P es head for door as nse delays ipo

1. PEs Head for Door as
NSE Delays IPO
Rs 178 crore After partial exits by IFCI and IDBI,
investor Actis set to sell stake to New Quest for `

2. Contd…
The impatient private equity investors in Nationa Stock Exchange (NSE),
miffed by the delay in the exchange's IPO (initial public offering) plans have
started selling shares, de spite a revival in investment sen timent that made
India one of the best-performing equity markets among emerging
economies.UK-based private equity (PE fund Actis has agreed to sell its
seven-year-old investment in NSE to Hong Kong-based secondary portfolio
buyer New Quest Capi tal Partners for `. 178 crore, at al most the same
valuation at which it acquired the stake.
Actis, along with other marquee investors including Citigroup and Goldman
Sachs, has been pushing the NSE management for an IPO for a while.
However, the exchange blamed regulatory and other issues for delaying its
listing plans. “As investors, we were looking for an IPO exit and it was just not
happening. There were regulatory and bureaucratic delays. It seemed to us
the IPO would be delayed indefi be delayed indefinitely.

3. Contd…
As financial investors, PE funds cannot wait on prolonged hopes of an exit,“ said an
official at the private equity fund. Established in 2011, New Quest was spun off
from Bank of America-Merrill Lynch's Asian PE team and specialises in direct
secondaries, or buying out portfolios of PE funds, which are in desperate need of
an exit. “New Quest's acquisition of a 1% stake in NSE from Actis was our entry into
India's biggest stock exchange, with the largest volumes at a price which was at a
slight discount, compared with the growth of the economy and anticipated growth
of the company,“ a person close to New Quest said. It currently manages two pan-
Asian funds with assets worth $700 million in listed and unlisted equities.
New Quest declined to comment on the fund's acquisition and its terms. Actis India
Partner JM Trivedi did not immediately return phone calls seeking comments.
Recently, state-owned IFCI and IDBI partially sold their stakes in NSE to Deccan
Value Investors and Acacia Partners, respectively, according to market sources. ET
could not independently verify this stake sale.

4. Contd…
Some of the existing investors in the exchange said the share price of NSE,
which is said to be Rs 3,950 apiece, has remained unchanged for past five
years and that they have received minimal dividends.
“The price of NSE shares has not moved in the past five years despite profits
having increased by almost 60% in the same period.NSE is being valued at a
PE (price-to-earnings) multiple of about 15x trailing net income despite
comparable emerging market exchanges trading at over 30x PE multiples.
The reason NSE shares are being traded at half of their intrinsic value is
because there has been no clarity on the likelihood or timing of an IPO,“ said
Sohil Chand, managing director, Norwest Venture Partners India, which owns
about 2.11% stake in NSE.

5. `ONLY MAJOR UNLISTED EXCHANGE'
“NSE is the only major exchange in the world that is not currently listed. The government should decide
whether we want to follow the example of the US, UK, Germany, Japan, Singapore, Hong Kong and other
developed and progressive countries or be in the company of Saudi Arabia, Argentina and Indonesia, which
also have unlisted exchanges,“ Chand said.
Public sector undertakings including Life Insurance Corporation, State Bank of India, General Insurance
Corporation, IFCI, Stock Holding Corporation and SBI Capital Markets collectively hold 50.9% of the shares. As
much as 21.5% stake is owned by investors through foreign direct investment and 14.3% through foreign
portfolio investment including General Atlantic, Morgan Stanley, Goldman Sachs, Temasek, SAIF Partners, PI
Opportunities Fund, Tiger Global Five Holdings and Citigroup.
However, an exchange spokesperson said it was all set for listing. “NSE is all for listing. However, the key is the
modalities. It should bring the best value for the existing and future shareholders. NSE board and management
are keen to take the listing to its logical conclusion, whenever it will happen. Shareholders who have been with
us from the beginning have given huge support over the period. Progress would not have been possible
without their support. It was originally infrastructure building and listing of the company was not the focus
then,“ he said.
Foreign investors' stake in NSE is currently worth about Rs . 10,400 crore with over 80% of ` these investments
being more than seven years old. Listing NSE would provide investors liquidity at a fair valuation, one of the
investors said.

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