NSE's Rs. 22,561 Crore IPO Tests Anchor Investor Appetite After Shareholders Trim Stake Sale

The National Stock Exchange of India (NSE) formally announced the IPO on September 15, fixing a price band of Rs. 1,700 to Rs. 1,785 per equity share at a press conference in Bengaluru. The panel at the presser included Sujay Kamath, MD & Head of ECM Syndication at 360 ONE, and Sriram Krishnan, Chief Business Development Officer (CBDO) at NSE.

At the top of the band, the exchange is valued at roughly Rs. 4.42 lakh crore due to which this the largest IPO in Indian history in terms of valuation and the issue is entirely an Offer for Sale (OFS) of about 12.6 crore shares, which means that NSE itself will not receive a rupee from the proceeds.

Why the Issue Size Shrank From Rs. 31,500 Crore to Rs. 22,500 Crore?

NSE's offer-for-sale size had been trimmed down from what was originally planned. As per the exchange's filing, NSE shareholders reduced 15% of their proposed stake sales, from 14.89 crore shares down to 12.64 crore. Major cuts were seen from State Bank of India that reduced its proposed sale from 1% to 0.7%.MS Strategic Cut its planned sale by 31%.

Other reductions came from the General Insurance Corporation of India (GIC), Bank of Baroda, and other public-sector insurers.

On why the proposed OFS was eventually reduced, Sriram Krishnan, Chief Business Development Officer (CBDO) at NSE, told GoodReturns that NSE had initially approached some of its larger shareholders to consider selling their shares, but there was little willingness to sell at the time.

"The initial price band that we had in mind was 2,000. We felt that by reducing it a bit and slightly bringing in a confidence of discount, it might be more appropriate for the retail participants, who will much appreciate that. Therefore, instead of fully pricing the IPO, we brought the price band down a little. But we found some of the selling shareholders said, " Sorry, we think NSE is much more valuable; we want to back off. So the issue size came down from 31,500 crores to 22,500 crores," he further explained.

Who Owns NSE?

India's Largest exchange has no promoter or promoter group, and the ownership is divided among over 2 lakh trading members and public shareholders.

The Public shareholders hold 64.44% of the company, while non-promoter, non-public shareholders hold 35.56%; this second category consists entirely of trading members and their associates. In total, 2,17,633 shareholders hold 247.50 crore equity shares.

Shareholder	Stake
Life Insurance Corporation of India (LIC)	10.72% (26.5275 crore Shares)
Aranda Investments (Mauritius) Pte Ltd	4.54% (11.2463 crore)
General Insurance Corporation of India (GIC)	>1%
Canada Pension Plan Investment Board (CPP Investments)	>1%
TA Asia Pacific Acquisitions Limited	>1%
The New India Assurance Company Limited	>1%
MS Strategic (Mauritius) Limited	>1%

NSE's Dominance By The Numbers

Talking about the humungous size of the IPO, Sujay Kamath, MD & Head of ECM Syndication at 360 ONE, said, "This is itself a scale of what we are about to launch. Since its incorporation in November 1992, NSE has been central to democratising access to Indian financial markets, as shown by the growth of its unique investor base. That's a staggering growth of 26% YoY. It reaches all parts of the country. I think it covers almost 99% of all of India's PIN codes, as well as across 1,400 cities."

"NSE is more than an exchange; it is a "first-level regulator" in the market ecosystem, and has a 68% share of equity cash volumes, and has the largest multi-asset class exchange globally by number of trades in cash equities and futures combined," Kamath said.

"NSE holds 100% market share in both index futures and stock futures, and 100% in stock options as well, according to the official figures. In index options, the only segment where a rival has meaningful presence, NSE's share sits between 70% and 72%, varying by period." Kamath further added.

The Grey Market Is Already Pricing NSE Higher

The IPO's share in the grey market has already crossed well past the IPO's own price ceiling. At the time of writing, the NSE IPO in the grey market was trading at a premium of Rs. 169 per share at Rs. 1954.

"The valuation works based on how the market perceives the stock. The grey market has already been seeing transactions where the stock touched more than 2,000 rupees per share as well," said Sriram Krishnan, CBDO, NSE.

"Because of its size, it has been trading in the private markets for a very long time. Websites have actually tried to track these transactions. So I would say about a month ago, there have been transactions that have happened at NSE recently, trading at 1,950 In terms of pricing this particular transaction, the IPO, it's been arrived at based on investor feedback." said Sujay Kamath, MD & Head of ECM Syndication, 360 ONE.

NSE Anchor Book Opens Today

Just a day before the public issue opens, the anchor book for the NSE IPO opened today for institutional investors

The anchor investment is expected to be around Rs. 6,250 crore. NSE's anchor book, initially pegged at around Rs. 9,000 crore, however, the final anchor allocation settled at just over Rs. 6,000 crore. Goldman Sachs Asset Management, Franklin Templeton and Fidelity International are named in the early participants list.

"In terms of interest in the anchor book, there is very strong confidence in the number of actual applications that we will see. We will notice a huge number of strong investors, both domestic and institutional. There is a lot of interest from there. The IPO comprises about 12.6 crore shares, and that is about 5.1% of the issued paid-up capital of the company," said Sriram Krishnan, CBDO, NSE

The public issue opens tomorrow, September 17, closes September 21, and shares are expected to list on the BSE around September 24.