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NYSE Selling 5% Stake In NSE For Over $150 Million

03 May, 2010

Reuters Update: Singapore state investor Temasek Holdings said on Monday it will buy a  5% stake in the National Stock Exchange of India (NSE). “We see our investment in NSE as a good proxy to India’s economic growth and the development of its capital markets,” Manish Kejriwal, senior managing director at Temasek said in a statement.

VCCircle Exclusive: NYSE Euronext, the world’s largest stock exchange by dollar volume, is exiting its investment in India’s top bourse National Stock Exchange (NSE). The selloff, which is in advanced stages, will see NYSE divesting 5% stake for a little over $150 million, sources said.

The buyer is a global financial services giant that also invests through its private equity arm, said a source familiar with the development, while declining to reveal the identity of the suitor. “The transaction is awaiting regulatory approval now,” this source added. The deal values NSE at over $3 billion.

In 2007, NYSE, or the New York Stock Exchange, had acquired 5% stake for $115 million, valuing the country’s top bourse by trading volume at $2.3 billion. At the time, Indian institutions like IFCI, IL&FS, ICICI, PNB and GIC had formed a consortium to sell off 20% stake in NSE. This was mopped up by NYSE, Goldman Sachs, SAIF Partners and General Atlantic.

A top honcho at a global private equity fund said, on condition of anonymity, that NYSE’s share was on offer in recent months even though his firm did not pursue the opportunity.

NYSE’s entry reflected the growing global interest in Indian markets while its exit now is not a reversal of that in anyway. The Indian FDI regulations do not allow a single foreign investor to hold more than 5% stake in the bourse. This stalled any hope of control and the stake was also too small to serve any cost synergies for NYSE, which merged with Euronext in 2006.

Three years ago, NYSE had pegged NSE’s valuation at nearly 40 times the earnings estimates, as bourses in markets like India sizzled in volume growth and continue to do so.

A spokesperson for NYSE in India, did not respond to queries, seeking more time for the same. An NSE India spokesperson did not respond to the queries at the time of posting this article.

As the market and the economy remain stable, the exchanges in the country such as National Stock Exchange (NSE) and National Commodity and Derivatives Exchange Ltd (NCDEX) and MCX-SX are attractive investment target for the private equity players.

NSE, an electronic national bourse which started in 1992, has two times the trading volume of 134-year-old cousin BSE, despite having lower number of firms listed compared to BSE. NSE has more than half the market share in equity trading but simply dominates derivatives trading in the country due to heavy trading by institutional investors. NSE India earned a total income of Rs 1,024 crore for the year ended March 31, 2009 against Rs 1,038 crore for the year ended March 31, 2008. It registered a profit after tax of Rs 515 crore for the year ended March 31, 2009 against Rs 521 crore.

Last year, Urbana Corp, a Canadian investment fund led by Thomas Caldwell that buys shares in stock exchanges, had delayed plans to buy 5% stake in NSE for $130 million, pegging the latter’s valuation at $2.55 billion.

There were recent media reports that US-based investor George Soros had acquired 1% stake in NSE owned by Stock Holding Corporation of India Ltd (SHCIL), which was also in talks with hedge fund Tiger Holding to sell another 0.86% stake.

During June, 2009, Norwest Venture Partners (NVP) had picked up a 2.11% stake in NSE from IL&FS Securities Services Ltd in a secondary transaction for Rs 250 crore. The deal valued NSE at around $2.5 billion. Earlier, in 2008, Hero Honda and Srei Infrastructure Finance had acquired stakes from IFCI and SHCIL at Rs 3,500 per share.

Following the government’s restriction that any single foreign investor/entity, including persons acting in concert, cannot hold more than 5% stake in a local commodity bourse, the investors such as Goldman Sachs (2%) and Intercontinental Exchange (3%) sold together their 5% in NCDEX to Shree Renuka Sugars for about Rs 36 crore last year.


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NYSE Selling 5% Stake In NSE For Over $150 Million

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