NSE to launch US$2.3b IPO as derivatives slowdown hits valuation
India's National Stock Exchange will launch its US$2.3 billion public offering on Sep 16, pricing shares 15-20 per cent below earlier roadshow expectations amid declining derivative trading volumes. The offer values the bourse at US$46 billion, with subscriptions opening Thursday and closing Sep 21.
MUMBAI: The National Stock Exchange of India (NSE) will launch its US$2.3 billion public offering on Wednesday (Sep 16) amid investor caution over capital market firms because of declining derivative trading volumes, which have already impacted the offer price.
The IPO for India's biggest bourse - set to be the country's third-largest ever - will begin with anchor investor bidding from institutional funds and is an offer-for-sale from existing private shareholders with no new capital being raised. Open subscriptions will begin on Thursday and close on Sep 21.
Investors are being asked to value the world's largest derivatives bourse at a time when its biggest growth engine is slowing down, raising questions about how much of the exchange's extraordinary derivatives-driven growth can continue. The NSE shares will be offered in a price band of 1,700 to 1,785 Indian rupees (US$17.72 to US$18.60), valuing the company at US$46 billion, public filings showed on Sep 11.
However, that is 15 per cent to 20 per cent lower than the valuation sought in pre-deal roadshows, according to two sources with direct knowledge of the matter who spoke on condition of anonymity, and is 40 per cent lower than what private markets sales of NSE shares in 2024 indicated. Investors are reluctant to pay higher prices because of regulatory changes that have slowed growth in options trading and an overhaul of trading rules to align Indian markets with global standards.
The NSE gains 80 per cent of its revenue from trading, of which 60 per cent is options trading, and those volumes have dropped 27 per cent from their peak in 2024. "NSE's high exposure to derivatives is a double-edged sword. Its dominant liquidity pool and scale are clear competitive strengths, but they also make earnings more sensitive to regulatory changes and shifts in trading activity," said Gary Tan, portfolio manager at Allspring Global Investments.
Still, even at this valuation, NSE would be among the top 10 largest listed exchanges globally. At the lowered offer price, several global institutional investors, including sovereign wealth funds and long-only asset managers, have provided commitments, the two sources with knowledge of the matter said. That includes Abu Dhabi Investment Authority, Singapore's GIC, Fidelity, Carmignac, Norges Bank Investment Management and Life Insurance Corporation of India (LIC), they said.
In a press conference on Saturday, Sriram Krishnan, chief business development officer at NSE, pointed to a disconnect between the offer price and current shareholder expectations. "Some of the shareholders feel that the NSE's valuation is much more than the valuation at which we are proposing to do the IPO. To them NSE is more valuable. There is some money on the table, possibly."
