Will NSE List in 2024?
Physician heal thyself!!
As the year 2023 draws to a close, the newspaper and the social media postings are rife with a stock take of the year gone by and the prospects for the coming one.
Why should anyone at this hour speculate on a subject that may sound quite distant to most readers, including those who transact in stocks regularly on the NSE platform?
Investors who day in day out transact on the exchange may pause little to ponder why the exchange that monitors the governance practices in all the listed companies is itself not listed?
The prompt to ask this question and seek an answer on the last day of the year when sundry other more important matters may await everyone’ attention is a recent information to the stock exchanges by a relatively unknown company, Maithan Alloys Ltd.
Maithan, like many other companies controlled significantly by a promoter family, chooses to invest the surplus from its core business in various avenues that the promoter fancies! It has a portfolio of investments in the company’ books that could be the envy of many PMS!
This vice is common to many closely controlled listed entities where the promoter is reluctant to distribute the surplus cash, and either hoards it in bank FDs, or an adventurous one like Maithan, sprays it in assorted stocks.
But Maithan has leapt far further than others! It has placed an order to buy 10lac shares of NSE at Rs3240 a piece and parking Rs324cr in an unlisted and illiquid investment.
NSE shares are traded in the grey market and not a day passes without some message on the whatapp of the availability of its shares at vague price points depending on the lot size!
NSE is among the premier stock exchanges in the world and despite its share of controversies around the colocation ruckus and the scandal concerning its erstwhile CEO, has operating parameters that would be the envy of any other corporate in a similar services industry.
Its shares are now cascading through the grey market among HNIs in the expectation that the exchange would list soon. This ‘soon’ has been a matter of many years. At least since 2015 the exchange has been attempting to list but the regulator has not yielded.
Besides, the HNIs and corporates like Maithan that are piling into this stock, the anchor investors are the government institutions that originally subscribed.
LIC is the biggest investors and so are the PSU non-life insurers. Even at the value that Maithan is paying, the value of shares held by the PSU non-life insurers is worth close to Rs100bn. These very companies are struggling to meet the capital adequacy norms and awaiting a dose of capital infusion by the government!
LIC’ stake would be valued much higher. So is the case of SBI. The government that is falling short on privatization targets and stretched for balancing the budget has such booty waiting to be retrieved!
The peer of the NSE, Bombay Stock Exchange, trades on the NSE platform with a market cap of around Rs300bn. BSE’ consolidated PBT in FY 2022-23 is Rs297cr; The unlisted NSE closed its at Rs10245cr!
NSE as a regulator seeks regular and prompt dispatches from the companies listed on its platform and expects detailed disclosures in the annual reports of such companies.
However, when it comes to the issue of the pending listing of its stock it discloses as follows in its annual report for 2022-23-
Since October 30,2019, NSE has been awaiting a clearance from the regulator for its listing! Even if the two were in different planets this should have got sorted out in the time elapsed in between!
The disclosure made in the annual report of 2016-17 is also worth noting.
Assuming the candidate in such a predicament was not NSE but another company looking to list and not getting the clearance of the regulator over so many years would its shareholders and the directors keep silent the way NSE’ board and its shareholders?
Is there more to this subject than meets one’ eyes?
The following extract from a recent statement of the top honcho of the exchange makes for an interesting reading-
While the Street patiently waits for the initial public offering of the National Stock Exchange (NSE), its top boss Ashishkumar Chauhan has said that the market regulator still has 'certain apprehensions'. On the sidelines of an event hosted by Business Today, Chauhan said, "As you are all aware, there were issues at NSE. And, SEBI has certain apprehensions about us meeting its expectations."
"Going ahead, as the number of investors in India doubles or triples from 7.5 crore currently, SEBI needs to have confidence in our processes, technology and intentions. As and when SEBI becomes more comfortable, they will tell us to apply (for IPO) and we will go ahead," he added.
The above is quite at variance with the extract from the annual report of NSE earlier provided. The CEO himself confesses to ‘issues at NSE’ that is causing the regulator to drag its feet.
If there is an admission of issues that need fixing how come the board’ report year after year silent on this? Would NSE or SEBI accept this situation with any other listed corporate in the country?
It is also noticed that the secretarial and the statutory auditors provide a clean report on the corporate governance matters and on internal controls. What type of issues that hold up the listing but would not fall into either the corporate governance box or the internal control box?
If NSE has issues to fix, should it continue to expand its business and list more entities year after year?
No adverse report on NSE is noted in the annual report of SEBI nor has the regulator come clean on this outside of the private communications with NSE itself.
It is naïve to believe that any company getting listed would be free of all possible issues that could arise to any business. What happens if after listing such issues surface?
It is difficult to separate some level of politics from what is prevailing in the strange impasse in this matter. Strangely the vocal and the vociferous media is keeping its silence on the matter.
The union Finance Minister who while recently on a tour of the flood affected areas of the south TN was irate learning that a public toilet was blocking the processional route of a deity of a local temple, ordered its removal, may with the same sense of speed suggest SEBI to smoothen the street for NSE’ listing!
With such ambitions as achieving the goal of a US$ 5tn and a 10tn economy etc., the fact that the most vital part of the capital market is ailing form an undisclosed illness is not good news to close 2023 or open 2024!
