The National Stock Exchange of India has taken a step further in its plans to list on the Indian stock market by filing draft papers with the market regulator, Sebi, to launch an initial public offering (IPO). This marks a significant step not only for NSE, which has been looking to enter the market for almost 10 years, but also for Dalal Street, as the IPO could be among India’s largest ever.

NSE had first launched its IPO papers in 2016 to raise around ₹10,000 crore through an OFS by existing shareholders. However, Sebi withheld approval amid concerns related to governance lapses and the co-location case.

Now, 10 years later, after receiving Sebi’s no objection certificate (NOC) in January this year, NSE has finally submitted a fresh draft red herring prospectus (DRHP). At the prevailing unlisted price of its shares, NSE’s IPO could be worth ₹30,000 — making it the biggest so far in India’s IPO history and surpassing Hyundai’s ₹27,870 crore offer.

How NSE IPO may influence India’s market cap

The market capitalisation at current prices for NSE amounts to a whopping ₹5 lakh crore and could likely place it among the 10 most valuable Indian companies upon listing. NSE’s draft papers filing marks a significant milestone for Indian capital markets, which could not only attract foreign capital but also boost the overall market capitalisation by nearly 1%.

NSE’s valuation of approx. ₹5 lakh crore is enormous in absolute rupee terms, said Balaji Rao Mudili, Research Analyst at Bonanza. In relative terms, it is about 1% of the entire country’s market cap, he said.

The market cap of the entire Indian stock market is the sum total of all the stocks listed on the exchange.

Harshal Dasani, Business Head, INVasset PMS, said that while the headline arithmetic is meaningful, this should not be confused with fresh wealth creation. “A part of that value is already sitting indirectly in the books of existing shareholders. The real change is that India’s market infrastructure itself becomes a listed, price-discovered asset.”

How do large IPOs impact market

Large IPOs such as NSE’s tend to affect the market through liquidity absorption, portfolio rebalancing, and valuation signalling.

A huge IPO needs huge amounts of cash to be subscribed, which can lead to investors selling their existing holdings in order to raise the cash. When many people do this, it puts temporary selling pressure on already listed stocks, and the broader market can dip in the days around the IPO, said Mudili.

Additionally, another key impact which a large IPO can have is that it may eventually qualify for inclusion in indices like Nifty 50 or Sensex, and when this happens, every index fund and ETF tracking those indices is forced to buy the stock to match the index and to sell a bit of else to make room. That creates a wave of mechanical buying for the new stock and reshuffling across the market, he explained.

Meanwhile, NSE’s IPO could deepen institutional participation in the market, believe experts. However, eventual response will depend on the pricing, said Dasani. “A large IPO does not hurt the market because it is large. It hurts when valuations leave little margin for error and breadth is already weak,” he added.

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