Sebi Clears Path for NSE IPO with No-Objection Certificate
The Securities and Exchange Board of India (Sebi) has officially issued a no-objection certificate (NoC) for the public listing of the National Stock Exchange of India Ltd (NSE), marking a significant milestone after nearly a decade of anticipation. This development, confirmed by sources familiar with the matter, effectively ends the prolonged wait for the initial public offering (IPO) of India's largest stock exchange.
Regulatory Approval and IPO Structure
According to an anonymous NSE official, the NoC was granted on Friday, aligning with earlier statements from Sebi chief Tuhin Kanta Pandey, who indicated in January that the regulator was prepared to give the green light by month's end. The IPO will be structured as an offer-for-sale, where existing shareholders will divest portions of their stakes to the public. Notably, NSE operates without a traditional promoter, making this divestment particularly significant for public shareholders.
Valuation and Market Impact
Based on data from InCred Money, NSE's current valuation stands at an impressive ₹5.2 trillion, derived from an unlisted share price of ₹2,105. Under Sebi's updated minimum public shareholding regulations, companies with a post-issue market capitalization exceeding ₹5 trillion are permitted to sell an initial 2.5% stake. Applying this to NSE's valuation, a 2.5% divestment would amount to approximately ₹13,025 crore, highlighting the substantial scale of this offering. To put this in perspective, NSE is nearly five times larger than its competitor BSE, which has a market cap of ₹1.13 trillion.
Historical Hurdles and Regulatory Challenges
The journey to this IPO has been fraught with obstacles, primarily stemming from the dark fibre case. This controversy involved allegations that certain high-frequency traders received preferential access to NSE's co-location servers between 2010 and 2014, allegedly allowing them to execute trades faster than others through private communication lines. In response, Sebi imposed significant penalties:
- In April 2019, NSE was ordered to disgorge ₹62.58 crore in purported unlawful gains, and several senior officials were barred from holding market-related positions.
- In 2022, Sebi levied a ₹7 crore penalty on the exchange, though this was later overturned by the Securities Appellate Tribunal (SAT).
- Sebi subsequently appealed the SAT ruling before the Supreme Court in September 2023 and again in February 2024, underscoring the ongoing legal complexities.
Unique Requirements for Market Infrastructure Institutions
Unlike standard listed companies, market infrastructure institutions such as stock exchanges, depositories, and clearing corporations must obtain a no-objection certificate from Sebi before filing their draft red herring prospectus. This regulatory step ensures compliance and stability in the financial ecosystem, making Sebi's approval a critical prerequisite for NSE's listing process.
The issuance of the NoC not only paves the way for NSE's IPO but also signals a renewed confidence in India's capital markets, potentially attracting significant investor interest and bolstering market liquidity. As the exchange moves forward with its public offering, stakeholders will be closely monitoring the execution and impact of this long-awaited event.
