NSE promoters may pare stakes after Sebi missive

The shareholding pattern of the National Stock Exchange is expected to witness major changes in the coming days as market regulator Securities and Exchange Board of India and the ministry of finance want stricter implementation of the demutualisation norms.

The most important provision in the guidelines notified recently is that no investor or entity will be allowed to hold more than 5% in stock exchanges, along with persons acting in concert.

It is reliably learnt that Sebi has asked both the NSE and the Over-the-Counter Exchange of India (OTCEI), set up as demutualised exchanges in the early ?90s, to adhere strictly to the guidelines. Highly placed Sebi sources dealing with the issue also confirmed the move, saying, ?Letters in this respect have been sent to both the exchanges.?

Shareholders who may be required to pare holdings to the 5% level following the Sebi and finance ministry directive are: Life Insurance Corporation of India (12.44%), IDBI Ltd (10.99%), State Bank of India (10.94%), Stock Holding Corporation of India Ltd (7.11%), ICICI Bank Ltd (6.64%) and Industrial Finance Corporation of India (5.44%).

At the time the guidelines were issued and notified, the ministry had played a critical role, asking Sebi to ensure that the norms be followed strictly by not only exchanges that were going to implement demutualisation schemes but also by those that were are already set up as demutualised entities.

NSE officials were unavailable for comment.

It may be recalled that the NSE recently concluded the placement of its 26% stake to 7 strategic investors in two tranches, with 13 of its 21 stakeholders participating. The top investors who sold their stakes in the first tranche included Industrial Finance Corporation of India Ltd which sold 7%, IL&FS Trust Company (5%), ICICI Bank (5%), General Insurance Corporation (2%) and Punjab National Bank (1%).

The buyers were NYSE Group, Goldman Sachs, General Atlantic Partners and Soft Bank Asian Infrastructure Fund. They bought 5% each in the NSE.

In the second round that saw 6% placement, the major sellers were IDBI and SBI. They sold 2% and 1.5%, respectively. The balance 2.5% NSE shares were sold together the public sector banks that individually held stake in a range of 0.50% to 1.42%.

The placement of 26% stake was under the foreign direct investment category.

Even after this placement, there are at least six shareholders that hold more than 5% in the NSE.