Markets regulator Sebi has asked NSE to divest its entire 37 per cent stake in Computer Age Management Services Ltd (CAMS) within a year.
In a letter dated February 4, Sebi said that NSE's acquisition of shares in CAMS in 2013-14 was done without its approval.
While announcing its December quarter results, the bourse said the regulator has directed it to divest the entire stake in CAMS.
NSE, which currently owns a little over 37 per cent shareholding in CAMS, said it has already started the process of offloading the stake.
The stake is held through one of the subsidiaries NSE Investments Ltd (NSEIL).
In the letter to NSE, Sebi said the exchange should have obtained its prior permission for acquisition of stake in CAMS, an associate company.
The regulator also directed the bourse to divest the stake within a period of one year along with certain restrictive directions in relation to the shareholding, NSE said quoting the letter.
"The company is doing the needful in this regard," NSE said.
Under the norms, Sebi's approval is required in case an exchange plans to pick stake in any new firm.
In January, CAMS filed draft papers with Sebi for an initial public offering and market sources estimated the IPO size to be anywhere between Rs 1,500 and Rs 1,600 crore.
The IPO would see sale of 1.22 crore equity shares through offer-for-sale by Great Terrain Investment, an affiliate of Warburg Pincus, NSE Investments, Acsys Investments, HDFC and HDB Employees Welfare Trust.
CAMS claims to be India's largest registrar and transfer agent with a market share of 69.4 per cent, based on mutual fund average assets under management, at the end of November 2019.
Meanwhile, NSE also said that it received a showcause notice in October and a supplementary notice in December from Sebi.
The notices were in relation to certain alleged irregularities in the appointment of Chief Strategic Advisor and his re-designation as Group Operating Officer and Advisor to Managing Director (MD) by the exchange's former managing MD and CEO. It also pertained to sharing of certain internal information pertaining to NSE with an alleged third party by a former MD and CEO.
The exchange said it has sought inspection of records from Sebi in the matter and has also filed a settlement application.
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