Unlisted shares of National Stock Exchange (NSE) have seen a surge of more than 20% over the past two weeks in off-market transactions, after almost two years of sideways moves. This upswing is linked to heightened demand from wealthy individuals and retail investors amid a restricted supply of shares, with a few large investors reneging on their commitment to sell, said brokers.
Additionally, a rally in the shares of the two listed exchange operators — BSE and Multi Commodity Exchange of India — and the unlocking of value through the proposed public issue of the National Securities Depository (NSDL), in which NSE holds a 24% stake, also played a role in fuelling the price, the brokers said.
Trading at around Rs 3,100-3,200 a month ago, the stock has currently ascended to a range of Rs 3,800-3,900, as reported by brokers. To be sure, these prices are from the transactions in the unlisted market and are not official figures.
At Rs 3,900 per share, India’s largest bourse would be valued at Rs 1.93 lakh crore, or 25 times its 12-months earnings.
Shares of BSE surged 220% in the past six months, while those of MCX gained around 94%. These two exchanges are currently trading 87 times and 348 times, respectively, their trailing 12-month earnings.
Sandip Ginodia, managing director of Abhishek Securities, said the NSE share price shot up was due to substantial demand from retail investors, coupled with a situation where a few significant investors had reneged on their commitment to sell.
After surging from Rs 1,800 in January 2021 to Rs 3,500 in December that year, the stock stabilised around Rs 3,000 until recently, primarily due to the prevailing uncertainty surrounding its initial public offering plan. In the past one to two years, several significant institutional investors had divested part of their holdings. In the quarter ended September, NSE shares valued at Rs 1,860 crore were traded at an average price of Rs 2,939.
“Against the backdrop of a robust surge in BSE and MCX stock prices, there has been a sudden surge in demand for NSE shares from HNIs (high-net-worth individuals) and retail investors,” said Narottam Dharawat of Mumbai-based Dharawat Securities. “The restricted supply of shares and the listing of its associate company, NSDL, have additionally played crucial roles in fuelling the upswing.”
NSDL, India’s largest depository, is likely to launch its maiden public issue in the next few months at a valuation of Rs 11,000-12,000 crore. NSE, which is currently holding a 24% stake in it, is selling a 9%.
For the six months through September 2023, NSE reported 25% growth in consolidated revenue to Rs 7,380 crore, and an 11% increase in net profit to Rs 3,843 crore. It has a profit margin of over 50%.
Buying NSE’s unlisted shares is not easy as the stock exchange has imposed strict compliance that involves know your customer, funding sources and background checks of investors. The exchange takes time to extend approval, said brokers.