The much-awaited initial public offering of the National Stock Exchange (NSE) could be rolled out in the next few weeks since market regulator SEBI is all set to allow the bourse to re-file its prospectus for the share sale.

Sources told BusinessLine that the NSE will launch India’s biggest IPO post-SEBI nod as it is likely to be valued at over ₹2 lakh crore.

In the unlisted market, NSE’s shares are currently quoting in the broad range of ₹3,000- 4,000 apiece.

IPO plan

The NSE had first filed for its IPO with SEBI in December 2016, two months before incumbent SEBI chairman Ajay Tyagi took charge. Then, Tyagi ordered the exchange to withdraw its offer documents since it got embroiled in the algo trading scandal.

A SEBI investigation was ordered into the alleged data theft and preferential access scam at NSE co-location servers.

In May 2019, SEBI framed charges against senior NSE officials and ordered the exchange to pay over ₹1,000-crore disgorgement amount for lapses in its co-location trading systems that gave an advantage to a select few.

Favourable legal opinion

Now, after having taken legal opinion, SEBI is firm on allowing NSE to re-file its prospectus. The legal opinion is in favour of allowing NSE to go ahead with the IPO because even though the algo scam matter is still sub-judice, there is no stay order given by a court on its proposed share sale. In addition, senior NSE officials who were charged by SEBI in the scam are out of the exchange.

Earlier, the legal opinion was that unless the NSE complied fully with the final SEBI verdict in the algo matter and filled the compliance gaps, its IPO should not be allowed.

The NSE has challenged SEBI’s ₹1,000- crore penalty at the Securities Appellate Tribunal (SAT) and is yet to accept there was any wrongdoing. In February this year, the Madras High Court stopped short of issuing a stay on NSE’s IPO. The court observed that the writ petition seeking a stay was ‘premature’ as SEBI had told the court that the question of its permission did not arise since NSE had not re-applied for its IPO then.

IPO valuation

Currently, the BSE has a trailing PE (price to earnings) ratio of 38, but the NSE enjoys a PE of 80- 100 in large private deals. Looking at the lofty PE of listed monopoly plays, the NSE IPO too will be priced in the higher PE bracket, the sources said.

The NSE has monopoly over equity derivatives and enjoys nearly 80 per cent EBITDA (earnings before interest, tax, depreciation and amortisation) margins and 93 per cent operating to total income ratio. As of March 2021, the NSE saw 60 per cent operating income growth at ₹5,625 crore compared to the previous year. Its net profit rose by 89 per cent to ₹ 3,574 crore compared with ₹1,885 crore in the previous year. The only drawback in NSE’s current valuation is that last year it earned a chunk of its net from the stake sale in CAMS, which was a one-time income.