NSE IPO: Why investors should contain excitement amid delays?

While SEBI’s recent comments have rekindled hopes around the long-delayed National Stock Exchange (NSE) IPO, market experts caution that optimism must be tempered with realism. Several regulatory and legal hurdles still stand in the way of what could be one of India’s most consequential public offerings.

The NSE IPO has long been a topic of anticipation and speculation. First proposed in 2016 with an aim to sell a 22 percent stake and raise ₹10,000 crore, the offering has yet to materialize due to the absence of a mandatory No Objection Certificate (NOC) from the Securities and Exchange Board of India (SEBI). This certificate is crucial for the exchange to formally proceed with its draft red herring prospectus (DRHP) and begin the listing process.

Recent developments, however, have reignited interest in the IPO. SEBI Chair Tuhin Kanta Pandey’s comment that the “NSE IPO application is not something that cannot be sorted” has been interpreted by many as a soft green light for the long-pending listing. 

Unlisted Share Rally Fuels Overexuberance

In response, unlisted shares of NSE have surged over 60 percent in recent weeks, trading between ₹2,380 and ₹2,419 apiece, according to unlisted stock platforms.

The price spike in NSE’s unlisted shares reflects high investor expectations that the IPO is imminent. But market veterans urge caution.

Trivesh D, COO of Tradejini, said: “NSE’s listing is long overdue, especially considering it first approached SEBI back in 2016. Given its dominant global position in derivatives and strong business fundamentals, going public is a natural step. A listing would not only enhance transparency and deepen governance but also set a benchmark for capital markets infrastructure in India. The recent rally in unlisted NSE shares shows strong market sentiment, although regulatory caution must still be factored in. Investors should not expect immediate action.”

The excitement is also being fed by reports that NSE is exploring a settlement with SEBI—potentially worth ₹1,000 crore—to clear legacy regulatory issues. While that may fast-track the approval process, there’s no formal confirmation of acceptance from the regulator yet.

Regulatory and Legal Hurdles Persist

During the May 7 earnings call, NSE MD and CEO Ashishkumar Chauhan addressed the IPO in detail. He confirmed that NSE had responded to SEBI’s February 28 communication and formally requested the long-pending NOC. However, Chauhan acknowledged that major regulatory gaps remain.

For instance, SEBI has yet to issue clear directives around the disinvestment of clearing corporations—an area critical to exchanges like NSE. Additionally, unresolved issues around key managerial personnel (KMP) salaries could complicate the IPO timeline.

“While we’ve responded to SEBI’s queries, the process doesn’t end there,” Chauhan said. “We await regulatory guidance on clearing corporation disinvestment and compensation norms. These are important aspects that could influence not just the IPO’s timing but its structure as well.”

Legal issues are another area of concern. NSE remains involved in cases currently pending before the Supreme Court, and while Chauhan said all such matters would be disclosed in the DRHP, the potential for further delay cannot be ruled out.

Co-location Case Still Haunts NSE

SEBI’s September 2024 order offered partial relief to NSE by clearing former executives, including ex-CEOs Chitra Ramkrishna and Ravi Narain, of any wrongdoing in the infamous 2019 co-location case. However, the order did highlight governance lapses and inadequate oversight, particularly around server access.

While these findings may not pose a direct legal obstacle anymore, they do underscore the need for stricter regulatory scrutiny. SEBI has signaled greater openness to listed exchanges in recent years, but only if adequate safeguards and conflict-of-interest frameworks are in place. This could mean additional compliance requirements for NSE before the IPO gets the green light.

Tempered Optimism Is Key

The NSE IPO remains one of the most anticipated events in India’s capital market history, and recent developments have certainly moved the process closer to realization. However, regulatory bottlenecks and legal challenges continue to stand in the way of immediate progress.

Investors must tread carefully. While the surge in unlisted shares reflects genuine enthusiasm, it may not align with the pace of regulatory approvals or legal resolutions. Until SEBI issues the much-awaited NOC and provides clarity on structural issues like clearing corporation disinvestment, the road to listing remains uncertain.

For now, the best approach is to stay informed, watch for official updates, and avoid overcommitting based on speculation. In the words of market watchers: the NSE IPO may be coming—but not as soon as the rally suggests.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.