MUMBAI – The National Stock Exchange of India’s planned initial public offering (IPO) is set to unlock the value of long-term investments for a group of backers including Morgan Stanley, Temasek and State Bank of India (SBI).
Among the biggest beneficiaries is SBI, which is selling 24.75 million shares. It stands to gain about 50 billion rupees (S$682 million), based on the gray market price of 2,055 rupees a share on unlisted stock trading platform sharescart.com and its average acquisition cost of 80 paise apiece. That’s an almost 2,568 fold gain for the stake SBI acquired between 1993 and 1999 – and doesn’t include the increase in the value of its remaining holding.
Other founding shareholders, including Stock Holding Corporation of India, General Insurance Corp. of India, New India Assurance Co., National Insurance Co. and Oriental Insurance Co. are also in line for sizable windfalls – as much as 6,422 times returns for the last three. Stock Holding, which is selling about 11 million shares, is on track for 4,467 fold returns based on the gray market price.
Many investors have been seeking an exit since NSE, the operator of the world’s busiest derivatives market, first attempted to go public in 2016 with a plan that was derailed by regulatory and legal hurdles. The pressure has built as NSE’s value soared over the past decade with India’s capital markets expanding and retail participation surging. The exchange now dominates domestic equity derivatives trading and has emerged as one of the world’s largest exchanges by contracts traded.
Among international investors, Singapore investment company Temasek plans to sell about 11.25 million shares. It acquired NYSE Euronext’s 5 per cent stake in NSE in 2010 for more than 7.8 billion rupees (now about S$106 million) and the gray market implies an about 33-fold increase in value since then, making it one of the most successful financial-sector bets in India. Morgan Stanley’s return is on track for about 31 times. In comparison, the benchmark Nifty 50 stock index has risen 4.61 times since 2010.
For long-time shareholders, the IPO is more than just a liquidity event. It represents the end of years of uncertainty and provides a rare opportunity to monetise investments that have generated extraordinary paper returns while remaining largely illiquid.
Even shareholders not participating in the offering stand to make gains.
Life Insurance Corp. of India (LIC) is the biggest shareholder, with a stake of almost 11 per cent. While LIC won’t be selling any shares in the offering, the company that was among first shareholders to subscribe NSE’s shares in 1992 is set for a sharp revaluation of its ownership.
LIC’s shares advanced more than 4 per cent on June 18. New India Assurance jumped 14 per cent while General Insurance added more than 2 per cent. BLOOMBERG
