For years, the National Stock Exchange (NSE) has been eagerly trying to list itself in the stock market, but regulatory hurdles have continuously kept it from moving forward.
It all began in 2016 when NSE first filed its DRHP to issue shares, but SEBI rejected the request in 2019 due to the revealed Colocation Scam.
Since then, NSE has been waiting for the SEBI NOC for IPO. Add to that the 2022 Himalayan Baba Scandal and it seemed like SEBI would never give the green signal to NSE for IPO.
But if we look at the current scenario, there are many instances where SEBI has favored NSE related to many decisions.
Does that mean that NSE would get the pass to issue its shares despite the unresolved controversies?
Two Major Scams That Raised Questions on NSE’s Credibility
In the last few years, there have been many irregularities in the decisions of NSE due to one or the other reasons. Along with that, the exchange name was linked with two major scams.
Due to this one of the SEBI officials in April 2023, mentioned that they would provide no approval to the NSE IPO until it gets clearance from all regulatory and legal issues.
Let’s get into a little detail to know about those scams:
1. Colocation Scam
This scandal raised many questions about the exchange’s integrity. SEBI investigation uncovered the involvement of NSE officials and a brokerage firm called OPG Securities in the scam.
The investigation unveiled that NSE had given OPG Securities preferential access to its trading servers. This allowed them faster trade execution and access to exclusive market data.
This “special treatment” compromised market transparency and fairness, impacting traders’ trust and confidence.
SEBI on concluding its investigation passed an order to disgorge ₹625 crore plus interest and imposed a penalty of ₹1,000 crore.
While NSE raised the issue in SAT, where SAT argued there was no concrete evidence of financial benefits from the violation, SEBI took the case to the Supreme Court.
The court later ordered SEBI to refund ₹300 crore to NSE, but the case remains unresolved.
2. The Himalayan Baba Scandal
In 2022, another shocking revelation emerged. Former NSE CEO Chitra Ramkrishna was found to be in contact with an anonymous “spiritual guru” from the Himalayas, often referred to as the Himalayan Baba.
Emails revealed that Chitra sought guidance from this Baba on critical matters, such as senior appointments, organizational strategy, and even salary structures.
Not limited to this few emails revealed that Chitra Ramkrishna was sharing confidential information with this “Baba” before making important business decisions at NSE.
This case raised even more questions about NSE’s corporate governance and leadership. As expected, SEBI again rejected NSE’s IPO request due to this scandal.
Is SEBI Providing Favors to NSE?
Unlike past years, in the last few months, things seem to be shifting. SEBI, once rigid and firm, is now sending signals that hint toward approving NSE’s IPO soon. Here are some of the highlights of the same.
On May 03, 2024, NSE announced a 4:1 bonus share which got approval by shareholders in June. With this NSE share capital increased from ₹49.50 crores to ₹247.50 crores.
Later in Sept 09, 2024, MD & CEO of NSE Mr. Ashishkumar Chauhan addressed the F&O discussion paper according to which SEBI proposed certain changes including:
- Increasing the minimum lot size value from ₹5 lakh to ₹25 lakh.
- Reducing weekly options expiry to one per exchange.
- Increasing Upfront Margin.
He mentioned that NSE had given its suggestion on the same however along with that he mentioned that NSE would follow whatever SEBI decision on this.
Now, knowing that this decision of SEBI could impact the trading volumes Ashishkumar Chauhan is ready accept SEBI’s final decision without raising any concerns or questions.
Isn’t it strange?
Finally, as per the news on September 13, 2024, SEBI provides an approval to NSE to raise its share capital by 10x to ₹500 crore. This increase also offers flexibility for the exchange to issue new shares during its public offering if it chooses to do so.
Also, such approvals are generally provided when the company plans to go public soon.
The Big Question: Why Are NSE and SEBI Favoring Each Other’s Decisions?
It seems like SEBI is starting to favor NSE in a way that raises more questions than answers.
Despite unresolved legal cases, including the Colocation scam, why is NSE being allowed to hike its share capital by 10x?
This along with NSE’s submission to SEBI’s proposals for the F&O market, seems like a strategy to win favor.
Further, on one hand, where the NSE was found associated with one or the other scams or scandals the share price revealed a different picture. NSE’s unlisted shares are trading at ₹6,200 per share which was trading at around ₹3,600 per share last year.
This means that there has been upto a 72% increase in unlisted share value in the one year. This has taken the market capitalization of the exchange to ₹3.06 lakh crore.
Now does this indicate that few things have been overlooked in the name of rapid growth?
To conclude the same, in the present time when the Colocation Scam is still in the Supreme Court and the Himalayan Baba Scandal left a huge question mark on NSE’s credibility why SEBI is showing such leniency?
- Shouldn’t a firm like NSE be held to the highest standard of accountability?
- Isn’t SEBI taking a risky step by providing approvals to NSE?
Retail traders and investors who mostly follow SEBI’s approvals and orders blindly need clarity on the same.
Will SEBI finally approve NSE’s IPO, or SEBI would still consider regulatory & legal issues of NSE?
Only time will tell, but all eyes are on SEBI now.
