IDFC, IFCI plans hit valuation hurdle

Both IDFC, IFCI own more than 5% in NSE

Domestic financial institutions Infrastructure Development Finance Company (IDFC) and IFCI Limited may shelve their plans to sell a portion of their holdings in the National Stock Exchange (NSE) if they fail to secure the desired valuations.

IDFC and IFCI, which own about five per cent each in India’s largest equity bourse, plan to sell a part of their holdings at Rs 4,500-4,800 a share, said a person privy to the development. However, prospective investors were quoting Rs 3,800-4,000 a share, he said. “IDFC and IFCI don’t mind calling off the deal if they don’t get the right price,” the person added.

Mumbai-based IDBI Capital Market Services is said to be managing the two share sales. Last month, through a newspaper advertisement, the domestic investment bank had invited bids from investors, including foreign institutional investors.

An IDFC spokesperson didn’t respond to a Business Standard query. An IFCI spokesperson said she wasn’t “aware of such a plan”. A senior IDBI Capital official refused to comment on the deal.

At Rs 4,800 a share, the unlisted exchange is valued at about Rs 21,600 crore; at Rs 3,800 a share, the valuation stands at about Rs 17,100 crore. According to market estimates, BSE is valued at about Rs 3,000 crore. Multi Commodity Exchange, the sole listed bourse in the country, has a market capitalisation of about Rs 4,400 crore.

Requesting anonymity, a senior official at a stock exchange said the lukewarm response to the share sale was due to weak investor sentiment.

“Valuations of stock exchanges are directly linked to the underlying market conditions. Though the market is only slightly off its peak, weak investor sentiment could weigh on such deals,” he said.

BSE is firming up plans to launch an initial public offering. The bourse has already hired a clutch of investment bankers and is seeking to be listed next financial year.

Last year, IDFC had sold about 1.33 per cent of its holding in NSE at Rs 4,100 a share, garnering about Rs 250 crore.

In 2011-12, NSE’s net profit grew 10 per cent to Rs 705 crore. For the nine months ended December 2012, its net profit stood at Rs 692 crore.

Other financial institutions, including State Bank of India, Life Insurance Corporation and GIC, also hold stakes in NSE. Foreign and private equity investors such as Temasek, Morgan Stanley, Citibank, Goldman Sachs Group, General Atlantic and SAIF Partners own two per cent to five per cent stake.
EXCHANGE OF EQUITY

• IDFC, IFCI plan to sell part of their NSE holdings
• They are seeking Rs 4,500-4,800 a share
• Interested buyers are offering Rs 3,800-4,000 a share
• Deal plans could be shelved on inappropriate valuations
• Last year, IDFC sold 1.3% in NSE at Rs 4,100 a share