Temasek buys 5% in NSE

Acquires NYSE Euronext’s stake for Rs 675 crore.

Temasek Holdings, Singapore’s sovereign wealth fund, on Monday acquired NYSE Euronext’s 5 per cent stake in the National Stock Exchange (NSE) for over Rs 675 crore.

The deal values NSE at over Rs 13,500 crore. The US exchange had bought the NSE stake at Rs 500 crore in 2007, valuing the exchange at nearly Rs 10,000 crore.

According to sources, NSE’s recent tie-up with the Chicago Mercantile Exchange (CME), a rival of NYSE, could be the reason for the stake sale. NSE had recently tied up with CME for product development and cross-listing of indices.

NSE has over 70 per cent market share in the equity cash segment and 95 per cent in derivatives. Manish Kejriwal, senior managing director, Temasek, said, “We see our investment in NSE as a good proxy to India’s economic growth and the development of its capital markets.”

Added Ravi Narain, managing director, NSE: “Temasek is a well-respected investor and we welcome them as a shareholder.”

When NYSE had picked stake in NSE, the exchange was being de-mutualised and domestic institutions like IFCI, IL&FS, ICICI, PNB and GIC had formed a consortium to sell 20 per cent stake in NSE. This was picked up by Goldman Sachs, SAIF Partners, NYSE and General Atlantic.

At that time NYSE had pegged NSE’s valuation at around 40 times the exchange’s earnings estimates, as bourses in emerging markets witnessed high volume growth.

During June 2009, Norwest Venture Partners had picked up a 2.11 per cent stake in NSE from IL&FS Securities Services in a secondary transaction for Rs 250 crore. The deal valued NSE at around $2.5 billion. Earlier, in 2008, Hero Honda and Srei Infrastructure Finance had acquired stakes from IFCI and Stock Holding Corporation of India at Rs 3,500 per share.

NSE India earned a total income of Rs 1,024 crore for the year ended March 31, 2009, against Rs 1,038 crore for the year ended March 31, 2008. It registered a profit after tax of Rs 515 crore for the former year, against Rs 521 crore in the latter.

As of March 2010, there were 1,470 companies listed on the exchange, with combined market capitalisation of Rs 60,09,173 crore ($1.3 trillion). In March 2010, the average daily trading turnover on the exchange was Rs 88,305 crore or $19.6 billion (of which Rs 13,631 crore or $3 billion was in cash equities and Rs 74,674 crore or $16.6 billion in derivatives).

Incorporated in 1974, Temasek Holdings is headquartered in Singapore. Supported by 12 affiliates and offices in Asia and Latin America, it owned a diversified $172 billion (US$119 billion) portfolio as on July 31, 2009, concentrated principally in Singapore, Asia and the emerging economies.