SEBI Keeps NSDL's Proposed Rs3,000 Crore IPO in Abeyance

Moneylife Digital Team 04 August 2023

Investor Interest

Markets regulator Securities and Exchange Board of India (SEBI) has decided to keep in abeyance National Securities Depository Ltd (NSDL) proposed Rs3,600 crore initial public offering (IPO).

Sharing the processing status of issues, SEBI says the "issuance of observations (has been) kept in abeyance." No futher details were provided by the market regulator.

Quoting a source, who did not want to be named, a report from Economic Times says, SEBI move is on account of a show-cause notice (SCN) to National Stock Exchange (NSE), the largest shareholder in NSDL. "The regulator had recently issued an SCN to NSE, the nation's biggest bourse, alleging that some high-frequency traders had manipulated its software to fire thousands of orders without being detected and crowding out other users from the system."

"In 2020, SEBI came out with a rule that said in cases where an SCN has been issued against any issuer, its promoters, directors or group companies, then observations on the offer document would be kept in abeyance for a period of 45 to 90 days, or until the conclusion of the legal proceedings. SEBI had kept the Go Airlines' IPO papers in abeyance because of this rule," the report says.

On 10 July 2023, NSDL, promoted by National Stock Exchange (NSE), filed its draft red herring prospectus (DRHP) for an IPO. The issue is an offer for sale (OFS) of 57.26mn (million) shares held by existing investors such as IDBI Bank, NSE, State Bank of India (SBI), HDFC Bank Ltd, Union Bank of India and the administrator of the specified undertaking of the Unit Trust of India (SUUTI).

According to the offer document, SBI and HDFC Bank propose to sell their 2% stake or about 4mn shares each in NSDL. IDBI Bank plans to sell up to 22.2mn shares, while NSE will sell its 18mn shares in the depository, Union Bank of India and the administrator of the SUUTI will divest 5.62mn and 3.41mn shares, respectively.

The Colo case dates to 2015 when Moneylife first published a letter by a whistle-blower going by the name Ken Fong in June 2015. The whistle-blower alleged that NSE officials were selectively allowing a few brokers to reap massive profits through preferential access to its colo servers in the form of early log-in or access to servers with low trading loads.

The NSE Colo scam has been documented by Moneylife editors Sucheta Dalal and Debashis Basu in their book Absolute Power: Inside Story of the National Stock Exchange's Amazing Success, Leading to Hubris, Regulatory Capture and Algo Scam, released in June 2021.

Read our coverage on NSE Algo Scam here https://www.moneylife.in/tags/nsealgoscam.html

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