The much-anticipated Initial Public Offering (IPO) of the National Stock Exchange of India (NSE) is scheduled to open for bidding on Thursday, September 17, and will close on Monday, September 21. This significant market event is poised to generate extraordinary wealth for many of its long-standing shareholders, with some poised to achieve returns exceeding 5,57,800% on their initial investment, based on their original acquisition cost and the IPO's upper price band.
An Offer-for-Sale by Existing Investors
The NSE IPO is structured entirely as an Offer-for-Sale (OFS), involving up to 12,64,36,650 equity shares by existing shareholders. At the upper end of the price band, set between Rs 1,700 and Rs 1,785 per share, these selling shareholders are expected to collectively amass Rs 22,568 crore from NSE's maiden stake sale. The Red Herring Prospectus (RHP) indicates that 23 investors, comprising 20 corporate entities and three individual shareholders, are participating in this OFS.
Who Stands to Gain the Most?
Several key shareholders are positioned to reap substantial benefits. Notably, the New India Assurance Company Ltd (NIACL), the Oriental Insurance Company, and the National Insurance Company are among the biggest gainers. These three insurers acquired their shares at a remarkably low weighted average cost of acquisition (WACA) of just Rs 0.32 per share. They are cumulatively divesting 1,32,76,290 equity shares, which is projected to yield them Rs 2,370 crore.
Other significant beneficiaries include:
- SBI Capital Markets: With a WACA of Rs 0.38 per share.
- Stock Holding Corporation of India: A WACA of Rs 0.46 per share.
- United India Insurance Company: A WACA of Rs 0.50 per share.
- Bank of Baroda: A WACA of Rs 0.54 per share.
- State Bank of India (SBI): A WACA of Rs 0.80 per share.
These entities are expected to achieve returns ranging from 2,230 to 4,700 times their original investment through the NSE IPO.
Varying Returns for Other Investors
While some early investors are looking at astronomical gains, returns vary across different shareholder categories. Institutional investors such as Be-In Eight SRL, Mahogany, Canada Pension Plan Investment Board, Crown Capital, 2726247 Ontario Inc, and ICICI Lombard General Insurance Company are projected to make more modest, though still significant, returns of 73% to 215% from their OFS.
Interestingly, one individual selling shareholder, Mahesh Gupta, is set to incur a loss. His weighted average cost of acquisition stands at Rs 1,826.85 per share, higher than the IPO price band, as he liquidates up to 500 equity shares.
Grey Market Premium and Listing Details
The NSE IPO has been commanding a grey market premium (GMP) of Rs 200-205 per share, indicating potential listing gains of 11-12% for investors. Following the bidding period, the shares of the National Stock Exchange are slated to be listed on BSE Ltd only, on Thursday, September 24.