Miffed with regulatory refusal to grant a no-objection certificate for the initial public offering (IPO) of the National Stock Exchange (NSE), a group of investors, led by the People Activism Forum has once again approached the Delhi High Court (HC), seeking directions for the Securities and Exchange Board of India (SEBI) to approve the listing of shares of the country's biggest bourse, says a report from
Economic Times (ET)
According to the report, in an affidavit filed last week, the People Activism Forum argued that even three months after NSE reapplied for SEBI's green light on 27 August 2024, the market regulator was yet to provide a valid justification for withholding permission for the IPO or the listing of NSE shares.
The investors claim that existing shareholders of the exchange are being denied the opportunity to unlock the value of their shares, while the general public is being deprived of the chance to participate in NSE's profits through the open market, the report says.
In August this year, NSE sought fresh approval from SEBI to move forward with its IPO. This update, detailed in NSE's latest annual report, follows a series of regulatory challenges that have previously affected its listing efforts.
In its April 2019 order, SEBI had imposed a significant penalty on the exchange amounting to over Rs1,000 crore with interest. Additionally, the regulator had barred NSE from raising funds through equity, debt, or other securities for six months. This restriction ended on 30 October 2019.
However, due to a significant reduction in the number of shares offered for sale—specifically by more than 50%—SEBI required NSE to file new offer documents. As a result, the draft red herring prospectus (DRHP) submitted earlier was returned. Subsequently, NSE approached SEBI again in 2022, but was instructed to hold off at that time.
Recent updates indicate that NSE has reignited its efforts to get listed. Despite the expiration of the previous restriction, NSE is still awaiting SEBI’s response to its latest request. The exchange has asked SEBI for a no-objection to proceed with its IPO plans and to refile the DRHP. As stated in its annual report, “NSE has requested SEBI to convey its no-objection to enable it to proceed with its IPO plan and for filing the DRHP. Response from SEBI is awaited.”
SEBI’s decision will be crucial for NSE's plans to list publicly and advance its financial strategy following a challenging regulatory period.
As reported by Moneylife, in January 2024, Ashish Chauhan, managing director (MD) of NSE, with the approval of its board of directors, had written to SEBI seeking an ‘amicable’ closure to all pending litigation in connection with the Colo scandal of 2015, either by settlement or payment of penalties.
"In some residual cases, fines imposed by SEBI may be paid without contest and a few appeals are already in the process of being withdrawn. A start was made in July this year when NSE sought to withdraw an appeal before the securities appellate tribunal (SAT) in a case involving the sharing of illegal data by favoured academic consultants with their relatives. NSE will pay the fine imposed by the regulator in that case." (
Read: NSE's Co-location Scandal: Close Issue, List and Usher Transparency)
In October this year, NSE paid Rs643 crore for itself and on behalf of nine others, including its former managing director and chief executive officer (MD&CEO) Vikram Limaye, to settle a case related to bypassing the trading access point (TAP) system. Those who settled the TAP case include Umesh Jain, GM Shenoy, both former chief technology officers (CTOs), Narayan Neelakantan, former chief information security officer (CISO), VR Narasimhan, former chief regulatory official (CRO), and other former key employees Kamala K, Nilesh Tinaikar, R Nandakumar and Mayur Sindhwad.
SEBI's investigation into the TAP architecture and network connectivity revealed that NSE did not take remedial measures to prevent or discourage any possible bypass of TAP. TAP was a software application deployed by NSE in 2008 on the servers of trading members (TMs) for managing connections and messages for orders and trades. TMs, registered with NSE, connected to TAP to establish communication with the NSE trading system. While NSE introduced 'trimmed TAP' in December 2013 and 'direct connect' in February 2016 as an alternative to TAP, it continued with TAP until September 2019 in the equity segment and until November 2020 in the securities lending and borrowing segment. (
Read: NSE Pays Rs643 Crore To Settle TAP Case against Ex-chief Vikram Limaye, 8 Other KMPs)
After a few days, NSE Clearing Corporation Ltd (NCL), a subsidiary of NSE, paid Rs27.13 crore to settle a case related to alleged non-compliance with the provisions of the interoperability agreement with the markets regulator. NCL is responsible for clearing and settlement of all trades executed on NSE and deposit and collateral management and risk management functions. (
Read: NSE Clearing Pays Rs27 Crore To Settle Interoperability Pact Violation Case with SEBI)
You may also want to read...
