Stock prices of BSE and IFCI surged on Monday on hopes of the listing of the National Stock Exchange, which is the highest valued company in the India unlisted space.
The upmove came after Securities & Exchange Board of India (Sebi) chief Tuhin Kanta Pandey said on Saturday that the regulator is likely to issue a no-objection certificate (NoC) for its proposed public issue by the end of this month.
NSE’s share in the unlisted space
This also drove the NSE’s share in the unlisted space to a fresh high of Rs 2,160 back to August-end level. The share price of its competitor BSE closed 4.8% higher at Rs 2,797 per share on the anticipated benefit from volumes it could get from the listing and that of public sector NBFC IFCI surged 17% to Rs 57.30 which holds 52.86% in Stock Holding Corporation of India (SHCIL), that has 4.4% of NSE.
The holding of retail investors in the company was 12.12% as of the quarter ended December as against 12.30% in the previous quarter.
What do market participants say?
George Joseph, CIO and CEO equity at ASK Investment Managers sees this news as a positive for NSE but he believes that market discovery has to happen as prices at which the shares are trading in the unlisted space are very different from those when the IPO is announced.
Shashank Udupa, SEBI Registered research analyst and Fund Manager on Smallcase, said that NSE has always been a compounder over the last decade mainly due to low competition and their ability to generate superior free cash flow and noted that it has grown their revenue 6x in 5 years while generating 75% operating margins.
On valuation, he said, it is trading at levels lower than BSE both from a Price to earnings ratio and price to sales ratio. “Depending on their listing valuation, there seems to be very limited valuation comfort here, for people who look at listing gains, the arbitrage might be less,” he said and added that BSE valuation seems a bit expensive.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.