Institutions Rush To Sell NSE Shares As Listing Uncertainty Prevails

Shares of India’s largest bourse are flooding the private market as three large investors look to sell a combined 2 percent stake amid lack of clarity over its much-delayed initial public offer.

Earlier this month, State Bank of India said it was looking to sell 50 lakh shares, or 1 percent stake, in the National Stock Exchange as part of its fundraising exercise, according to a tender document on its website. The SBI group is the NSE’s largest shareholder after Life Insurance Corporation of India, together holding close to 20 percent stake as of December. The last date of auction was Jan. 15 and the minimum bid size was 10 lakh shares.

The public sector lender sold the shares at Rs 1,001 each, informed a person who bought a chunk of the offering on the condition of anonymity.

On Jan. 27 and 28, United India Insurance Company Ltd. and Union Bank of India offered 30 lakh and 20 lakh shares, respectively, two bankers aware of the matter told BloombergQuint on the condition of anonymity as details are not public.

The combined of the 2 percent stake the three institutions plan to sell is about Rs 800 crore at the current valuations in the private market.

Institutions have been selling stake in private market since 2016 as the bourse’s Rs 10,000-crore IPO plan ran into regulatory roadblock over allegations that the exchange offered certain brokers unfair access via a co-location arrangement. The Securities and Exchange Board of India in April 2019 ordered Rs 1,000-crore disgorgement and barred the exchange for six months. After the ban expired in October last year, NSE again approached SEBI seeking approval. While it hopes to launch the offer in September, it’s yet to hear from the regulator.

State-run public institutions would need large buyers because of bigger lot sizes and a near-30 percent recent surge in the stock price in the over-the-counter market.

The price jumped after billionaire Radhakishan Damani acquired shares of NSE, people aware of the matter said. The promoter of Avenue Supermarts Ltd.—the operator of D-Mart supermarket chain—bought the shares at Rs 825 apiece, they said on the condition of anonymity, and the stock price in the private market has since risen to Rs 1,050 apiece.

BloombergQuint couldn’t independently confirm the trade and an emailed query to Damani’s office remained unanswered.

Since institutions plan to sell at least 10 lakh shares in a single bid, at the current price a single potential investor would need as much as Rs 100 crore to buy the securities being auctioned even though prices softened a bit after the three state-run companies put part of their holdings on the block.

So, wealth managers and alternate investment funds are carrying out book-building process by pitching NSE shares to investors and creating a pool a bid price of Rs 935-1,015 apiece, the people quoted earlier. At this price band, the NSE will be d between Rs 46,000 crore and Rs 50,000 crore, nearly 20 times that of BSE Ltd. The wealth managers, the people quoted above said, are seeking 25 percent margin money.