Anyone who has followed the unlisted share market in the last decade can agree that news this week signals a major milestone. India’s largest stock exchange is set to submit its Draft Red Herring Prospectus (DRHP) with SEBI by Thursday, with speculation surrounding the listing positioning as one of the largest in India’s history. Currently, the stock exchange is valued at over ₹5 lakh crore in the unlisted market, attracting interest to India’s largest stock exchange pre-IPO.
Table Of Contents:
- What’s Happening: NSE’s DRHP Filing
- NSE’s Expected ₹5-5.25 Lakh Crore Valuation
- Why NSE Unlisted Share Prices Are Rallying
- A Decade-Long Wait: NSE’s IPO Journey
- NSE Unlisted Shareholder Information
- What This Means for Unlisted Share Investors
- FAQs
What’s Happening: NSE’s DRHP Filing
CNBC-TV18 cites reports that NSE will file its draft red herring prospectus by Thursday. Today’s report states the document will be ready for the NSE board for final reviews and/ or approval by this evening. NSE recently approved the final list of intermediaries for the NSE IPO[1].
This included the selection of 20 merchant bankers and 8 law firms. The process is supervised by the NSE IPO committee. The public offering is expected to be planned as an Offer for Sale. No fresh capital will be raised, as existing shareholders will sell their portions of the stake.
This filing is today’s reason why there has been an increase in searches and trading of NSE unlisted shares in recent days.
NSE’s Anticipated Valuation of ₹5–5.25 Lakh Crore
The IPO valuation is expected to fall between ₹5 lakh crore and ₹5.25 lakh crore. With unlisted shares trading over ₹5 lakh crore, NSE is already over ₹5 lakh crore in valuation in the unlisted market.
As of June 16, the share price of NSE is already trading over ₹2,000 in the unlisted market. There are reports of NSE shares trading on the grey market.
For the largest share offering in the history of the Indian capital market, the NSE shares will need to be offered to the public for the shares to be listed at around the price of ₹5 to ₹5.25 lakh crore[2].
Why NSE Unlisted Share Prices Are Rallying
There are a number of factors driving up NSE’s pre-IPO share price.
- Strong Quarter-on-Quarter Earnings: The latest quarterly report shows a 21% increase in total earnings to ₹5,360 crore. This increase is a result of an increase in transactional earnings. This indicates a growth in the business which will support NSE’s listing[3].
- Large Number of Retail Shareholders Awaiting Liquidity: The NSE has approximately 180,000 shareholders, with a large part waiting for a long time for liquidity. Since the IPO will be an Offer for Sale, the focus will be on the remaining institutional shareholders. End of the Regulatory Overhang: There was a long standing regulatory issue that has now been resolved[3].
According to reports, the High-Powered Advisory Committee of SEBI has recommended that NSE’s co-location case, which has hindered the exchange’s listing goals, should be settled for more than ₹1,800 crore[2].
Recent strong gray market pricing for the NSE unlisted share, and increased interest in the adjacent counters on the MSEI unlisted share market, is attributable to these factors combined, as they provide valuable insight into exchange-sector valuations.
A Decade-Long Wait: NSE’s IPO Journey
The NSE’s IPO saga is one of the earliest of its kind in India. The advertising of IPOs by the NSE began in 2016 with a proposed issue size of ~₹10,000 crores. In 2018, NSE’s IPO application got stuck with SEBI due to issues around NSE’s governance and the co-location controversy.
The blockade began before. In April 2019, NSE was banned by SEBI from accessing the capital markets for six months due to the alleged violations of the co-location facility prohibition, with the ban being lifted on October 30, 2019.
SEBI instructed the exchange to pay ₹625 crores plus an interest of 12% for the period starting April 2014. NSE wrote to SEBI to refile the DRHP. The IPO process that was stuck is now underway.
NSE Unlisted Shareholder Information
Recent reports indicate that NSE’s largest shareholder is the Life Insurance Corporation of India (LIC), which holds more than 10% of NSE’s shares. The State Bank of India (SBI) and SBI Capital Markets hold nearly 7.5%. Domestic and foreign financial institutions hold considerable shares of the exchange [4].
The NSE’s diversified ownership is one of the reasons institutional and retail investors have confidence in the NSE’s shares prior to the NSE’s IPO on platforms that track the NSE’s shares.
What This Means for Unlisted Share Investors
When it comes to investors that currently hold NSE pre-IPO shares or are interested in buying them, the DRHP filing means that the listing date is most likely imminent after several years of uncertainty.
There is also risk involved with the investment since, in the grey market, share prices may fluctuate with news of the offering, and the listing share price may be higher or lower than the pre-listing price and can be impacted by SEBI’s final call, the appetite for anchor investors, and the general mood of the market prior to the official listing.
Since pre-filing DRHP estimates can be highly inaccurate, investors should monitor the official DRHP when filed to obtain the actual financials and risk factors and the final OFS structure.
FAQ
What is the latest update on NSE’s IPO?
This year, it is expected that NSE will file its Draft Red Herring Prospectus (DRHP) with SEBI. This filing will kick off the NSE IPO process.
What is the expected NSE IPO valuation?
The NSE valuation is expected to be around ₹5.25 lakh crore, making it one of the largest IPOs in India.
Why are NSE unlisted share prices increasing?
The NSE unlisted shares are expected to increase from the DRHP filing, financially strong results, and better clarity on regulations and IPO timelines.
Will NSE offer new shares in the IPO?
The NSE IPO will be an Offer for Sale (OFS) where NSE will not offer new shares. The final details will be provided in the DRHP.
What caused the NSE IPO delays?
The NSE co-location and governance issues created regulatory concerns and delays, which made the NSE IPO process take almost a decade.
Who are the major shareholders of NSE?
NSE shareholders are large domestic, foreign, and institutional investors like LIC and SBI.
Can retail investors buy NSE shares before the IPO?
Currently, NSE shares are in the unlisted market and available through selective authorized intermediaries. Potential investors should be cognizant of the risks associated with pre-IPO investments.
How will the DRHP help investors evaluate NSE?
The DRHP provides descriptions of NSE’s business and operations as well as their financial history and proposed share structure, and will allow investors to understand the potential risks and opportunities associated with the NSE IPO.
Disclaimer
This article is for informational purposes only and should not be considered investment advice. Prices and data of unlisted shares are based on publicly available sources and may vary. Investors are advised to conduct independent research or consult financial professionals before making investment decisions.
