NSE files UDRHP with Sebi; IPO size likely to be cut to ₹23,000 cr as shareholders trim OFS: Sources

In a fresh development around the much-awaited initial public offering (IPO) of National Stock Exchange (NSE), the exchange on Wednesday filed an updated draft red herring prospectus (UDRHP) with Sebi.

The proposed IPO size is expected to be lower than that proposed in its draft red herring prospectus (DRHP) filed in June, as public-sector insurance companies and Morgan Stanley have scaled back the number of shares they intend to sell through the offer for sale (OFS), according to industry sources.

The country’s largest exchange is now expected to raise around ₹23,000 crore, down from nearly ₹30,000 crore estimated in NSE’s original DRHP filed in June. The issue is likely to be launched by end of the next week, with with the exchange targeting a listing around September 25.

The reduction in the offer size comes despite strong investor interest in the much-awaited listing, with NSE shares continuing to command a premium in the grey market. The IPO’s grey market premium (GMP) stood at around ₹255 as of September 9, up from ₹245 on September 8, but below ₹285 on September 7. The GMP was ₹200 on September 4.

There is speculation in the market that the exchange is likely to trim the stake offered in the IPO to around 5.5%, from the earlier plan of nearly 6%, as some shareholders are understood to have decided against selling at the proposed valuation.

The IPO, however, will remain a pure OFS, meaning NSE itself will not receive any proceeds from the issue.

SBI, Morgan Stanley among key selling shareholders

According to the DRHP filed with Sebi in June, NSE had proposed an OFS of 14.89 crore shares, equivalent to nearly 6% of the exchange’s total equity.

Several major institutional shareholders are expected to participate in the OFS. Life Insurance Corporation of India (LIC), one of NSE’s largest shareholders, however, has decided against selling its stake in the IPO.

State Bank of India (SBI) and its group entities are likely to be the largest selling shareholders in the OFS, with up to 2.48 crore NSE shares on offer. Following a recent revision to the shareholding structure, SBI Capital Markets (SBICAPS), a wholly owned subsidiary of SBI, has been separately included as a selling shareholder. Under the revised arrangement, SBI will offer up to 1.59 crore NSE shares, while SBICAPS will sell up to 87.80 lakh shares.

Mauritius-based MS Strategic, an entity linked to Morgan Stanley, is expected to sell around 1.6 crore shares, while Canada Pension Plan Investment Board (CPPIB) could offload nearly 1.19 crore shares.

Aranda Investments (Mauritius) is likely to sell approximately 1.12 crore shares. Bank of Baroda and Stock Holding Corporation of India are each expected to offer around 1.1 crore shares.

Public-sector insurance companies are also set to participate in the OFS. General Insurance Corporation of India (GIC Re) and New India Assurance are each expected to sell more than 1 crore shares, while National Insurance Company and United India Insurance Company could offer around 60 lakh shares each.

As per the allocation structure proposed in the DRHP, qualified institutional buyers (QIBs) will be allocated 50% of the net offer, while non-institutional investors (NIIs) will receive 15%. The remaining 35% will be reserved for retail investors.