National Stock Exchange of India Ltd. (NSE), the world's largest derivatives exchange by volume, has reduced the size of its initial public offering (IPO). The company cut the number of shares offered to 126.44 million from the initially planned 148.9 million, indicating growing investor concern over the valuation NSE was seeking. This reduction represents more than a 15% decrease in the number of shares on offer, with about 5.1% of the company's equity capital now for sale, down from approximately 6% previously planned.
This downsizing comes as investors have expressed concerns regarding NSE's valuation, especially in light of slowing growth and increased regulatory scrutiny of stock market activity. Options trading, a significant growth driver for the exchange, has faced pressure as Indian authorities aim to curb speculative derivatives activity. Analysts like John Ninia of Mobius Investments believe NSE appears expensive compared to global peers, particularly given the risks associated with tighter trading rules and their potential impact on derivatives volumes.
The company is now likely to price the IPO between 1,700 rupees and 1,785 rupees per share, which is below an earlier marketed range of 2,000 rupees to 2,100 rupees. At the upper end of the revised price range, selling shareholders could raise as much as 226 billion rupees (approximately $2.4 billion). This figure is less than the $278.7 billion raised by Hyundai Motor Co.'s Indian unit in 2024, which was India's largest-ever IPO. The offering will consist entirely of existing shares from current investors, including State Bank of India, General Insurance Corp. of India Ltd., and Canada Pension Plan Investment Board, some of whom have reduced their selling portions.
The IPO, which is expected to take investor orders from September 17 to September 21, with a potential listing on September 24, has been a decade in the making, previously delayed by regulatory issues and a co-location scandal. Despite being a significant offering in India's financial market, the investor excitement observed early last year has diminished. The backdrop for the IPO is also less favorable, with investors currently drawn to AI stocks, a sector India lacks, alongside rising oil prices and delayed trade deals impacting the economy. Concerns about the ability of NSE to maintain growth after regulators curtailed its booming derivatives business were frequently raised during investor meetings in global financial hubs.
The original planned IPO size aimed to raise around 300 billion rupees by selling a 6% stake. The current reduced size of approximately 5.5% stake is now expected to raise about 230 billion rupees. Morgan Stanley's investment vehicle, MS Strategic (Mauritius), a significant selling shareholder, is reported to have cut its stake sale by 5 million shares from an original 16 million. Other investors, including Bank of Baroda, Indian Bank, General Insurance Corporation of India Ltd. (GIC Re), Stock Holding Corporation of India Ltd., and National Insurance Co. Ltd., have also scaled back their planned offerings.
