When is the NSE IPO expected? Also, is it true that LIC will be reducing its stake in the National Stock Exchange?

The NSE IPO can go ahead only once the issue of algo trading which is currently under SEBI investigations is fully resolved. SEBI is currently investigating the case and the ED is also involved in the entire exercise. The regulator has already made it clear that NSE cannot come out with an IPO unless this case is fully resolved. Also, the NSE would not want to come out with the IPO now because as of now most of its algo related income is still going into an escrow account. Institutional investors will be interested in giving a good valuation to NSE only if the algo issue is resolved and the escrow accounts are de-frozen and the full cash flows made available to NSE.

Regarding the LIC selling stake in NSE, it is a regulatory requirement and is a different issue altogether. As per SEBI’s shareholding norms, institutional investors are allowed to hold up to 15% in stock exchanges. Post the merger with IDBI Bank, the combined entity has 13.96% in the National Stock Exchange, which is still within the stipulated limits. However, there is a problem here. Since the IDBI Bank group has a trading membership and broking business within its group, the combined entity will now be classified as a trading member and not as an institutional investor. The current SEBI limit for trading members to own shares in the stock exchange is limited to 5%. Due to this change in classification, LIC will be required to offload the shares. However, it remains to be seen whether the regulator makes an exception in this case.