MUMBAI: As executives at the National Stock Exchange (NSE) of India Ltd pitch their long-awaited initial public offering (IPO) to global investors, one question keeps coming up: How would the bourse keep growing after regulators curbed its booming derivatives business?
Without that growth engine, investors at meetings in Hong Kong, London and New York expressed concern that the valuation NSE was seeking – roughly US$55bil – was just too high, according to people who attended the meetings.
That investor pressure ultimately forced NSE executives to slash the maximum valuation they’re seeking when they launch the IPO next week by about 15%, other people involved in the deal said, requesting anonymity as the information is private.
Even at that new price tag of US$47bil, NSE shares would be more expensive than the top 10 global exchanges, based on earnings for the last fiscal year.
“NSE seems quite expensive over the short to medium-term when compared to other exchanges globally,” said John Ninia, a partner at Mobius Investments, citing tighter trading rules as a risk to derivatives volumes.
“As a long-term investor, we would find the risk/reward more attractive following a valuation reset.”
A decade in the making, NSE’s listing has been slowed by regulatory setbacks and legal hurdles.
The regulator’s crackdown last year on Jane Street Group, coupled with measures to curb excessive speculation, has cooled the derivatives market that had made India the world’s leading options hub.
The backdrop has also become less favourable, with investors flocking to artificial intelligence stocks that India lacks while spiking oil prices and a delayed trade deal with the United States add pressure to the economy.
The IPO will still draw plenty of attention given the country’s importance in emerging-market portfolios – more than 120 global funds including BlackRock Inc and GQG Partners LLC attended the meetings – but the investor excitement that was so palpable early last year has faded.
A similar story played out earlier this month in Hong Kong, where Shein Global Holdings Ltd’s IPO came well past its growth peak.
Its shares plunged as much as 10% after they began trading and remain below the IPO price today, an outlier at a time of frenetic post-IPO rallies in Asia. — Bloomberg
