The National Stock Exchange (NSE) has filed a settlement application with market regulator Securities and Exchange Board of India (SEBI), offering to pay nearly Rs1,400 crore to resolve the long-pending co-location (Colo) and dark fibre cases. The move is seen as a major step toward clearing regulatory roadblocks ahead of its much-anticipated initial public offering (IPO).
Quoting people familiar with the matter,
a report from Moneycontrol says, NSE submitted the application on Friday, proposing a total settlement amount of around Rs1,388 crore, Rs1,165 crore for the Colo case and Rs223 crore for the dark fibre matter. "The exchange had earlier deposited Rs1,100 crore with SEBI, of which Rs300 crore was returned in 2023 following a Supreme Court directive. After adjusting this amount and adding interest, NSE is expected to pay an additional Rs600 crore to settle the cases."
If approved by SEBI, this will pave the way for the IPO by the country's largest stock exchange, which has faced repeated delays due to regulatory and legal hurdles. According to
a report from Economic Times (ET), NSE had renewed its push to go public after Tuhin Kanta Pandey took over as SEBI chairman in February this year.
Quoting a person close to the development, the report from ET says, "The case can be settled as the people who had done the violations have all gone from the exchange."
The nearly Rs1,400 crore offer, if accepted, would mark one of the largest settlement amounts in India’s capital markets and could pave the way for SEBI to issue a no-objection certificate, a critical requirement for NSE’s public listing.
The IPO proposal, one of the most anticipated in Indian capital markets, has been under SEBI's review due to concerns over compensation to key executives, technology governance and the NSE's control over its clearing corporation. “All outstanding issues will be resolved shortly,” Mr Pandey assured.
During NSE’s recent earnings call, managing director and chief executive officer (MD&CEO) Ashish Kumar Chauhan also acknowledged pending legal matters,
a report from Bloomberg says.
NSE's recent efforts to clean the slate include a significant payment of Rs643 crore in October 2024 to settle a separate case linked to the controversial trading access point (TAP) system. The settlement covered the Exchange and nine of its former key officials, including ex-MD & CEO Vikram Limaye.
The TAP system, deployed by NSE since 2008, came under regulatory scrutiny after SEBI found the Exchange failed to implement timely safeguards to prevent potential misuse of the architecture by trading members. According to SEBI’s investigation, NSE continued with TAP in some market segments until as late as 2020, despite launching alternative systems like ‘trimmed TAP’ in 2013 and ‘direct connect’ in 2016.
In August 2024, NSE sought fresh approval from SEBI to move forward with its IPO. This update, detailed in NSE's latest annual report, follows a series of regulatory challenges that have previously affected its listing efforts.
In its April 2019 order, SEBI had imposed a significant penalty on the Exchange amounting to over Rs1,000 crore with interest. Additionally, the regulator had barred NSE from raising funds through equity, debt, or other securities for six months. This restriction ended on 30 October 2019.
However, due to a significant reduction in the number of shares offered for sale, specifically by more than 50%, SEBI required NSE to file new offer documents. As a result, the draft red herring prospectus (DRHP) submitted earlier was returned. Subsequently, NSE approached SEBI again in 2022 but was instructed to hold off at that time.
Recent updates indicate that NSE has reignited its efforts to get listed. Despite the expiration of the previous restriction, NSE is still awaiting SEBI's response to its latest request. The Exchange has asked SEBI for a no-objection certificate to proceed with its IPO plans and to refile the DRHP. As stated in its annual report, "NSE has requested SEBI to convey its no-objection to enable it to proceed with its IPO plan and for filing the DRHP. Response from SEBI is awaited."
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