NSE IPO

The National Stock Exchange (NSE), which enjoys near monopoly in the equity derivative market, has filed a draft prospectus with SEBI for an IPO on December 28, 2016. This is considered as the biggest IPO to hit capital market in recent times.
 
Purpose of issue: The existing shareholders intend to offload their stakes to unlock invested capital. These shareholders include global private equity funds and financial institutions such as Tiger Global Holdings, Temasek Holdings, Goldman Sachs Inc., Citigroup as well as state-owned Indian banks like State Bank of India, IDBI Bank and Bank of Baroda.

The offer: The shareholders will sell around 22.5 per cent stake in the NSE through Offer for Sale up to 111,411,970 equity shares. Ahead of the IPO under the plan approved by the NSE board on Thursday, its existing shareholders will get one bonus share for every 10 shares held. Subsequently, each stock with a face value of Rs 10 will be split into 10 shares of Re 1 each, according to a statement from the exchange.
 
Merchant Banker: Citigroup Global Markets India Pvt Ltd, JM Financial Institutional Securities Ltd, Kotak Mahindra Capital Company Ltd, Morgan Stanley India Company Pvt Ltd.
 
Expected size of the issue: ~Rs 10,000 cr
 
Listing of the issue: The shares will be listed only on the BSE as SEBI does not allow self-listing of the shares.
 
About NSE: NSE is India’s leading stock exchange and the world's fourth-largest by equity trading, enjoying ~85 per cent domestic market share in the segment. It owns and manages the NIFTY 50 index, a benchmark index for the Indian capital markets.

Further, the bourse offers coverage of the Indian capital markets across various asset classes, which include equity, fixed income, and derivative securities. It offers a trading services segment, a clearing and settlement house among other segments and offers services, indices, market data feeds, technology solutions and financial education.
NSE’s revenue in FY2016 stood at Rs 2,359.17 crore, as compared to Rs 2,291.04 crore in the previous year. Its consolidated net profit for the same period was Rs 975.21 crore, as against Rs 993.81 crore in previous year.  The company has shown a ~7 per cent CAGR growth over FY12-16. The bourse had cash and cash equivalents and cash at bank of Rs 8937 crore as on September 30, 2016.

As for revenue mix, trading segment generates ~50 per cent of its total revenue in FY16, whereas rival BSE (which is also hitting the capital market with its IPO) generates ~27 per cent revenue from trading. NSE also beat its only rival BSE with PAT margin of ~49 per cent as compared to ~20 per cent of BSE.