NSE to File Second Largest IPO since Coal India

Yesterday the National Stock Exchange (NSE) filed draft prospectus for a Rs 10,000-crore Initial Public Offer (IPO) of equity with market regulator SEBI for its much-awaited IPO, expected to be one of the biggest in recent times. It will be an Offer for Sale (OFS), of 111.4 million equity shares, 22.5% of the exchange’s post offer paid-up equity capital. At an estimated valuation of Rs 40,000-45,000 crore, the issue size could be Rs 9,000-10,125 crore, the highest since the Coal India IPO of Rs 15,000 crore in 2010. The exchange, which had been petitioning the regulator to self-list, will list on rival BSE.

WHY OFS?

The OFS will offer existing shareholders a chance to exit. Chief shareholders are Life Insurance Corporation (LIC) with a 12.5 per cent stake, and Gagil FDI, Aranda Investments and SAIF II SE Investments each holding 5 per cent. A few months earlier, Mauritius-based Veracity Investments had acquired a 5 per cent stake in the bourse from State Bank of India (SBI) for Rs 911 crore, valuing the exchange at Rs 18,200 crore.

Most shareholders have decided on for a partial exit. The top selling foreign ones are Aranda, SAIF Investments, GAGIL FDI, Norwest Venture Partners, Citigroup Strategic Holdings and GS Strategic Investments. Main domestic shareholders doing so are SBI, SBI Capital, IFCI, Bajaj Holdings and Bank of Baroda. Tiger Global Five Holdings, which has 3 per cent stake, is offering all its shares. LIC is not parting with any.

Listing Abroad:

On June 23, NSE’s Board of Directors had given a nod to list the exchange in India and abroad. It had declared that the draft prospectus would be filed by January 2017 for domestic listing and another by April for doing so abroad. The Draft Red Herring Prospectus (DRHP) for domestic listing has been filed with SEBI well in advance of the exchange’s own deadline of January 31, 2017.

Earlier this month, the bourse’s managing director (MD) and chief executive, Chitra Ramkrishna, had resigned, mentioning personal reasons. Her tenure was to conclude in March 2018. The board has set up a selection committee to get a replacement, with group president J Ravichandran as provisional chief. The IPO is not likely to benefit employees immediately, as the company does not run an Employees Stock Option Plan scheme.

The Team:

NSE has assigned Citigroup Global Markets, JM Financial Institutional Securities, Kotak Mahindra Capital and Morgan Stanley India as joint global coordinators to manage its IPO. Cyril Amarchand Mangaldas will be legal advisor. HDFC Bank, ICICI Securities, IDFC Bank and IIFL Holdings are the lead managers.

Nifty Financial Snapshot in Crores:Other Exchange IPOs:

BSE, its competitor and Asia’s oldest bourse, has already filed a draft prospectus with the markets regulator for an Rs 1,200-crore IPO. It has also opted for the OFS route. CDSL, promoted by BSE, filed the draft papers yesterday for an initial public offer through which it plans to sell over 3.5 crore shares. Currently, MCX is the only listed exchange in the country, but it had come out with an IPO as a standalone commodity exchange much before the amalgamation of Forward Markets Commission (FMC) with Sebi to create a unified capital markets regulator. Currently, MCX share price is trading at Rs. 1259.15 while Nifty share price was trading at 8030.60 Levels.

The Top IPOs Since 2010:

NSE IPO beat the ICICI prudential’s Rs. 6000 crore IPO but lagged the Coal India’s Rs. 14475 crore IPO. Equitas holding had been another noticeable IPO which was listed at Rs. 110. As on December 28th Equitas share price has gained 32.2 per cent and is trading at Rs. 145.4. Also DB Realty was listed at Rs. 468. As on December 29th DB Realty share price was trading at Rs. 36 declining over 92.3 per cent since then.

NSE is ranked first among exchanges globally in terms of stock index options and currency options trading volumes in 2015, according to the World Federation of Exchanges. By way of total turnover, NSE had a market share of 85% in equity cash trading, 94% in equity derivatives and 59% in currency derivatives for 2015-16, according to the Oliver Wyman Report.