Large NSE shareholders sell stake amid IPO delay, total holding down by 10%

Citigroup, Goldman Sachs and Norwest Venture sold their entire stake in FY22, exchange data shows; others have pruned holdings

Institutional shareholders have continued to trim their stake in the National Stock Exchange of India (NSE) this financial year amid the inordinate delay in the bourse’s initial public offering (IPO).

Citigroup, Goldman Sachs and Norwest Venture Partners have sold their entire stake in the exchange in FY22, exchange data shows. These three had a stake of 1.64 per cent, 2 per cent and about 1 per cent at the end of last fiscal. Elevation Capital (formerly SAIF Partners) has trimmed its stake to 2.14 per cent from 3.21 per cent in FY21.

IIFL Special Opportunities Fund, a category II alternative investment fund, has also trimmed its stake in the exchange in FY22, said people in the know. The fund aims to provide individual investors the opportunity to participate primarily in IPO and pre-IPO events as institutional investors. IIFL Asset Management had reportedly invested $60 million via the fund in NSE in 2017 followed by another $100 million in February 2018.

In FY21, the exchange’s public institutional shareholding fell by nearly 5 per cent. Investors that reduced their stakes include the likes of Life Insurance Corporation of India (12.51 per cent stake reduced to 10.72 per cent), Veracity Investments, Mauritius (5 per cent to 3.93 per cent), General Atlantic’s Gagil FDI (complete divestment of its 3.79 per cent stake), State Bank of India (3.63 per cent to 3.22 per cent), and GS Strategic Investments, Mauritius (3 per cent to 2 per cent), among others.

The total institutional shareholding in the last five years to March 31, 2021 has reduced by 9.74 percentage points to 76.6 per cent.

Institutional shareholders blame the delay in the exchange’s IPO as the chief reason for trimming their holdings.

“The shareholders wanted the exchange to go public way back in 2015 but the exchange kept putting it off on one pretext or the other,” said a shareholder, on condition of anonymity. IPO is one of the ways in which an investor in an unlisted company can get an exit; the other is a secondary sale.

The NSE had requested the Securities and Exchange Board of India (Sebi) for its nod to proceed with its IPO plan and for filing the draft prospectus, which had not elicited a response, the exchange’s annual report for FY21 said. Since then, speculation has been rife that the exchange would get the go-ahead. The exchange had filed for its IPO in December 2016 but was asked to withdraw its offer documents pending investigations into the co-location scam.

An email sent to NSE and Sebi did not get a response.

“Private equity funds have a finite life cycle; how many extensions can we seek? Some of the public sector entities that were either cash-strapped or wanted to exit their non-core assets also decided to sell their holdings,” said the person quoted above.

General Atlantic, the NYSE Group, Elevation Capital and Goldman Sachs were among the first group of foreign investors to acquire a 5 per cent stake each in NSE in 2007. The same year Morgan Stanley, Citigroup Inc. and Actis purchased 3 per cent, 2 per cent and 1 per cent in the exchange.

NSE’s shareholding is a lot more diffused today. Shareholder numbers have grown from under 100 to over 1,600 in the past five years, with several high net worth individuals and family offices lapping up NSE shares. The percentage of individuals’ holding has risen to 7.5 per cent as of March 31, 2021 from 1.16 per cent five years ago.

Share prices have zoomed 250 per cent to Rs 3,500-3600 in the unlisted market in the past two years as demand for the shares amid rising profitability and hopes of an IPO.

"As part of fund management, we may buy or sell shares depending on fund specific activities or developments. We remain extremely positive on NSE and continue to add NSE in various funds. In fact, it remains one of our largest holdings across various funds," said Anshuman Goenka, Head-Private Equity, IIFL AMC.