The National Stock Exchange of India (NSE) launched its $2.3 billion initial public offering (IPO) on September 17, with anchor investor bidding commencing and open subscriptions starting September 18 and closing on September 21. This IPO is an offer-for-sale from existing private shareholders, meaning no new capital is being raised for the exchange itself. The offering is expected to be India's third-largest ever.
Investor caution regarding capital market firms, particularly due to declining derivative trading volumes, has impacted the offer price. Sources indicate the price band is 15%-20% below roadshow expectations. The IPO valuation of approximately $47 billion is a significant reduction from the $55 billion initially sought, a cut of about 15%. This revised valuation still makes NSE shares more expensive than the top 10 global exchanges. The upper end of the price band, around ₹1,785 per share, is also about 6% below NSE's latest unlisted market price of approximately ₹1,900, causing potential losses for investors who bought unlisted shares previously. Some reports suggest the grey market expects an 11-12% premium to the offer price.
NSE's dominant derivatives business, which accounts for over 60% of operating revenue, faces a weaker growth outlook and fresh regulatory risks. Options volumes have fallen 27% from their 2024 peak after rule changes. For example, its share of the equity options premium market dropped to 68.5% in Q1FY27 from nearly 97% in FY24. Regulatory measures in FY26 led to a 3% contraction in operating revenue and an 8% fall in premium average daily turnover. However, Q1FY27 showed a recovery with a 13% year-on-year growth in operating revenue and 7% profit growth, driven by a 16% rise in equity options premium average daily turnover.
Despite the recovery, new regulations like SEBI's Closing Auction Session (CAS) have further impacted volumes. NSE's total monthly derivatives turnover fell to ₹33.5 trillion in August, the first month after CAS, from ₹42.6 trillion in July. Analysts predict a sequential fall of 7-10% in NSE's transaction revenue for the September quarter. While NSE's valuation at ₹1,785 is around 43 times its FY26 earnings of ₹41.62 per share, making it cheaper than rival BSE on an earnings multiple basis, analysts like Kush Gupta of SKG Investments and Advisory suggest the valuation gap may not present a significant upside, as BSE had stronger earnings momentum in FY26. NSE does have more stable revenue streams from colocation, connectivity, data feeds, and index licensing services, which generated ₹1,956 crore in FY26 and grew annually at 18% since FY24.
Comparatively, the IPO values NSE at a roughly 30% discount to BSE Ltd. on FY27 earnings estimates, despite NSE being nearly three times its size. In Q1 FY27, BSE's reported profit grew 62% compared to NSE's 7%, highlighting BSE's faster growth in its options business and its mutual-fund platform. While the valuation is considered justified and not overly expensive by some analysts like Paul, they emphasize the importance of sustainable growth over market leadership alone.
