NSE IPO: Why SEBI Has Stalled the Exchange’s Listing for Eight Years

It has been over eight years since the National Stock Exchange of India (NSE) first filed a draft red herring prospectus (DRHP) to list its shares in the equity market. However, the Securities and Exchange Board of India (SEBI) is yet to provide a no-objection certificate (NOC) for the firm’s IPO.

After years of back-and-forth between the two sides, NSE has once again written to the capital markets regulator for permission to list its shares.

“…we hereby submit this request letter to SEBI for seeking NOC/permission to take further actions towards listing of shares of NSE, including filing the DRHP with SEBI,” the letter dated March 28 said, as per a report by Moneycontrol.

Responding to the development, SEBI Chairperson Tuhin Kanta Pandey said NSE must address several issues, including ongoing cases related to the co-location matter, governance and technology concerns, and its stake in its clearing corporation before its IPO can proceed.

“Before it goes public, it (NSE) will need to be cleared from different angles, which we must carefully examine. Some issues have already been identified. There are pending issues like litigation, which is one part; the other part could involve governance and technology issues that may arise; and additionally, there is the clearing corporation issue,” Pandey told Mint at an event on March 29.

NSE's IPO Attempts So Far

In 2016, NSE, in its draft IPO papers, stated its intention to raise Rs 10,000 crore through an offer for sale by existing shareholders. However, regulatory hurdles, primarily linked to the co-location scandal, have delayed its listing.

In 2019, SEBI returned NSE’s draft prospectus, instructing the exchange to reapply after resolving governance issues.

Since then, NSE has written to SEBI several times, including in 2020, 2022, and again in August 2024, seeking a no-objection certificate.

In October 2024, NSE settled a Rs 643 crore penalty related to the co-location case, removing a major obstacle. However, last month in reply, SEBI flagged several deficiencies in NSE’s IPO application and gave the exchange up to 24 months to address them before moving forward.

NSE's Response to SEBI’s Objections

One of SEBI’s key concerns is NSE’s majority stake in its clearing arm, NSE Clearing Ltd (NCL). The regulator believes clearing corporations should operate independently, especially with interoperability between exchanges.

However, According to a Moneycontrol report, NSE in its response to SEBI argues that its ownership aligns with existing regulations and cites BSE and MCX, which also have wholly owned clearing subsidiaries. It further suggests that any potential changes in ownership rules can be disclosed as risks in the draft IPO prospectus.

NSE also contends that diversifying NCL’s ownership could reduce the need for capital support from the exchange, strengthening its reserves.

On the technology front, NSE has outlined steps taken to enhance infrastructure and prevent outages, stating that no major disruptions have occurred in the past four years.

Regarding key management personnel (KMP) concerns, NSE highlighted a significant increase in its workforce in its letter to the market regulator, with staff numbers rising from 1,115 in FY23 to 1,673 in FY25.

Addressing ongoing legal cases, NSE has expressed its commitment to resolving pending matters through settlements. It reaffirmed this stance in a letter to SEBI in August last year, seeking an amicable resolution of all cases before the regulator and judicial bodies.