The National Stock Exchange of India's (NSE) share listing plan will not be approved by the market watchdog until pending legal and regulatory cases involving the nation's biggest bourse are resolved, two sources familiar with the matter said.
The Securities and Exchange Board of India (SEBI) has formed an internal view that due to the pending cases it won't approve NSE's application made last year for an IPO, the sources said.
“Till the legal and regulatory issues are cleared there is no chance that SEBI will approve NSE's IPO plans,” said one of the sources, who is a senior regulatory official.
A delayed NSE IPO will test the patience of its core shareholders - banks, insurance companies and foreign funds - who have been waiting for an exit opportunity in rising markets.
A listing would allow NSE to have a broader shareholder base like its biggest competitor, BSE Ltd.
SEBI and NSE did not reply to emailed requests for comment. The sources declined to be named as the matter is confidential and the regulator does not comment on specific entities.
The regulator's reluctance to approve NSE's IPO has not been previously reported. Sources have said NSE in 2016 had targetted offering 10% of its total shares in a listing, and given the current 'grey' market valuation of 2 trillion rupees ($24.35 billion), the IPO size could be around $2.5 billion.
NSE is also the world's largest derivatives exchange in terms of contracts traded, and its core shareholders include Life Insurance Corporation of India, State Bank of India, Canada Pension Plan Investment Board, a Tiger Global fund and a Morgan Stanley fund, among others.
It has been embroiled in a long running case since 2016 related to equitable access to all its trading members. SEBI, in an order in April 2019, had faulted the exchange for not ensuring equitable access and fined it 11 billion rupees but the exchange challenged the order in the Securities Appellate Tribunal, a judicial authority.
In January this year, SAT set aside some parts of the SEBI order and reduced the fine on the exchange but the matter was escalated by SEBI to the Supreme Court, which, on March 21, agreed to hear the matter.
Following the SAT order, shareholders of NSE sought clarity from the exchange on the likely timing of the public offering in an investor call in February, according to a transcript of the call uploaded on the exchange website.
In response, the exchange's CEO Ashish Chauhan said the matter is in the hands of the regulator.
“There are many legal matters pending across many courts in the country which may or may not have any bearing on the IPO at all," Chauhan said.
Apart from the ongoing case in the Supreme Court, SEBI is still finalising orders in two other cases involving NSE, said the regulatory source. These include whether certain brokers made unfair gains due to preferential access to NSE’s trading systems and another lapse in NSE’s trading architecture, the source said.