NSE Responds To SEBI's Letter Flagging Issues In Granting NOC For IPO, Sources Say—NDTV Profit Exclusive

The National Stock Exchange, in the works to launch its much-anticipated initial public offering, has responded to a letter by the Securities and Exchange Board of India regarding a no-objection certificate, according to people familiar with the matter.

The exchange claimed that it will divest its clearing corporation operations once regulatory clarity comes, seeking the certificate at the earliest. The NSE had first sought the certificate in August 2024.

The NSE added that it had not faced tech outages in recent years and has committed to work collaboratively with the regulator on various issues in a timely manner, the people told NDTV Profit on the condition of anonymity.

The letter noted that the exchange, in line with SEBI's advice, measures its technology resiliency by computing an IT resilience index that factors in various parameters like availability/reliability, scalability, business continuity, governance, security, integrity, etc.

The letter further mentioned that NSE has consistently invested in technology and spent Rs 2,763 crore (in operating and capital expenditure) over the past three years towards building a resilient technology infrastructure, according to sources.

NDTV Profit reported on Thursday that SEBI had flagged a number of potential shortcomings with the bourse's IPO in a detailed letter, according to senior officials. The letter was sent at the end of February, coinciding with the conclusion of Madhabi Puri Buch's tenure as SEBI’s chairperson.

SEBI, in its letter, had given the NSE a period of twenty-four months to comply with its advice, which included concerns for the exchange's internal processes, governance and more.

The regulator had advised NSE to pause the launch of the maiden book build offer by a year or two until it addressed the concerns at hand. However, industry sources are of the belief that certain issues raised fall outside SEBI’s purview and are unrelated to the IPO.

The exchange had filed its IPO prospectus back in the year 2016.

SEBI, in a letter dated Nov. 21, 2016, approved the listing of equity shares on a recognised stock exchange, contingent upon compliance with applicable regulations and SEBI circulars. The offer received approval from NSE's Board of Directors and shareholders through resolutions passed on Oct. 4, 2016, and Nov. 10, 2016, respectively.

During that period, NSE, its directors, and its group companies were not barred from accessing or operating in capital markets by SEBI or any other authorities.

However, in a 2019 order, SEBI barred NSE from accessing the securities market for six months due to complaints related to its co-location facilities. Although the Securities Appellate Tribunal modified financial penalties in January 2023, it upheld the market access restriction.

Subsequently, NSE's 2022-2023 annual report emphasised that the six-month prohibition period had ended and that it awaited SEBI's further approval for listing. News articles in December 2023 suggested SEBI had imposed additional conditions for NSE's IPO approval, including maintaining a glitch-free year, enhancing technological infrastructure, improving corporate governance, and resolving pending legal matters.

However, the NSE colocation case was settled in October 2024 for a whopping amount of Rs.643 crore.