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The National Stock Exchange (NSE) is potentially nearing the end of its long-awaited Initial Public Offering (IPO) journey. According to sources, the Securities and Exchange Board of India (SEBI), the market regulator, is likely to issue a No Objection Certificate (NOC) by the end of July. This anticipated approval marks a significant step forward in NSE's efforts to go public, a process that has been hampered by regulatory hurdles and legal challenges for several years. The primary obstacle to NSE's IPO has been the litigation surrounding two critical issues: co-location and dark fiber. To address these concerns, NSE has filed a settlement application with SEBI, aiming to bring about a resolution and closure to these legal matters. The settlement process is expected to be completed by mid-July, paving the way for further progress on the IPO front. The co-location issue revolves around allegations that certain brokers exploited NSE's infrastructure by strategically positioning their servers in close physical proximity to the exchange's servers. This proximity allowed for faster data access, providing these brokers with an unfair advantage over their competitors. The controversy sparked concerns about market fairness and equal access to information, leading to regulatory scrutiny and legal challenges. Similarly, SEBI had penalized NSE for allegedly granting preferential access to select brokers through the use of dark fiber. Dark fiber refers to unused or reserved optical fiber infrastructure that can provide faster connectivity to co-location facilities. The allegations suggested that NSE provided certain brokers with an unfair advantage by enabling them to access data more quickly than others. These allegations of unfair practices have cast a shadow over NSE's operations and have significantly delayed its IPO plans.
To address these issues, NSE has engaged in extensive negotiations with SEBI's department responsible for handling settlement applications. These informal discussions have aimed to find a mutually agreeable resolution to the outstanding legal concerns. Following these negotiations, NSE formally filed a settlement application with SEBI, seeking to resolve the co-location and dark fiber issues. The settlement application will now undergo a thorough review process within SEBI. An internal committee within SEBI will assess the application and make recommendations. Subsequently, the application will be reviewed by SEBI's Market Regulation Department, which is responsible for regulating exchanges, depositories, and clearing corporations. This department will provide feedback on the proposed settlement amount, ensuring that it aligns with the prescribed formula under the settlement rules. Following the Market Regulation Department's review, the matter will be escalated to SEBI's High Powered Advisory Committee (HPAC) on Settlements. The HPAC will provide further guidance and recommendations on the settlement application. After the HPAC's endorsement, a panel of whole-time members (WTM) will ultimately approve the settlement application. This approval marks a crucial step in resolving the outstanding legal issues and paving the way for NSE's IPO. However, the co-location matter is currently pending before the Supreme Court. To address this, SEBI and NSE will jointly request the Supreme Court to allow the issue to be resolved mutually. They will present the details of the settlement terms to the court, seeking its approval to withdraw the case. If the Supreme Court grants permission, SEBI will withdraw the case, effectively removing a significant obstacle to NSE's IPO.
Once the legal hurdles are cleared and SEBI issues the NOC, NSE is expected to promptly initiate the IPO process. The initial step will involve preparing the Draft Red Herring Prospectus (DRHP). This document provides potential investors with comprehensive information about the company, its financials, and the risks associated with investing in its shares. The preparation of the DRHP is a time-consuming process, typically requiring around 4-5 months. This timeframe is necessary to ensure that all quarterly financial data is audited and accurately presented in the prospectus. Following the DRHP submission, SEBI will conduct a thorough review, raising routine queries to merchant bankers involved in the IPO. This review process typically takes approximately 2-3 months. If all goes smoothly, sources suggest that NSE's listing may be possible by the last quarter of the current financial year (Q4FY26). This would mark a significant milestone for NSE, allowing it to access public markets and raise capital for future growth and expansion. NSE's IPO plans have been delayed for over eight years. The exchange initially filed its draft papers in 2016, but the aforementioned legal challenges and regulatory hurdles have prevented the IPO from moving forward. NSE has repeatedly sought an NOC from SEBI, submitting requests in November 2019, twice in 2020, and again in August 2024. The anticipated NOC by July-end represents a potential breakthrough in this long-standing saga.
Public Sector Undertakings (PSUs) collectively own approximately 31 percent of NSE's shares, representing a substantial stake valued at over Rs 1.7 lakh crore. The successful listing of NSE's shares is expected to have a positive impact on the net worth of these PSUs, providing them with significant financial support. Furthermore, large entities like the Life Insurance Corporation of India (LIC) are also expected to realize substantial profits from the NSE share listing. These profits can be utilized to expand their business operations without the need to raise additional equity. The potential listing of NSE is expected to generate significant interest from investors, both domestic and international. The exchange plays a vital role in India's financial markets, providing a platform for trading in equities, derivatives, and other financial instruments. The IPO is expected to provide investors with an opportunity to participate in the growth and development of India's capital markets. The successful completion of the NSE IPO would represent a significant achievement for the exchange and a positive development for India's financial markets. It would also serve as a testament to the efforts of SEBI and NSE to address regulatory concerns and promote fair and transparent market practices. The IPO is expected to enhance NSE's corporate governance standards, improve its financial performance, and strengthen its position as a leading stock exchange in the region. It would also provide a boost to investor confidence and contribute to the overall growth and development of India's economy.
Moreover, the IPO would enable NSE to attract and retain top talent, further enhancing its operational efficiency and competitiveness. The exchange would also be able to invest in new technologies and infrastructure, strengthening its ability to meet the evolving needs of the market. The successful listing of NSE would also provide a boost to the Indian IPO market, which has been experiencing strong growth in recent years. It would encourage other companies to consider going public, further deepening the capital markets and providing investors with a wider range of investment opportunities. The IPO is expected to be closely monitored by investors and market participants, as it would serve as a benchmark for future IPOs in the Indian market. The performance of NSE's shares following the listing would also be a key indicator of investor sentiment towards the Indian capital markets. The potential listing of NSE is a highly anticipated event that has the potential to significantly impact India's financial markets and economy. The successful completion of the IPO would represent a major milestone for the exchange and a positive development for the country as a whole. It would also provide investors with an opportunity to participate in the growth and development of one of the world's fastest-growing economies. The IPO process, however, remains subject to regulatory approvals and market conditions. Any unforeseen circumstances could potentially delay or even derail the listing plans. Therefore, investors should carefully consider the risks involved before making any investment decisions.
In conclusion, the NSE IPO is a significant event with the potential to reshape India's financial landscape. The resolution of long-standing legal issues and the anticipated SEBI approval pave the way for a potential listing in Q4FY26. This event promises substantial benefits for PSUs, LIC, and the broader Indian economy, fostering growth and innovation in the capital markets. However, investors must remain vigilant, considering the inherent risks and regulatory factors that could influence the IPO's trajectory.
Source: NSE may get go ahead to file IPO papers by July-end, listing likely by Q4FY26, say sources