE’s IPO, particularly given its dominant position in the Indian stock market.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.