NSE IPO on the anvil

The National Stock Exchange (NSE),  Country’s largest stock exchange and 4th largest in the World , on  28/12/16 has filed  draft papers with market regulator SEBI for its much-awaited IPO which plans to raise over 10000 crore. ICICI Pru IPO recently had a  size of  Rs. 6000 Crore and the largest IPO to date, Coal India Ltd. was for Rs 14,475 Crore  way back in year  2010.  The issue size, pegged at Rs 10,000 crore, will eclipse ICICI Prudential’s Rs 6,000 crore IPO concluded recently, but will fall short of Coal India’s Rs 14,475 crore IPO launched in October 2010.E intends to sell up to 111,411,970 equity shares, constituting 22.5 per cent of the company’s post-offer paid up equity share capital.

NSE was established in 1992 as a start-up to take on BSE monopoly and  grew aggressively, largely propelled by quicker absorption of technology. It has emerged as the largest exchange in the country with an average daily turnover of more than 225 billion rupees

The initial public offer may see existing shareholders offloading about 22.5% stake  to the public. The offer for sale by the exchange’s shareholders  include global  PE  funds , financial institutions and Indian banks like   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 offer may give NSE a valuation of over Rs. 40-45000 Crore.

NSE stake holders had been making small exits from the bourse as they had been invested for quite a long period.

  • In June 2013, GTI Capital Group bought 0.44 per cent in the NSE from IDFC for Rs 79 crore, valuing the exchange at Rs 17,954 crore.
  • In Sept 2015, IFCI Ltd sold its 1.5% stake in NSE in September last year for Rs.263.25 crore to the US-based fund Deccan Value Investors at Rs.3,900 per share, which value the stock exchange  at Rs.17,550 crore.
  • In April,2016 , IDBI Bank Ltd sold a 2% stake in NSE to Life Insurance Corp.at Rs.3,900 per share for Rs.351 crore valuing the exchange at 17550 crore,
  • In Sept, 2015  IFCI sold 1.5 per cent of its stake in the National Stock Exchange of India (NSE) for Rs 263 crore. The deal valued the exchange at Rs 17,550 crore at that time. Next in July,2016 IFCI sold a 0.5% stake in NSE for for ₹89 crore. IFCI sold 2.25 lakh shares in NSE at ₹3,950 a share. This valued  NSE at about Rs. 18,000 crore compared to an expected valuation of Rs. 45,000 crore being sought now. Luckily for IFCI shareholers, IFCI put on hold selling its remaining 3.05 per cent stake in NSE. A week before that SBI had sold 5 per cent stake in NSE to Mauritius-based Veracity Investments for ₹911 crore, valuing the exchange at just ₹18,200 crore.

The government had recently hiked foreign holding limit in Indian bourses to 15% from 5%. NSE’s largest shareholders are LIC (12.5% stake), SBI(5%),Gagil FDI Ltd. (5%), SAIF Investments (5%), SBI Capital Markets(4.3%) and IFCI (3.6%). A total of 27 investors are selling mostly part of their stake in the NSE. While Tiger Global Five Holdings is selling its  entire 3% stake. Temasek, through its arm Aranda Investments (Mauritius) Pte Ltd is selling 2.5% out of a total holding of 5%. SBI is selling a much lower percentage i.e. 1.08% out of total l 5% it owns in NSE. LIC  which holds a 12.5% stake and is  the biggest is not offloading any share.

Rival  Exchange BSE is also in the process of launching its IPO of up to Rs. 1,500 crore for which it filed draft prospectus with SEBI in September. Currently, MCX is the only listed exchange in the country, which at the time of its IPO was only as a standalone commodity exchange. However Since at present, all exchanges have become deemed stock exchanges.

NSE saw the surprise exit of its Managing Director and CEO Chitra Ramkrishna  about a month back. NSE IPO had run into some troubled waters on allegations that some market participants were given unfair access to its servers.  The NSE board was also summoned by Sebi in this case where a whistle blower had accused NSE officials of colluding with certain brokers to allow them faster access to information in its trading servers, which gave the brokers an undue advantage. A Sebi investigation had found the allegations to be true and had asked the NSE board to rectify the same and also fix responsibility.

The IPO-bound NSE board had in Oct 2016  approved payment of interim dividend at 795%, a bonus issue of one share for every 10 shares and also a stock split from Rs. 10 share to Rs. 1 share. NSE’s board of directors have also given their nod to list the exchange abroad for which it plans to file a draft prospectus aboard.

For the Year ended 2016, NSE reported a Revenue from operations of  Rs. 1863 crore and total income of 2336 crore with a Net profit of  975  crore.

Citigroup Global Markets, JM Financial Institutional Securities, Kotak Mahindra Capital and Morgan Stanley India as joint global coordinators to manage its IPO. . HDFC Bank, ICICI Securities, IDFC Bank and IIFL Holdings are the lead managers.

This Post Has 2 Comments

  1. irrelevant

    made a mistake of 10X …

    the revised working is as follows:

    Hence, every 1 share held on September 30, 2016 is now equivalent to 11 shares after Bonus & Split.

    Thereby, EPS for FY 15-16 is Rs.18.86 & EPS for H1 16-17 is Rs.13.13

    with the (assumed) CY EPS of Rs.26.26 (13.13 X 2)
    … and if the IPO is priced @Rs.600/-
    … then the PE will work out to be 22.85X

    Is that good or bad?

  2. irrelevant

    For viewing the NSE Consolidated Financial Results for the Six Months Ended Sep 30, 2016

    See Link here below

    Please note:

    On November 24, 2016 NSE allotted Bonus shares in the ratio: 1:10

    On December 13, 2016 NSE has sub-divided the equity shares having a face value of Rs. 10/- each into equity shares having a face value of Rs.1/- each

    Hence, every 1 share held on September 30, 2016 is now equivalent to 110 shares after Bonus & Split.

    Thereby, EPS for FY 15-16 is Rs.1.886 & EPS for H1 16-17 is Rs.1.313

    with the (assumed) CY EPS of Rs.2.63 (1.313 X 2)
    … and if the IPO is priced @Rs.60/-
    … then the PE will work out to be 22.85X

    Is that good or bad ?

Leave a Reply