Key Takeaways
- Top investors in India’s National Stock Exchange (NSE) IPO are trimming their share sales.
- The expected rise in share prices post-listing is driving this decision.
- The overall issue size is being reduced to 5.2% of NSE’s total equity capital.
Some of India’s top investors are scaling back their planned share sales in the upcoming National Stock Exchange (NSE) Initial Public Offering (IPO), according to sources. These investors, including National Insurance Co. of India, General Insurance Company, Stock Holding Corporation, and MS Strategic (Mauritius), are expected to sell fewer shares than initially planned.
The reduction in share sales is primarily due to the anticipated rise in share prices post-listing, which is higher than the initial offer price. At the upper end of the price band, the IPO is expected to be worth 226 billion Indian rupees ($2.37 billion), according to Reuters.
The overall issue size is being reduced to 5.2% of NSE’s total equity capital from the previously announced 6%. This means that shareholders will now sell 126 million shares instead of the earlier 149 million.
The decision to reduce share sales is also influenced by the lower-than-expected price band. One source noted, 'These shareholders believe they will get better valuation in the secondary market post-listing.'
The informal market where unlisted shares of NSE trade currently sees prices ranging from 2,000 to 2,100 Indian rupees, according to recent deals.
Market conditions have also played a significant role. Tighter market rules, including curbs on retail participation in the options trading market, have affected the likely pricing of the issue. Other factors include tighter bank funding curbs, higher taxes on derivatives trading, and the introduction of a closing auction session in India.
A significant portion of NSE’s revenue, over 60%, comes from options transaction charges. However, NSE options turnover fell more than 12% year-on-year in August, further impacting the valuation.
Indian lenders Bank of Baroda and Indian Bank have also reduced their planned share sales, as notified to the local stock exchange.
The NSE is expected to price the IPO in a band of 1,700-1,785 Indian rupees per share, with the upper end of the price band making the IPO worth 226 billion Indian rupees.
