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The National Stock Exchange (NSE) of India is set to reap substantial profits from its early investment in the National Securities Depository Limited (NSDL). The initial investment of Rs 59 crore has now ballooned to an impressive Rs 3,840 crore, representing a staggering return of 6,415%. This significant appreciation in value is attributed to NSDL's recent Rs 4,012 crore Initial Public Offering (IPO), which commenced on Wednesday, July 30. The IPO is expected to unlock considerable value for NSDL’s long-term shareholders, including NSE, which was one of the earliest institutional backers of the securities depository. NSE initially acquired a 24% stake in NSDL, equivalent to 4.8 crore shares, at an average cost of just Rs 12.28 per share. This strategic investment, made well before NSDL's public debut, has since appreciated significantly, highlighting the potential for substantial returns in India's financial market infrastructure. The IPO's upper price band of Rs 800 per share values NSE's total holding at Rs 3,840 crore, underscoring the substantial gains that long-term investors in the Indian market infrastructure ecosystem are beginning to realize. The regulatory landscape, particularly the Securities and Exchange Board of India (Sebi)'s mandate, plays a crucial role in shaping these investment dynamics. As part of the IPO's offer for sale, NSE is divesting 1.8 crore shares to comply with Sebi's regulations, which limit institutional ownership in a depository to a maximum of 15%. This dilution will reduce NSE's stake from 24% to 15%, but not before NSE realizes proceeds of Rs 1,418 crore from the partial sale, which is more than 24 times its original investment. This strategic move allows NSE to comply with regulatory requirements while simultaneously unlocking substantial value from its long-term investment. The IPO's structure is not driven by profit-taking alone, but rather by statutory requirements. NSDL's Red Herring Prospectus explicitly states that its shareholders, IDBI Bank Limited and National Stock Exchange of India Limited, currently hold 26.10% and 24.00% of the paid-up Equity Share capital, respectively, exceeding the maximum permissible limit of 15%. Consequently, these shareholders are mandated to dilute their respective shareholdings. This regulatory compliance underscores the importance of adhering to Sebi's guidelines to maintain a balanced ownership structure within depositories.
The NSDL IPO, which was open for public subscription from July 30 to August 1, comprised a sale of 5.01 crore shares by existing shareholders, including NSE, IDBI Bank, State Bank of India (SBI), Union Bank of India, Canara Bank, and IIFCL. The shares were priced in a band of Rs 760 to Rs 800 and are set to be listed on the BSE on August 6. The IPO garnered significant interest from both domestic and international investors, reflecting confidence in NSDL's growth prospects and the Indian financial market infrastructure. Ahead of the offering, NSDL successfully raised Rs 1,201 crore from anchor investors by allotting 1.5 crore shares at Rs 800 each. This substantial anchor investment demonstrates strong institutional backing for NSDL's IPO. Prominent investors, including Life Insurance Corporation of India (LIC), led the anchor book with a Rs 144 crore investment, followed by allocations to global and domestic institutions such as Small Cap World Fund, Fidelity Funds – India Focus Fund, SBI Mutual Fund, and the Abu Dhabi Investment Authority. The participation of these renowned investors underscores the attractiveness of NSDL as an investment opportunity and the growing confidence in the Indian financial market. The NSDL IPO provides an opportunity for several public sector shareholders to monetize decades-old holdings at substantial premiums. IDBI Bank, which acquired its stake at Rs 2 per share, is selling 2.22 crore shares for Rs 1,776 crore, translating to a remarkable return of nearly 39,900%. This staggering return highlights the significant value creation that NSDL has achieved over the years. Similarly, SBI will net Rs 320 crore from the sale of 40 lakh shares, also purchased at Rs 2 apiece. Union Bank of India, with a more modest holding of 5 lakh shares bought at Rs 5.20, will realize Rs 40 crore, yielding over 15,000% in returns. These substantial returns for public sector banks demonstrate the potential for long-term value creation in the Indian financial market infrastructure.
Even investors with higher acquisition costs are poised to benefit from the NSDL IPO. HDFC Bank, which bought 20.1 lakh shares at Rs 108.29, is set to earn approximately Rs 139 crore from the sale. SUUTI (Specified Undertaking of the Unit Trust of India) is selling 34.15 lakh shares bought at Rs 2 for a total of Rs 273.2 crore. These transactions highlight that even investors who acquired shares at higher prices can still realize substantial gains from the IPO. For NSE and other long-term investors, the NSDL IPO represents more than just a compliance-driven divestment; it is a rare value-unlocking moment in India's tightly held financial market infrastructure sector. The IPO provides an opportunity to realize the true value of their investments and capitalize on the growth and development of NSDL over the years. The successful IPO of NSDL also reflects the maturity and sophistication of the Indian capital market. It demonstrates the ability of Indian companies to attract significant investor interest and access capital through public offerings. The IPO also underscores the importance of regulatory frameworks in promoting transparency and investor confidence in the market. Sebi's regulations, such as the cap on institutional ownership in depositories, ensure a balanced ownership structure and prevent undue concentration of power. In conclusion, the NSDL IPO is a significant event for the Indian financial market. It represents a substantial value-unlocking opportunity for long-term investors, including NSE and public sector banks. The IPO also underscores the maturity of the Indian capital market and the importance of regulatory frameworks in promoting transparency and investor confidence. The success of the NSDL IPO is a testament to the growth and development of the Indian financial market infrastructure and its potential to generate significant returns for investors.
Source: 6,415% return! NSE's Rs 59 crore investment turns to Rs 3,840 crore in NSDL