Uncertainty Plagues NSE’s Much Awaited IPO

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It has been a while since we are expecting the country’s largest stock exchange, National Stock Exchange, to release its much-awaited IPO. As per a recent share market news, Securities and Exchange Board of India (Sebi) has asked the stock exchange to refile the offer document for its initial public offer (IPO). It is anticipated that the IPO of NSE will beraising more than Rs. 10,000 Cr. from the investors.The IPO will witness existing shareholders offloading 20-25% shares to the public through the OFS.

NSE had filed its prospectus for the approval from the regulator, Sebi last year in the month of December. Since then the exchange went through many material changes and latest updates in the offer document. Moreover, as per the rule, the financial numbers for a company which is going to have an IPO cannot be more than two quarters old. The IPO of NSE is now stuck on the ‘unfair access’ controversy at its co-location facility.

Now, unless the issue co-location facility is resolved, the IPO of the NSE cannot proceed as communicated by both the board and the exchange. The business news says that the co-location controversy may take another six months to resolve and till then we will have to wait.

However, the exchange has been trying to make the process quick and controversy to end by settling the case through the consent mechanism. The exchange believes that this may avoid lengthy procedures and case will be resolved soon. Though the board is not sure if the NSE issue will be able to get settled through the consent mechanism.

The rules of consent mechanism says that an alleged wrongdoer settles the matter with the regulator without admitting or denying the guilt. As a consequence, Sebi in that case may either levy a penalty on the wrongdoer or mayban the wrong doer from the stock market, or sometimes even both. Various companies have resorted to this “consent mechanism” in past. The firms that have used the consent mechanism in past to settle disputes with Sebi include Reliance Infrastructure, Suzlon, RBL Bank, and JP Morgan. But, as a matter of fact,all the matters are hardly settled through the consent mechanism.

The experts of this matter believe that the board will be able allowing the consent mechanism after it determines the gains made by brokers and associated entities due to the lapses at NSE’s co-location facility. But the news says that even after numerous audits on NSE, none of the audits have been able to ascertain the gains made by the entities involved. This has also been followed by the appointment of forensic auditor by Sebi to find out the gains made by brokers or other entities involved.

It may take another 2-3 months to get clarity that whether Sebi will be go for the penal action or will settle the matter through consent. Only after this, NSE will be able to come out with an update on its IPO document.

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