Top investors in India's NSE IPO trim stake sales, sources say
Some top investors in India’s National Stock Exchange (NSE) are reducing the number of shares they will be selling in the bourse’s upcoming IPO as they expect the shares to rise after listing compared to the low offer price, three sources said. NSE’s IPO will be an offer-for-sale by existing shareholders with no fresh capital being raised. Shares will likely be priced in a band of 1,700-1,785…
Top investors in India's National Stock Exchange (NSE) are cutting down the share sales in the upcoming IPO, sources have revealed. This reduction is anticipated as the shares are expected to appreciate after the listing, contrary to the low offer price, according to three sources. NSE's IPO will be an offer-for-sale by existing shareholders, with no fresh capital being raised.
Share prices are projected to range between 1,700-1,785 rupees per share, which equates to a valuation of 226 billion Indian rupees ($2.37 billion) at the upper end, Reuters reported on Wednesday. Notable shareholders who have reduced their stake sales include National Insurance Co. of India, General Insurance Company, Stock Holding Corporation, MS Strategic (Mauritius) - a Morgan Stanley fund - and Mahogany Ltd from Singapore.
NSE is expected to price the IPO at the lower end of this price band, as sources did not wish to be identified, citing non-authorization to speak to the media. Additionally, Indian banks Bank of Baroda and Indian Bank have also lowered their planned share sales, as per notifications to the local stock exchange. Consequently, the overall issue size is now set to be 5.2% of NSE's total equity capital, down from 6% earlier.
This reduction in share sales is primarily attributed to the lower-than-expected price band, as one source explained. Shareholders believe they will achieve a better valuation in the secondary market post-listing. In an environment where unlisted shares of NSE trade, prices have fluctuated between 2,000 rupees to 2,100 rupees in recent deals.
Tighter regulations in the market have impacted the likely pricing of the issue, according to the sources. The Securities and Exchange Board of India (SEBI) had recently introduced stricter regulations, including curbs on retail participation in options trading, which have dampened the expected valuation of the IPO. Furthermore, tighter bank funding curbs, higher taxes on derivatives trading, and the recently introduced closing auction session have also contributed to reduced trading volumes.
The NSE generates over 60% of its revenue from options transaction charges, and a decline in options trading volume has negatively affected the valuation. In August, NSE options turnover fell by more than 12% year-on-year.
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