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National Stock Exchange of India Limited is set to launch an IPO through an offer for sale of 11,14,11,970 equity shares, each with a face value of ₹1. The price per equity share will be determined closer to the offer date. The IPO will constitute 22.5% of the company’s post-offer paid-up equity share capital. 

The company, in consultation with joint global coordinators and book-running lead managers, will finalize the minimum bid lot and price band. The details will be published in widely circulated English, Hindi, and Marathi newspapers at least five working days before the opening date. These updates will also be available on BSE Limited’s website for public reference. This article will review and analyze the IPO, covering its key aspects, strengths, and potential risks.

About the company 

The National Stock Exchange of India stands as a powerhouse in the global financial landscape. It ranks as the leading stock exchange in India and the fourth largest worldwide by equity trading volume. The exchange manages the NIFTY 50 index, a key benchmark for Indian capital markets. It offers various services across various asset classes, including equity, fixed-income, and derivative securities.

Moreover, the exchange boasts an integrated business model. This model encompasses exchange listings, trading services, and clearing and settlement processes. It also includes indices, market data feeds, and financial education offerings. NSE also oversees compliance by its members and listed companies with relevant rules and regulations. Its comprehensive approach ensures smooth operations across all aspects of trading.

Furthermore, the National Stock Exchange has achieved significant milestones since its inception in 1994. It has maintained its position as India’s largest stock exchange regarding total turnover and average daily turnover for equity shares. The exchange’s market share is impressive across various segments, including equity cash trading, derivatives trading, and currency derivatives trading.

Its success stems from its robust infrastructure and innovative approach to meeting market needs. As of September 2024, The National Stock Exchange has nearly 2200+ companies listed on its exchange. 

Besides this, the exchange also boasts of a vertically integrated business model. This model includes post-trade and non-trading businesses. It serves the investment community’s diverse needs and provides complementary revenue sources.

Key points

1. National Securities Clearing Corporation Limited (NSCCL) offers clearing and settlement services for the exchange.

2. NSE  manages 400 indices under the NIFTY brand.

3. NIFTY 50 is the flagship index, used as a benchmark globally and is traded internationally

4. DotEx International Limited distributes real-time market information.

5. NSE offers IT services and financial education through NSEIT Limited and NSE Academy Limited.

The exchange operates an “anywhere, any asset” trading platform. It supports all listed products and offers web-based, mobile, and tablet functionality. As of March 31, 2024, its high-speed network connected over 225,718 terminals across India. The scalable technology platform handles high trading volumes efficiently.

NIFTY indices serve as benchmarks for various products. They underpin 150 ETFs listed in India and 12 ETFs listed abroad. Additionally, derivatives based on NIFTY indices trade on four international exchanges. These include the Singapore Exchange, Chicago Mercantile Exchange, TAIFEX, and Osaka Exchange.

The exchange’s success is reflected in its market share. It holds 85% in equity cash trading and 94% in equity derivatives trading. Furthermore, it claims 59% in currency derivatives and 79% in interest rate derivatives in India, as of 2016.

NSE’s achievements have earned it several accolades. It was named Indian Exchange of the Year for 2014 by Futures & Options World. The exchange also received the CII EXIM Bank Excellence Prize in 2014 and 2016. Other honors include the IMC Ramkrishna Bajaj National Quality Certificate of Merit for 2014. Global Finance recognized NSE with the Best Derivatives Providers Performance Award in 2014.

About the Industry

The Indian capital markets have evolved significantly since 1991. Financial services became the backbone of India’s growth. Key indicators like banked population and market capitalization improved. 

Indian households traditionally invested most savings in physical assets. However, financial asset allocation increased recently. This trend is expected to continue due to better financial literacy, a focus on inclusion, and market confidence. Compared to other emerging markets, India has room to expand its financial product range.

As literacy and savings grow, investment in sophisticated products may increase. Indian capital markets differ from global peers in several ways as companies heavily rely on banks for funding, while the corporate bond market remains underdeveloped. Retail investor participation is low, and low free float levels have transformed the market into a para.

The outlook for Indian capital markets is positive. This is due to:

1. Corporate bond market development

2. Large SME funding gap

3. Growing retail investor participation

4. Continued foreign investment flows

Indian exchanges rank among the top globally in turnover volumes. They’re in the top 15 for cash and derivatives trading.

The revenue mix differs between Indian and global exchanges. Indian exchanges earn mostly from transactions. This suggests potential for growth in other areas like data services. Indian exchanges also have more non-core operating revenues, which is unique to this market.

Financial Highlights Of NSE IPO

Disclaimer: EBITDA has been calculated using Profit before tax and adding back depreciation and amortization, interest, and deducting other income. While EBITDA margin has been calculated by dividing EBITDA with Revenue from operations.

The company has shown remarkable growth in recent years. Its revenue surged from ₹3,508 crore in March 2020 to ₹14,780 crore in March 2024. This upward trend indicates strong market performance. Furthermore, the company’s net profit has risen steadily. It increased from ₹1,885 crore in March 2020 to ₹8,306 crore in March 2024. This growth suggests effective cost management and improved operational efficiency.

Additionally, the EBITDA has seen significant improvement. It grew from ₹2,706 crore in March 2020 to ₹11,623 crore in March 2024. This increase reflects the company’s ability to generate higher operating profits. However, the EBITDA margin has fluctuated over the years. It peaked at 88% in March 2023 but decreased to 79% in March 2024. This change may indicate some challenges in maintaining high-profit margins.

Lastly, earnings per share have shown consistent growth. They rose from ₹38.08 in March 2020 to ₹167.79 in March 2024. This increase suggests improved profitability for shareholders.

Overall, these financial indicators point to a strong market position. The company appears to be effectively managing its operations and capitalizing on market opportunities.

Revenue Segments

In the financial years from 2020 to 2024, the company’s trading segment saw consistent growth, rising from ₹2,832.41 crores in 2020 to ₹13,586.63 crores in 2024. The clearing segment also expanded, growing steadily from ₹366.83 crores in 2020 to ₹2,018.20 crores in 2024.

However, the “Others” category experienced fluctuations, with a peak of ₹1,392.85 crores in 2022 before settling at ₹968.46 crores in 2024. Overall, while trading and clearing operations showed strong upward trends, the other operations displayed variability, reflecting different market dynamics during these periods.

NSE IPO – Listed Key Competitors

Revenue:  

In 2024, NSE leads with ₹14,780 crore, significantly higher than BSE’s ₹1,592 crore. Both exchanges have seen notable revenue growth from 2020, with NSE improving by 321% from ₹3,508 crore and BSE showing a 162% rise from ₹606 crore.

Net Profit:  

NSE outperforms BSE in 2024 with a net profit of ₹8,306 crore compared to BSE’s ₹772 crore. From 2020 to 2024, BSE’s profit grew by 538%, while NSE saw a robust 340% increase from its ₹1,885 crore in 2020.

EBITDA:  

NSE’s 2024 EBITDA is ₹11,623 crore, vastly surpassing BSE’s ₹626 crore. Over this period, NSE’s EBITDA increased by 329%, from ₹2,706 crore in 2020, while BSE also made significant gains, with a 392% rise from ₹127 crore.

EBITDA Margin:  

In 2024, NSE maintained a strong EBITDA margin of 79%, whereas BSE achieved 39%. BSE’s margin improved by 18% from 21% in 2020, while NSE slightly reduced from 77% in 2020 but remained impressively high throughout the years.

Earnings per Share:  

NSE’s earnings per share reached ₹167.79 in 2024, overshadowing BSE’s ₹57.5. BSE’s EPS improved by 535% from ₹9.05 in 2020, while NSE’s EPS increased by 340%, rising from ₹38.08 during the same period.

Strengths of the Company

1. Market leader:  

NSE is the market leader in India and ranks among the top stock exchanges globally, offering unmatched market depth, liquidity, and investor confidence in its operations.

2. Growth potential:  

With a solid growth history, NSE is well-positioned to capitalize on India’s expanding economy, which promises significant opportunities for further financial market expansion.

3. Comprehensive offerings:  

NSE delivers a wide range of innovative products and services through a vertically integrated business model, ensuring efficient, cost-effective solutions tailored to diverse market needs.

4. Risk management:  

NSE’s robust risk management system ensures market stability and investor protection, supporting its long-standing reputation for reliability and trust in volatile market conditions.

5. Technology leadership:  

NSE leverages an advanced technology platform, consistently innovating to enhance trading efficiency, security, and performance, staying ahead in the ever-evolving financial market landscape.

6. Strong financial profile:  

NSE enjoys a strong, diverse financial profile, drawing revenues from both established and rapidly growing business lines, ensuring steady profitability and long-term sustainability.

Weakness of the Company

1. Trading volumes:  

NSE faces the risk of not being able to maintain or grow its trading volumes, which could result in losing market share and reduced revenue from transaction charges, negatively affecting overall business performance.

2. Regulatory compliance:  

Operating in a highly regulated industry, NSE must comply with strict legal and regulatory requirements. Any failure in compliance may lead to penalties, fines, or reputational damage, impacting operations.

3. Non-trading revenue:  

NSE may struggle to significantly grow revenues from its non-trading businesses, which are prone to various operational risks, potentially limiting its diversification efforts and long-term revenue streams.

4. Regulatory approvals:  

NSE’s business heavily relies on obtaining and renewing statutory approvals, licenses, and permissions. Delays or failures in securing these could disrupt operations and hinder business continuity.

Objects of the offer

Disclaimer: As per 2016 DRHP

According to the DRHP, the purpose of the offer is to facilitate the selling of up to 111,411,970 equity shares by the selling shareholders and to reap the benefits of listing the equity shares on the stock exchange. The equity shares’ listing will improve the company’s reputation and give current shareholders access to liquidity.

NSE anticipates that the proposed listing will give the equity shares in India access to a public market. The Offer will not generate any revenue for the Company.

Also read…

NSE IPO – Key IPO Information 

Promoters: No promoters

Joint Global Co-ordinator and Book Running Lead Manager: Citigroup Global Markets India Private Limited, JM Financial Institutional Securities Limited, Kotak Mahindra Capital Company Limited, Morgan Stanley India Company Private Limited.

Book Running Lead Manager: HDFC Bank Limited, ICICI Securities Limited, IDFC Bank Limited, IIFL Holdings Limited 

Registrar to the Offer: Link Intime India Private Limited 

Shareholding Pattern

Public shareholders form the largest group, holding 57.26% of the total shares. Next, Trading Members and Associates of Trading Members own 42.74% of the shares. Interestingly, there are no shares held by Promoter & Promoter Group, Employee Trusts, or Shares Underlying DRs.

The total number of shareholders is 15,596, with 14,030 being public shareholders. Additionally, the total number of shares is 49,50,00,000. Finally, all shares appear to be fully paid-up equity shares, as there are no partly paid equity shares or shares underlying Depository Receipts listed.

Some of the prominent Trading Members and Associates of Trading Members are the State Bank of India and Life Insurance Corporation holding close to 13% of the share cumulatively.

Latest News Update

For its IPO, NSE submitted a draft prospectus to SEBI in 2016. But about that time, rumors began to circulate that MD Ramkrishna and other officials were complicit in illicit activities. In the wake of SEBI’s probe, NSE withdrew its IPO documentation in 2019. Even though NSE applied for approval once more in 2022, SEBI recommended against it.

NSE told shareholders at its most recent AGM that it intended to apply to SEBI for an NOC for its initial public offering. After MCX and BSE, NSE would be the third listed exchange in India once it goes public. The market valuation of NSE might be between ₹2.1 lakh crore and ₹3.1 lakh crore based on the valuations of unlisted shares. Exchanges are unable to list on their platforms, hence NSE will list on BSE instead.

Conclusion

NSE’s potential IPO presents a unique opportunity for investors. The exchange boasts strong financials and market leadership. However, regulatory challenges have delayed its listing plans. Despite these setbacks, NSE remains committed to going public.

Its robust infrastructure and diverse offerings position it well for future growth. Moreover, the company’s technological advancements keep it competitive in the global market. As India’s economy expands, NSE stands to benefit from increased market activity. Nonetheless, potential investors should carefully consider the risks and regulatory environment.

Question for the readers: How might NSE’s listing impact India’s financial markets? What challenges could NSE face in maintaining its market dominance after going public? Comment below.

Written By Dipangshu Kundu

By utilizing the stock screener, stock heatmap, portfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks, also get updated with stock market news, and make well-informed investments.

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National Stock Exchange of India Limited is set to launch an IPO through an offer for sale of 11,14,11,970 equity shares, each with a face value of ₹1. The price per equity share will be determined closer to the offer date. The IPO will constitute 22.5% of the company’s post-offer paid-up equity share capital.  The
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