India's National Stock Exchange (NSE) will pitch its initial public offering (IPO) to over 30 global investors this month as a bet on the country's rapid financial expansion and growing capital-market participation, according to two sources and an investor presentation reviewed by Reuters.
India's largest and world's most active derivatives exchange filed draft papers for an IPO last month, making it one of two mega IPOs likely to come to the country this year. Billionaire Mukesh Ambani's Reliance Jio is the other.
Investor meetings are set to begin next week, with a listing expected around October, said the sources, who are directly familiar with the IPO process.
The sources declined to be identified as they are not authorised to speak to the media. A spokesperson for NSE in an email comment said it has filed its IPO papers for regulatory clearance and it is unable to provide further comments at this stage.
Reuters had reported last month, citing sources and private market trades, that the size of the IPO could be $3.3 billion.
Existing shareholders are expected to sell around 6% of NSE's shares through the IPO, the exchange operator said in its IPO papers.
Its older listed peer, BSE Ltd, has seen its shares surge more than 30 times since its 2017 listing. BSE's revenue grew 88% in the latest fiscal year, while NSE's revenue, though nearly six times that of BSE, fell by 3% due to regulatory curbs on derivatives trading.
NSE will tell investors it expects to see annual turnover growth of 12% in cash equities and equity futures and 10% in equity options across the market over the next five years.
The exchange currently has 100% market share in equity futures trading, 93% in cash market and 75% in equity options, it said in investor presentations.
India's capital markets penetration is still 'very low' across segments as compared to other major economies and has room to grow, NSE said.
NSE also sees 15% growth in the market for currency derivatives, 20% in interest-rate derivatives, 10% in commodity derivatives and 10% in corporate bonds, the presentation shows.
The estimates are based on NSE's own internal assessments
"India's rapid financial expansion and NSE's growth will go hand in hand," said one of the sources, explaining the exchange's pitch to investors.
NSE's public offering was delayed for a decade by litigation linked to a regulatory order against it for failing to provide fair and equitable access to all market participants. The exchange has since applied to settle the remaining proceedings by paying about $158 million, according to its draft IPO papers.
While growth in the Indian market and increased retail investor access to equity markets is an opportunity for exchanges, its implications for an exchange's frontline supervisory responsibilities are among the issues regulators would need to be mindful of, said R. Gandhi, a former central bank deputy governor and former chairman of regulatory panel which formed rules for governance at exchanges.
"Growth ambitions, profit maximization, profit appropriation, utilising surplus for market development and safety, etc will have to be within controlled limits," Gandhi said.
NSE's IPO papers have warned investors that policy, tax, regulatory changes, rupee depreciation and weaker market conditions could reduce trading volumes, curb demand for its products and limit foreign investor participation.
ROADSHOWS BEGIN NEXT WEEK
NSE's senior management will begin meeting key institutional investors in India starting next week and will travel to Singapore, Malaysia and Hong Kong towards the end of the month, sources said.
The last leg of investor road shows will be conducted next month in the U.S., UAE and London, sources added.