NSE Likely To Get Sebi Nod For IPO Soon

After protracted delays, the ₹10,000-crore initial public offering (IPO) by the National Stock of Exchange of India Ltd (NSE) is close to getting regulatory approval, two people aware of the matter said.

On 30 April 2019, the Securities and Exchange Board of India (Sebi) barred India’s largest stock exchange from raising funds for six months and directed it to deposit ₹1,200 crore in an investor fund. The orders came after Sebi found some NSE brokers had secured preferential server access through NSE’s co-location service. Following the Sebi order, NSE withdrew its IPO application but reapplied in January this year.

“Sebi did not formally allow NSE to restart the IPO process due to pending regulatory investigations and actions," one of the two people, a Sebi official, said. “As of today, the number of pending regulatory actions and investigations against NSE has reduced; in some cases, quasi-judicial proceedings are underway. Considering this, Sebi could soon give assent to the public offer," the official said on condition of anonymity.

Life Insurance Corp. of India, State Bank of India Group, IDBI, Norwest Venture Partners and GS Strategic Investments Ltd (Mauritius) are among NSE shareholders keen to sell stakes worth 22-24%.

Emails sent to Sebi and NSE remained unanswered.

To be sure, public share offers can proceed despite pending investigations and regulatory action; however, the company needs to disclose these in the IPO prospectus.

“The case for market infrastructure institutes such as exchanges is different. An investigation and regulatory action, which could raise concerns on the conduct of an exchange, needs to be done cautiously. However, disclosure of financial impact due to regulatory action is something that investors can factor in," the second of the two people said.

As part of its interim directions in the co-location case, NSE was asked in September 2016 to deposit revenues from the service in an escrow account pending investigations.

“Accordingly, as on 30 June, an amount of ₹4,066.78 crore ( ₹3,606.73 crore as of 31 March) was transferred to a separate bank account and then has been invested in accordance with the board of directors-approved investment policy and procedures," NSE said while disclosing its financial results on 7 August.

The first person said two issues are still under probe. The first is alleged irregularities in re-appointment of NSE’s chief strategic adviser Anand Subramanian as chief operating officer and adviser to managing director, by NSE’s former managing director and CEO Chitra Ramakrishna. According to Sebi rules, Subramanian’s appointment, considering he is a key managerial personnel, had to be routed through the exchange’s nominations and remuneration committee, which was not done. The second is an assessment of gains made by brokers when they got unfair access to the exchange’s high-speed trading platform.

Sandip Ginodia , CEO

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