Some of the top shareholders of the National Stock Exchange (NSE) have reduced the number of shares they plan to sell in the exchange’s upcoming initial public offering (IPO), expecting the stock to fetch a better valuation after listing, reported news agency Reuters.
The to be priced in the range of Rs 1,700–1,785 per share, with the issue expected to be an offer-for-sale (OFS) by existing shareholders. No fresh shares will be issued by the exchange.
At the upper end of the price band, the would be valued at around Rs 22,600 crore.
The overall size of the NSE IPO has now been reduced to 5.2% of the exchange’s total equity capital from 6% earlier, Reuters reported, citing three sources.
Shareholders will now sell around 12.6 crore shares, compared with 14.9 crore shares planned earlier.
The shareholders that have reduced their planned stake sales include National Insurance Company of India, General Insurance Company, Stock Holding Corporation, MS Strategic (Mauritius), a Morgan Stanley fund, and Singapore-based Mahogany Ltd, according to the sources cited by Reuters.
Bank of Baroda and Indian Bank have also reduced their planned share sales through notifications to the stock exchanges.
The sources said the lower-than-expected price band was the main reason behind the reduction in the number of shares being offered.
“These shareholders believe they will get better valuation in secondary market post listing,” one source told Reuters.
Unlisted shares of NSE have recently been trading at around Rs 2,000-2,100 apiece in the informal market, according to recent deals cited by Reuters.
That is above the likely .
The difference has prompted some existing shareholders to hold on to more of their shares rather than sell them through the IPO, expecting the stock to appreciate after listing.
Tighter market regulations have weighed on the expected valuation of NSE, according to the sources cited by Reuters.
More than 60% of NSE’s revenue comes from transaction charges on options trading, making trading volumes in the derivatives market particularly important for the exchange.
The Securities and Exchange Board of India (Sebi) introduced tighter restrictions on retail participation in the options market last year.
Higher taxes on derivatives trading, tighter restrictions on bank funding and India’s newly introduced closing auction session have also affected trading activity, according to the sources.
NSE’s options turnover fell more than 12% year-on-year in August.
One source said the decline in options volumes was putting pressure on the exchange’s valuation, while the closing auction session had added to the pressure.
At the upper end of the expected price band, the NSE IPO would be worth around Rs 22,600 crore.
That would put it behind the expected IPO of Mukesh Ambani-led Reliance Jio, which is expected to raise around $3.8 billion, and Hyundai Motor India’s $3.3 billion IPO in 2024.
Since the NSE issue is an OFS, the proceeds will go to existing shareholders selling their stakes rather than to the exchange for raising fresh capital.
The NSE and the shareholders named in the Reuters report did not immediately respond to requests for comment.