Landmark NSE IPO threatens to hollow out Dalal Street’s shadow market
With the National Stock Exchange preparing for its listing, India's primary market is poised for significant enhancement. The landmark IPO is anticipated to trigger a marked decrease in the flourishing unlisted shares market, compelling platforms involved in these trades to identify alternative investment prospects.
The National Stock Exchange of India Ltd.'s landmark IPO is poised to significantly impact India's shadow market, which thrives on unlisted shares. Accounting for about half of the trading volume in this market, NSE's IPO could trigger a sharp decline in activity, forcing platforms that facilitate these transactions to seek new sources of interest.
As India recorded record-breaking IPO proceeds in the past two years, the unlisted market has emerged as an attractive venue for high-net-worth individuals and funds to invest in companies in the listing pipeline. NSE's prominence in this market stems from its scale, profitability, dominant position, and detailed disclosures that mirror those of listed companies.
The presence of BSE Ltd. provided investors with a valuation benchmark, while the delayed listing of NSE prolonged the trading window, turning this niche corner of India's financial system into a mainstream investment avenue. With 231,378 shareholders ahead of its IPO, NSE surpassed several listed companies in this regard. However, the exchange's IPO may pose challenges for platforms that have grown around it, as there are currently no other offerings that combine NSE's size, familiarity, and liquidity.
Investors in unlisted shares have not always experienced profitability, with some high-profile names like HDB Financial Services Ltd. and Tata Capital Ltd. incurring losses. Nevertheless, there have also been instances of substantial returns in this market, underscoring the importance of timing and valuations.
Written by urgent.news from The Economic Times - Top News's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
