NSE looks to assuage Sebi concerns around IPO, seeks nod to file DRHP

Underscores steps taken to bolster technology, governance

The National Stock Exchange (NSE) has submitted a 16-page response to the Securities and Exchange Board of India (Sebi), addressing concerns raised by the markets regulator over its initial public offering (IPO)-readiness.

 

In the letter, the exchange has sought permission to file its draft red herring prospectus (DRHP) for listing. It highlighted steps taken to strengthen its technological infrastructure and improve governance, besides its commitment to resolve legal matters.

 

“If required, the DRHP may include specific disclosures and risk factors, developed in consultation with Sebi, to align with current ICDR (issue of capital and disclosure requirements) regulations and ensure transparent disclosures under the disclosure-based regime for listed companies,” the NSE stated.

 

Business Standard has reviewed the letter. When contacted, the exchange declined to comment on the matter.

 

The response follows a directive from the NSE’s governing body, which, during its March 4 meeting, advised the exchange to reply to Sebi’s concerns.

 

In a letter dated February 28, Sebi flagged multiple issues, including ongoing legal disputes, technology and governance shortcomings, and concerns about key managerial personnel (KMPs), compensation disparities, transparency, and the ownership and economic structure of the clearing corporation.

 

Sebi specifically raised concerns over technological glitches and the NSE’s handling of them, noting that it is still examining certain incidents from FY25, with reports pending.

 

In response, the NSE outlined measures taken to enhance its technology infrastructure, focusing on reliability and scalability, and highlighted ongoing initiatives in this area.

 

The regulator also stressed the need to prioritise public interest verticals over commercial ones and pointed to significant gaps in the compensation and stature of the managing director (MD) and KMPs.

 

The NSE countered that its public interest verticals account for 67 per cent of total employee expenses, underscoring its commitment to this priority.

 

Additionally, the exchange sought Sebi’s feedback on its August 2024 letter regarding settlements, stating: “The NSE is keen to resolve all pending matters amicably through a settlement mechanism, as available and appropriate.”

On the ownership of clearing corporations, the exchange affirmed its compliance with existing regulations and guidelines.

 

Sebi had previously instructed the NSE to address these concerns satisfactorily before its listing could proceed.

 

The NSE noted that it is awaiting the regulator’s final annual inspection report for FY24 and pledged to resolve any deficiencies identified in the future promptly.

 

The NSE’s IPO plans have been stalled since 2016, when it first sought Sebi’s approval for listing and filed its DRHP. In 2019, the regulator returned the DRHP, directing the exchange to refile after resolving the colocation issue. 

Sebi to NSE

  *  Address issues before seeking approval

*  Cites instances of technological glitches, resource allocation issues

*  Asks to give priority to public-interest over commercial interest

*  Huge gap in compensation of key employees, seeks detailed road map

 

NSE to Sebi

  -  Measures taken to strengthen technology, governance, and manpower

-  Compliance in ownership of clearing corporation, cites examples of other exchanges

-  Keen to resolve pending matters through settlement

-  Stresses need for listing, given its diversified shareholders, and for transparent price discovery