NSE seeks Sebi's go-ahead for IPO amid mounting pressure from shareholders

The National Stock Exchange (NSE) has once again set the ball rolling on its initial public offering (IPO). The country’s largest bourse has written to markets regulator Securities and Exchange Board of India (Sebi), asking whether it can once again file the draft red herring prospectus (DRHP) to go public. The move comes amid mounting pressure from shareholders, many of whom are waiting to liquidate their holding for over a decade.

“The NSE has requested Sebi to convey its no-objection to enable it to proceed with its IPO plan and for filing the DRHP. A response from Sebi is awaited,” the exchange said in its annual report.

Sources said the market regulator is yet to give a go-ahead to the exchange. Emails sent to the NSE and Sebi seeking comment didn’t elicit any response. 

According to people in the know, the bigger shareholders of the exchange want Sebi and the NSE to expedite the listing process and they have taken up the issue with the NSE’s management several times.

“It has been a long wait for all of us. The non-monetary and remedial measures issued by Sebi have been adhered to. The IPO shouldn’t be obstructed anymore,” said an executive representing the NSE’s foreign shareholder. 

In April 2019, Sebi had barred the NSE from accessing the capital markets for six months for alleged lapses at its colocation facility. The ban period ended on October 30, 2019, according to the NSE. The regulator also directed the exchange to disgorge Rs 625 crore, along with a 12 per cent interest from April 2014, but the exchange filed an appeal against Sebi’s order before the Securities Appellate Tribunal (SAT). The tribunal has heard the matter and reserved its order. 

Sebi had passed two more orders in the same matter, which are currently being heard by SAT. Giving clearance to the NSE IPO before the SAT passes its order can be challenging, the sources said.

“Approving the IPO at this stage could be construed differently by the SAT. Also, there are a few other critical issues -- such as the CBI investigation, brokers default, and trading outage in February -- that need to reach their logical conclusion,” said a regulatory official.

The NSE’s annual report also revealed that Sebi in January 2021 issued an adjudication show cause to it in the matter pertaining to the default by Karvy Stock Broking. Meanwhile, a criminal writ petition has been filed by clients of Anugrah Stock -- another broker that defaulted -- before the Bombay High Court, seeking an investigation by a special investigating team (SIT) into alleged wrongdoings by exchanges, Anugrah, and its executives. 

The sources said the CBI recently sought information from Sebi on the status of the investigation and also enquired about the official who is handling the matter. 

DRHP refiling 

In 2016, the NSE had filed its DRHP for a Rs 10,000-crore IPO. However, the probe into the colocation matter derailed its listing plan. A total of 27 shareholders had planned to sell 111.4 million shares (22.5 per cent stake) in the IPO. 

Among the largest selling shareholders are private equity funds Tiger Global, Aranda Investments, and SAIF Partners. A clutch of domestic banks and financial institutions had also planned to sell their holdings in the IPO. However, given the delay some investors -- such as IDBI Bank and IFCI -- resorted to selling their shares before the IPO, altering the capital structure. Sebi, therefore, returned its DRHP, which would require a lot of reworking before it is filed again.