In India's Best Year for IPOs, the Top Exchange Can't Go Public
NSE planned to list in 2017 but regulatory investigation forced it to shelve the effort.
(Bloomberg) -- The National Stock Exchange of India Ltd. hosted many of India’s initial public offerings in what’s been the best-ever year for new listings. Unfortunately for its shareholders, the NSE itself missed out on the party.
The operator of the country’s dominant bourse shelved plans to list this year because of an investigation into whether the exchange gave high-frequency traders unfair access to its systems. Former Chief Executive Officer Chitra Ramkrishna quit weeks before it filed an IPO draft prospectus, while millions of dollars of revenue has been temporarily confiscated by the regulator.
India more than 160 debuts that raised $12 billion in 2017, according to data compiled by Bloomberg, and it was also the first year in which the country saw four billion-dollar IPOs. Despite accounting for more than 80 percent of all stock market trading in the country, NSE couldn’t list its shares and questions remain over when it will be able to come to market.
The NSE “missed the bus,” Chakri Lokapriya, managing director at TCG Asset Management, which has $3 billion of assets, said in an interview. “It’s been a great year for new issues.”
A record-setting rally in Indian equities helped fuel the unprecedented IPO haul. First-time share sales raised 766 billion rupees, more than double the amount raised in 2016.
The largest was from General Insurance Corp., which raised about 114 billion rupees in October. If NSE had listed, the sale would have been the year’s second-biggest. The bourse, which filed its IPO papers in December 2016, was looking to raise 100 billion rupees, which could have valued the operator at as much as 400 billion rupees, people with knowledge of the matter said at the time of the filing.
Trying Again
The NSE hopes to revisit its IPO next year, provided the regulatory investigation is finished, Chairman Ashok Chawla said in August. “We have already mentioned that the IPO process is incumbent on the resolution of the process with Sebi, and we will duly inform the authority as per the procedures,” a spokesman for the bourse operator said by email Thursday.
An auditor’s report outlined in NSE’s sale document said that the exchange’s colocation systems -- which place brokers’ servers next to those of the bourse -- gave preferential access to some firms. In January, the Securities and Exchange Board of India said it would focus on fixing any problems found in its probe. In June, the regulator said it would appoint forensic auditors to investigate possible connivance by exchange staff and brokers, and whether any unfair gains were made. Last month, tax authorities searched the premises of some present and former NSE officials as part of the same probe.
The exchange’s colocation revenue, totaling 7.4 billion rupees at the end of September, has been taken from the company and deposited in a separate account after an order from the regulator.
While India’s market is expected to stay hot for a while, Satish Betadpur, director of research at the India unit of William O’Neil & Co., said NSE may not be able to list in time to take full advantage.
“The IPO market won’t cool next year -- at least for the first six months -- but it doesn’t seem like the NSE’s issues would be sorted by then,” Betadpur said by phone.
--With assistance from Ameya Karve Santanu Chakraborty Timothy Sifert and Manish Modi
To contact the reporters on this story: George Smith Alexander in Mumbai at galexander11@bloomberg.net, Ravil Shirodkar in Mumbai at rshirodkar@bloomberg.net.
To contact the editors responsible for this story: Sam Mamudi at smamudi@bloomberg.net, Marcus Wright
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