BoB’s proposed stake sale puts spotlight on NSE valuation

BoB’s proposed stake sale puts spotlight on NSE valuation

A proposed stake sale by a public sector bank on Monday has put the spotlight on the valuations of the National Stock Exchange of India (NSE), the country’s largest bourse.

State-run Bank of Baroda (BoB)‘s proposed auction to sell 2.1 million shares, or a 0.42% stake, at a floor price of Rs 3,150 per share pegs the bourse’s value at about Rs 1.57 trillion ($19.2 billion). This is a 16-19% discount to the price of Rs 3,650-3,750 that was being quoted in late 2021, which translated to a valuation of roughly Rs 1.87 trillion ($25 billion).

The bourse’s valuations have somewhat been impacted after a probe in the co-location matter led to the finding that its former chief Chitra Ramakrishna had shared confidential data with a mysterious yogi based in the Himalayas.

NSE shareholders have been pushing the exchange to go public since 2015. The exchange had filed for its IPO in December 2016, but was asked to withdraw its offer documents pending investigations into the co-location scam, which led to higher scrutiny by the regulators. In FY21, the exchange approached the market regulator for a nod to its IPO plan, which did not elicit a response.

Earlier this year, the Securities Appellate Tribunal set aside the market regulator’s Rs 624-crore disgorgement order against the NSE. Subsequently, the Supreme Court, by way of a partial relief to the NSE in the co-location matter, directed Sebi to refund Rs 300 crore to the NSE. The amount was deposited by the NSE as per the disgorgement order.

Several marquee investors have been offloading their stake in the exchange after a prolonged wait for an IPO. Citigroup, Goldman Sachs and Norwest Venture Partners, for instance, sold their entire stake in the exchange in FY22.

BoB is the latest to join the bandwagon and has invited bids from insurers, mutual funds, foreign institutional investors, corporates, banks, public sector units, non-resident Indians, and high net worth individuals for the stake sale. This will fetch the bank Rs 661.5 crore.

The last date to submit the offer is July 10, while pre-bid queries will be between June 5 and June 15. The bids will be opened on Sunday.

NSE’s shareholding is a lot more diffused at present. The number of shareholders has grown from under 100 to over 4,300 in the past six years, with several high net worth individuals and family offices lapping up the shares. The percentage of individual holding has risen to 10.7% as of March 31, 2023, from 1.16% seven years ago.

Over seven million shares of the NSE changed hands in March at an average price of Rs 2,947 per share. Close to 1.51 million shares changed hands between domestic investors.

The NSE posted a consolidated net profit of Rs 2,067 crore for Q4FY23, up 31% YoY from Rs 1,580 crore. NSE’s consolidated net profit after tax for 2022-23 stood at Rs 7,356 crore versus Rs 5,198 crore in FY22. Income from operations stood at Rs 11,856 crore in FY23, compared with Rs 8,313 crore in FY22. Total revenue on a consolidated basis stood at Rs 12,765 crore, up 44% YoY.