NSE co-location scam: The widely touted reason for foreign investors cutting exposure to the NSE shares is the delay in the stock exchange’s plan to go public. But some observers says the sudden flurry of selling in January could have to do with more than just the delay in NSE’s listing plan. The timing of the sales—just a few weeks before the SEBI order—and the price, have raised eyebrows.
Some foreign shareholders dumped NSE shares just before SEBI order on Chitra Ramkrishna
There was a flurry of activity in National Stock Exchange (NSE) shares in January just before market regulator SEBI issued an order on the stock exchange’s former MD and CEO Chitra Ramkrishna for sharing confidential information with an ‘unknown yogi from the Himalayas.’ This can be seen from the details of the share transfers published on the NSE website.
Of the 209 transactions in NSE shares, more than one-third involved foreign shareholders selling to domestic investors.
A total of 11.61 lakh shares were sold by foreign investors for prices between Rs 1,650 and Rs 2,800 per share with a vast majority of those deals being struck below Rs 2,000. It could not be confirmed if the shares were sold by one foreign investor or many
While 11.61 lakh shares account for 0.2 percent of NSE’s equity base, it must be noted that NSE shares are not traded actively since they are unlisted.
The peak price for NSE shares in January was Rs 3,650, a deal between two domestic investors, but for a small quantity.
There appears to be signs of distress selling by foreign investors in January, because nearly 50 percent of similar transactions in December happened at prices above Rs 2,000 per share, with quite a few of them at Rs 2,800 per share. Incidentally, December too saw many foreign investors and non-resident Indians cutting their exposure to the bourse.
NSE co-location scam: Institutional investors held 87 percent stake in NSE at the end of FY12. That has now come down to less than 50 percent.
Prominent HNIs who own stake in NSE include Radhakishan Damani, owner of the DMart chain of retail stores, besides other well known stock market investors and some industry captains as well.
NSE’s share price has more than doubled from around Rs 1,000 in June 2020, as many domestic investors are betting that the bourse will eventually get the long awaited SEBI approval for going public. Brokers dealing in the market for unlisted shares say that the NSE stock is quoting around Rs 2800-3000 at present.
“Investors don’t seem to be too bothered about the controversy, they are confident that once the crisis blows once investigation is concluded, it is a matter of time before the shares list,” said a market participant tracking the space.
For the nine months ended December 31, 2021, NSE reported revenues of Rs 5,551 crore, with an operating profit margin of 76 percent and a net profit margin of 54 percent.
Earlier this year, Chennai-based Spark Capital initiated coverage on National Stock Exchange with a buy rating and a target price of Rs 3950.