National Stock Exchange Receives Approval for Long-Awaited IPO

The Securities and Exchange Board of India (SEBI) has granted a no-objection certificate (NOC) for the initial public offering (IPO) of the National Stock Exchange (NSE) of India, bringing to an end a protracted wait of nearly ten years. This approval marks a significant milestone for India’s largest stock exchange, which has been working towards its listing for a decade.

Srinivas Injeti, the Chairperson of NSE, expressed his enthusiasm about the SEBI approval, stating, "With SEBI's approval, we embark on a new chapter of value creation for all our stakeholders. This approval also reinforces confidence in NSE being an integral part of the Indian economy and a beacon of Indian capital markets."

The approval comes after the NSE settled a long-pending legal case with SEBI, involving a settlement exceeding Rs 2,000 crore (approximately £200 million). This settlement is subject to final approvals and may increase, as it includes interest at a rate of 12% up to the date of settlement, as reported by NDTV Profit.

NSE plans to file its draft red-herring prospectus (DRHP) within the next three to four months, and the exchange anticipates that its listing could occur in about eight to nine months. The NOC was issued by SEBI without waiting for the endorsement of its High-Powered Advisory Committee (HPAC).

Once the pending case is presented to the HPAC, it will require approval from a panel comprising two whole-time members. Following this, SEBI will seek to withdraw the case from the Supreme Court, which would formally conclude the matter.

NSE originally submitted its IPO prospectus back in 2016, receiving initial approval from SEBI contingent upon meeting applicable regulations and circulars. This proposal also gained the backing of NSE's board of directors and stakeholders in October and November of 2016.

However, in 2019, SEBI temporarily barred the NSE from accessing the securities market for a duration of six months due to issues related to its co-location facilities, which provide companies with the ability to place their trading systems in close proximity to the exchange’s main servers for speed advantages. Although the Securities Appellate Tribunal adjusted the financial penalties in January 2023, it upheld the six-month restriction on market access.

In its annual report for the financial year 2022-2023, NSE highlighted that the period of prohibition had concluded and that it was awaiting further approval from SEBI to proceed with the listing. Reports from December 2023 indicated that SEBI had placed additional conditions on NSE's IPO approval, which included the necessity for maintaining a glitch-free trading year, bolstering technological infrastructure, enhancing corporate governance, and resolving outstanding legal issues.

The co-location case, which had been a major hurdle for the NSE, was ultimately settled in October 2024 for Rs 643 crore (approximately £64 million). This resolution has played a crucial role in the current approval for the IPO, paving the way for the NSE to finally move forward with its public offering, which is expected to bring significant changes to the capital markets landscape in India.