After a long delay the Indian National Stock Exchange finally has something to celebrate. The exchange, long delayed initial public offering closed this week, and was greeted by enthusiastic investor demand, launching the stock on its path to trading on September 24. With its price band at the upper end, the exchange is valued at approximately 46 billion dollars, making it one of India’s most valuable firms and, not quite surprisingly, giving it close kin with many major institutions worldwide.
For anyone watching Indian markets, the listing feels very tangible. NSE has been the centre of trading activity for more than three decades. Established in the early 90s to restore stability following a string of market scandals, it became the growing venue of choice for equity and derivatives trading. Today, it carries an estimated 99 per cent of all futures and options contracts in India, a market that has boomed as India’s once-sleepy retail investing crowd opened accounts during the pandemic years. Watching the exchange itself extend its hand to go public hits a little close to home.
It was fully on offer by shareholders, not new equity issue. That means the proceeds will go to NSE investors, not NSEs own purse. The price band was set at 1700-1785 rupees and by the time that the offer closed on September 21, NSE was oversubscribed 5.71 times. There were huge institutional take up, with demand overshooting the offering by 12 times, 60 percent of that coming from high net worth individuals. Retail demand was slightly more modest and the offer was book accumulated 91,000 crore rupees in total compared to an issue size of around 22,500 crore rupees making it one of the biggest offerings of the year in in Indian history after the Hyundai Motor India listing.
Market observers had anticipated good volumes but the final figures still felt like a load off investor’s shoulders. The IPO was stuck to launch several times due to some regulatory impediments, mostly around the issue of co-location. Those issues are behind us now and the timing is right. In India, the primary market has been re-energized following a subdued first half of the year and there remains a robust global institutional appeal to the largest population in the world. NSE’s market share in derivatives means that the exchange has a nice appreciation for the challenge. While volumes can be led by investor sentiment, structural improvements that were driven by a move to passive and growth investors, as well as broader adoption of strategies using options now underpin a solid flow.
Listing will also throw open NSE for more public scrutiny. Being a privately held entity NSE was answerable mainly to its and regulatory authorities. Once the shares are on bourses, quartely numbers, governance norms and strategic decisions will be constantly monitored by the markets. This is considered well. With rival BSE getting the market’s thumb of approval for its performance, NSE can same thing look forward to the same.
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