NSE Awaits SEBI Approval For Reconstitution Of Board, IPO Process
Employees walk through the atrium of the National Stock Exchange of India Ltd. (NSE) building in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

NSE Awaits SEBI Approval For Reconstitution Of Board, IPO Process

The board of directors of India’s largest stock exchange has had no chairman for 10 months, is running under capacity and the terms of three of its directors have ended. The National Stock Exchange, a quasi-regulator itself, is currently awaiting the market regulator’s nod to reconstitute its board to full strength, according to two people aware of the development. They declined to be named given the sensitivity of the matter.

Regulation allows for up to 15 directors on the board of a stock exchange. For atleast three years prior to 2018, NSE had a 10-member board. Over the last one year that number has fallen to seven as three directors resigned. Former State Bank of India Managing Director Anshula Kant stepped down in October 2018, veteran bureaucrat Ashok Chawla, chairman of the NSE board, resigned in January 2019 and Dharmishta Raval, former executive director SEBI, stepped down in September 2019.

The NSE’s board currently comprises Managing Director Vikram Limaye, three shareholder directors and three public interest directors.

The three shareholder directors are

  • Abhay Havaldar of General Atlantic LLC
  • Prakash Parthasarathy, former chief investment officer of Premji Invest
  • Sunita Sharma, former managing director of LIC Housing Finance Ltd

The terms of the three public interest directors, appointed by the Securities and Exchange Board of India, came to an end in July but they have been allowed to continue till their replacements are approved or their term is extended, the people cited above said. SEBI regulations allow for an existing public interest director to continue until the regulator approves a replacement.

The public interest directors on the bourse’s board are

  • Dinesh Kanabar, chief executive officer, Dhruva Advisors LLP
  • Naved Masood, former Company Affairs Secretary
  • TV Mohandas Pai, chairman of Manipal Global Education Services Pvt. Ltd.
NSE Awaits SEBI Approval For Reconstitution Of Board, IPO Process

The Securities and Exchange Board of India had appointed the public interest directors in July 2016 to strengthen the board of the exchange amid the co-location probe triggered by a whistleblower letter.

SEBI’s Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 allow public interest directors across market infrastructure institutions to serve for a maximum of three terms of three years each, or up to 75 years of age, whichever is earlier, with not more than two terms in one market infrastructure institution.

The exchange has already written to the market regulator regarding extension of existing public interest directors or their replacement, said one of the persons cited earlier. As per regulations, the exchange’s board has submitted names of three-four probable candidates for each of the public interest director positions. SEBI can either select from those or nominate a person outside the recommendations of the exchange board. But SEBI is yet to decide, the person said.

NSE has also submitted names to replace the other directors.

The regulations don’t require shareholder approval for the appointment of directors to the exchange’s board. Once approved by SEBI, the names must be presented to shareholders. Taking the shareholders’ nod is a formality, said one of the persons cited earlier.

While the NSE declined to comment, an email sent to SEBI remained unanswered.


Not only does the board situation put NSE in a sticky governance position, its also has ramifications for the exchange’s already much-delayed initial public offering.

NSE originally intended to do an IPO in 2017. That was scuppered by allegations that the exchange offered certain brokers unfair access via a co-location arrangement. Eventually SEBI imposed a Rs 1,000-crore disgorgement and a six-month ban on accessing capital markets and introducing new products as part of the co-location order. The NSE has challenged the disgorgement order with the Securities Appellate Tribunal.

After its six-month ban on accessing capital markets ended in October, the exchange board has written to the market regulator that it’s beginning work on the IPO, said one of the persons cited earlier, adding the board is awaiting clarity from SEBI.

Bankers have begun work on the IPO and will soon reach out to shareholders of the exchange to pool their shares into an escrow account, a process undertaken before filing of prospectus for Offer for Sale.

Work on the draft red herring prospectus has also begun and the DRHP may be refiled in the next four to eight weeks, once SEBI clarity comes through, the people said.

The current board has initiated the process but it could be taken forward by the new board, one of the persons pointed out.

But with a board that’s missing a chairman and not yet fully manned and a regulator that’s yet to move on new director appointments, the IPO process might face yet another hurdle.

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