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PSU Banks, Insurers Sit on NSE IPO Gains as Unlisted Shares Rally
Unlisted market deals suggest NSE IPO may price at a premium. State-run banks and insurers that bought early could see large paper gains when the exchange lists.
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The National Stock Exchange's initial public offering is drawing fresh attention. Transactions in the unlisted shares market hint at a potential valuation well above what early investors paid.
According to a report from ETMarkets, state-run banks and insurance companies that bought NSE shares in earlier rounds are sitting on large paper gains. Some bought years ago. The unlisted market has been pricing NSE shares at levels that imply a valuation above the last formal funding round. That gap between the grey market price and the cost basis for these long-term holders is the source of the IPO excitement.
NSE dominates Indian equity derivatives and cash equities, processing over 90% of exchange-traded derivatives volume. That near-monopoly position makes its shares valuable for investors seeking steady fee income. Early investors include state-run banks and insurers that participated in earlier funding rounds. They are now seeing substantial returns on their initial outlay, based on the current unlisted market pricing.
The unlisted market has seen increased activity in recent months. Deals are being struck at prices that offer a window into the potential valuation. The gap between these prices and what early investors paid years ago is substantial.
The report did not specify exact pricing. The Securities and Exchange Board of India still needs to give final approval. The exchange has not commented on timing.