NSE IPO: SBI, Insurance Firms Among Selling Shareholders Set For Rs 16,500 Crore Gain From Share Sale
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SBI, insurance companies and other NSE shareholders could make around Rs 16,500 crore from the exchange's IPO. Several acquired their shares at less than Re 1 apiece and are now selling them at a price of up to Rs 1,785 per share.
State Bank of India, insurance companies and other shareholders of the National Stock Exchange could together make gains of around Rs 16,500 crore from the exchange's upcoming IPO, as several of them had acquired their NSE shares at less than Re 1 apiece.
The gains come from the huge gap between their original purchase price and the IPO price. NSE has set the price band at Rs 1,700-1,785 per share, meaning some shareholders could sell their holdings at more than 2,000 times the price they originally paid.
SBI is among the biggest beneficiaries. The bank's shares being offered in the IPO were acquired at an average cost of about 80 paise each. At Rs 1,785 a share, the difference between the purchase cost and the IPO price translates into a potential gain of around Rs 2,849 crore.
New India Assurance is set to make a potential gain of about Rs 1,874 crore. Its shares were acquired at an average cost of around 32 paise each.
SBI Capital Markets is another major seller, with an acquisition cost of about 38 paise per share for the shares being offered. Its potential gain works out to around Rs 1,567 crore at the upper end of the IPO price band.
Across 10 major selling shareholders, the estimated gain is around Rs 16,500 crore against an aggregate acquisition cost of roughly Rs 534 crore.
The unusually high gains are linked to how long these institutions have held their NSE shares. Many bought their stakes when the exchange was privately held and its shares were valued at a fraction of the price at which they are now being offered to public investors.
The IPO documents show acquisition costs of less than Re 1 per share for several of the selling shareholders. The current IPO price therefore represents a sharp increase over their original cost.
Bank of Baroda, General Insurance Corporation of India, National Insurance Company, United India Insurance Company and Stock Holding Corporation of India are among the other institutional shareholders selling shares.
Foreign investors including Canada Pension Plan Investment Board, MS Strategic and Aranda Investments are also part of the offer.
What happens to the IPO proceeds
The NSE IPO is entirely an offer for sale. The shares being sold are held by existing shareholders, rather than being newly issued by the exchange.
This means the money raised through the sale will go to the shareholders participating in the offer. NSE itself will not receive fresh capital from the IPO.
The final offer comprises 12.64 crore shares, compared with 14.89 crore shares proposed earlier. At the upper end of the Rs 1,700-1,785 price band, the issue is worth around Rs 22,562 crore.
The IPO will open for subscription on September 17 and close on September 21.
For the selling shareholders, however, the main takeaway is the difference between what they paid for their NSE holdings and what those shares are now worth in the public offering. That gap is what creates the estimated Rs 16,500 crore gain.
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This article is for informational purposes only and should not be considered investment advice from Kotak Neo. For compliance T&C and disclaimers, Visit www.kotakneo.com/disclaimer
Rochelle Britto has spent 8+ years decoding India's markets, businesses, and consumer economy, reporting for ET Prime and Times Internet along the way, covering the stories behind the numbers.
A Mumbai native and perpetual planner of the next holiday, she stays far, far away from the eternal question, “Where are we going next?” When she's not chasing headlines, she's chasing new cultures, open roads, and a bit of quiet in nature.
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