The Hindu Business Line : NYSE, Goldman, Softbank acquire stake in NSE

On the heels of the Government announcing a new foreign direct investment (FDI) policy for stock exchanges, the National Stock Exchange (NSE) announced on Wednesday that four reputed foreign institutions including NYSE Group Inc and Goldman Sachs have been inducted as shareholders in the country's largest stock exchange by average daily turnover.

Five Indian institutions and banks — IFCI (7 per cent), IL&FS (5 per cent), ICICI (5 per cent), PNB (1 per cent) and GIC (2 per cent) — have in aggregate sold 20 per cent stake in NSE to NYSE Group, Goldman Sachs, General Atlantic and Softbank Asian Infrastructure Fund. The stake sale was in the range of Rs 2,250-Rs 2,500 per share of Rs 10 each, with different prices for different selling shareholders.

All the four foreign buyers have acquired 5 per cent each in NSE. IL&FS coordinated the transactions that involved four foreign buyers and five sellers. The five Indian institutions continue to remain as shareholders of NSE and have offloaded only a part of their holding in the exchange.

The FDI policy has capped the maximum investment by a foreign investor, either directly or indirectly, in a stock exchange at five per cent.

The NYSE Group Chief Financial Officer and Executive Vice-President, Mr Nelson Chai, termed the 5 per cent interest as "strategic" and start of a long-term relationship with NSE. It would pay $115 million in cash for purchasing the stake. He also said that NYSE wanted to increase its visibility in India and attract more Indian companies to list in that exchange.

The NSE Managing Director, Mr Ravi Narain, said induction of NYSE Group as strategic investor was in a way a negation of "healthy scepticism'' in certain quarters that foreign investors would not be interested in Indian stock exchanges if their holding is capped at 5 per cent.

Asked whether NSE would look at going in for an initial public offering, Mr Narain replied in the negative. He also said that NSE had no plans to enhance its capital base for the time being. Its paid up capital stood at Rs 45 crore.

In 2006, the average daily traded value in equities stood at about $2 billion and the notional average daily traded value in equity derivatives was about $7 billion.

Meanwhile, sources said IL&FS would receive about $125 million for the 5 per cent stake sold by it. Punjab National Bank is likely to get a little over Rs 100 crore for its 1 per cent stake sale in NSE.

The transactions announced today puts the estimated enterprise value of NSE at about $2.5 billion.

While IFCI shares surged by 19.26 per cent on the NSE to close at Rs 16.10, ICICI and PNB shares declined by 3.12 per cent and 1.59 per cent, respectively on Wednesday.

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