NSE files for IPO; Tiger Global, Temasek to sell stake
National Stock Exchange of India Ltd (NSE), India’s largest stock exchange, on Wednesday filed a draft prospectus with the capital markets regulator Securities and Exchange Board of India for an initial public offering (IPO).
The IPO, to list shares on the rival bourse BSE Ltd, comprises a complete offer for sale by the exchange’s shareholders that include global private equity funds and financial institutions such as Tiger Global Holdings, Temasek Holdings, Goldman Sachs Inc., Citigroup as well as state-owned Indian banks like State Bank of India, IDBI Bank and Bank of Baroda.
The shareholders will sell a total of 22.5% stake in NSE, as per the draft prospectus.
The share sale is estimated to be worth Rs 10,000 crore ($1.5 billion), three bankers aware of the matter said. This would value NSE around Rs 44,450 crore ($6.6 billion).
The move comes weeks after Chitra Ramkrishna quit as the CEO and managing director of the exchange.
NSE becomes the third financial market infrastructure entity to announce an IPO. Securities depository firm Central Depository Services Ltd (CDSL) on Tuesday filed its draft prospectus for an estimated Rs 450 crore IPO. BSE, Asia’s oldest stock exchange, filed its IPO proposal in September. The BSE IPO will see Singapore Exchange Ltd and US billionaire George Soros’s hedge fund Quantum exiting the bourse.
NSE had decided to go public at a board meeting on 23 June, after continued pressure by its shareholders, some of whom have been invested for more than a decade. NSE shareholders are hopeful of a listing by March next year.
Here’s a snapshot of the IPO
Issue: Tiger Global Five Holdings will sell its entire 3% stake. Private equity firm Temasek, through its arm Aranda Investments (Mauritius) Pte Ltd, has proposed to sell a 2% stake of the total 5% it owns in NSE.
SBI, the country’s largest lender by asset, will sell a 1.08% stake. SBI owns a 5.2% stake, as per the prospectus. Insurance behemoth Life Insurance Corporation of India, which is the biggest shareholder with a 12.5% stake, is not selling any shares.
Bankers: Citigroup Global Markets India Private Ltd, JM Financial Institutional Securities Ltd, Kotak Mahindra Capital Company Ltd, Morgan Stanley India Company Pvt Ltd are global lead financial advisors to NSE’s IPO.
The bourse has also hired HDFC Bank Ltd, ICICI Securities Ltd, IDFC Bank Ltd, and IIFL Holdings Ltd as book running lead managers to the proposed IPO.
NSE is India’s leading stock exchange and the world’s fourth-largest by equity trading volume in 2015. It owns and manages the NIFTY 50 index, a benchmark index for the Indian capital markets.
Besides, the bourse offers coverage of the Indian capital markets across asset classes, including equity, fixed income and derivative securities. It has a trading services segment, a clearing and settlement house among other segments and offers services, indices, market data feeds, technology solutions and financial education.
The NSE, which was set up in 1992, has been under pressure from some institutional investors to float an IPO to provide them an exit option for quite some time. In May 2016, Reuters reported that some foreign investors had accused the NSE of going slow on its IPO but the exchange rejected those allegations.
NSE reported consolidated net profit of Rs 588.32 crore on revenue (operations) of Rs 1,033.72 crore for six months ending September 2016, according to the prospectus.
For 2015-16, its revenue from operations stood at Rs 2,359.17 crore compared with Rs 2,291.04 crore in the previous year. Consolidated net profit for 2015-16 was Rs 975.21 crore compared with 993.81 crore the year before.
Corporate governance issues
NSE has appointed consulting firm Deloitte India to probe allegations that several brokers got unfair access to its co-location servers for algorithm trading, according to an October 24 Mint report.
Co-location refers to bourses allowing members to set up automated trading systems on their premises to reduce the time required for orders to flow between the exchange and the broker’s trading system.
The Deloitte report on whether brokers gained undue advantage was submitted to SEBI on 23 December, NSE said in the prospectus.
NSE said that, pending investigation and submission of the final report, the bourse has deposited in a bank account Rs 6.53 crore towards rack charges and connectivity charges and Rs 47.67 crore for September towards revenues generated from the co-location facility in the nature of transaction charges on trade orders placed through the co-location facility.
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National Stock Exchange of India Ltd. operates as a stock exchange. It offers services in capital markets such as equities, indices, mutual funds, exchange-traded funds, initial public offerings, offer for sale, institutional placement program, security lending and borrowing scheme; derivatives like equity derivatives, currency derivatives and national stock exchange (NSE) bond futures; debt such as debt segment and corporate bonds; trackers like bank nifty, global indices and India volatility index (VIX). It provides fully automated screen-based trading system with national reach. The company was founded in 1992 and is based in Mumbai, Maharashtra with additional offices in Delhi, Chennai, Hyderabad, Kolkata and Ahmedabad.
BSE Ltd. (formerly Bombay Stock Exchange Ltd.) owns and operates stock exchange. It offers products and services in cash equities, futures, options, swaps, exchange-traded products, bonds and market data, Corporate Data and Historical Data etc. It provides investor services, BSE on-line trading and BSE training institute services. The firm also provides an efficient and transparent market for trading in equity, debt instruments, derivatives, mutual funds. The company has a platform for trading in equities of small-and-medium enterprises (SME) and BSE Hi-Tech (Institutional Trading Platform for young fast-growing companies to list itself and can meet potential investors to raise funds). The firm also provides depository services through its central depository services Ltd. (CDSL) arm and a host of other services to capital market participants including risk management, clearing, settlement, market data services and education. The company was founded in 1875 and is based in Mumbai, Maharashtra with additional office in New Delhi.
Tiger Global LP is a private equity fund managed by Tiger Global Management LLC. It provides growth stage capital to companies operating in India and worldwide. The firm seeks to invest in finance and technology sectors.
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