NSE IPO files DRHP: Why analysts see a long-term value play at a discount to BSE

That said they do not rule out volatility in the near-term. Let’s look at how some of the country’s key market experts and industry observers see the issue unfolding.  

NSE IPO: ‘Expect steady participation and record listing’ 

Given the size of the NSE IPO, Sandip Sabharwal of Asksandipsabharwal.com believes that it will be “well accepted by the markets. The price is quite well discovered because it is a very actively traded counter in the unlisted market. So it will be a large IPO with a large market capitalisation. And we should see a lot of participation from foreign investors in this IPO also.”

Market veteran Ajay Bagga added that “market expectation is building around a potentially record-setting listing. Current discussions point to a valuation that could make it one of India’s largest IPOs. Timing appears increasingly linked to regulatory clearances and market conditions, with investors closely watching developments after fresh disclosures in the filing process.”

He pointed out that “NSE will add substantially to the Indian large-cap universe and give a boost to the Indian market cap. Banks are constrained by capital market exposure limits in continuing to hold it. Once the post-IPO lock-in ends over the next year, we expect great institutional participation as well.”

Deven R Choksey, Founder and MD of DRChoksey Finserv, highlighted, “Well, we fundamentally remain very convinced about this kind of paper entering into the market. Also, because of the fact that some of the large investors in sovereign funds, insurance funds, and pension funds, particularly, I think, are the ones who like to buy these kinds of businesses which generate the regular cash flows. An exchange business is one such business which generates regular cash flow. So it’s an annuity business as we want to call it.”

NSE Vs BSE: Which exchange offers a more attractive proposition

But how does NSE stack up to its listed peer, BSE. When compared to BSE, Sabharwal believes “BSE moved into a premium in comparison to NSE valuations after the recent rally. That might not be sustained. It could also moderate the valuations across the exchange plays.”

He pointed out that right now only BSE and MCX are listed, and MCX is relatively smaller. But going forward, he expects a definite uptick in supplies once NSE makes its debut. “The supply increase (after NSE) and especially for NSE, given that a lot of institutions hold stakes in NSE. After the initial IPO and the lock-in ending, we will see a continuous supply coming into NSE stock into the markets. So I think that will keep the valuations at moderate levels.”

Deven Choksey highlighted that “The capital is not getting diluted at this point in time, as it is an OFS. We believe that with a 15-20% earnings growth and a 1-year forward price-to-earnings ratio of around 30 to 45 times, I think, the company from the valuation perspective is also attractive.”

Dipan Mehta, Director of Elixir Equities, added that, “BSE is valued around 63 times and NSE’s valuation is expected around 50 times. As I read from media reports, the market cap is expected to be around Rs 5 lakh crore, and 10,000 crore is the profit that they made last fiscal. So it’s at a discount.”

He added that “the response to the IPO will be expectedly good and you will get a good pop on listing as well. And then depending upon how much interest there is thereafter and what the quarterly numbers are, things will get going. But it is certainly a little bit of a discount to BSE’s present market value.”

Sneha Poddar, VP, Research, Wealth Management, Motilal Oswal,  elaborated that “At a current unlisted price of Rs 1,900, the stock is trading at trailing P/E of 45x and 38x on 1-year forward basis which is reasonable compared to BSE. Thus NSE is a reasonable proposition for a high-quality monopoly-grade franchise.”

Will NSE listing be a boost for Bombay Stock Exchange?

After a decade-long wait, tangled in regulatory and legacy overhangs, “this filing signals a mature, institutionalised regulatory environment,” as per Sneha Poddar. 

She pointed out that, “Considering India is the world’s largest derivatives market by contract count but still has a rock-bottom household equity penetration of just 5%, this IPO serves as the ultimate structural play on India’s multi-decade financialisation runway. 

According to her, “The listing transitions India’s exchange landscape into a highly visible, listed duopoly. With BSE trading at a premium due to its agile F&O market share gains, NSE’s formal listing will establish an institutional benchmark for price discovery, leading to a tactical rebalancing across all market infrastructure institutions.”

Dipan Mehta highlighted that the fact that NSE is likely to be listed only on the Bombay Stock Exchange “is definitely a boost to BSE as well, because their cash market volume may go up because it’s exclusively paid on BSE. Then that certainly will benefit BSE.”

According to Mehta. “It may eventually even benefit the BSE futures volume because it will find its way into the F&O market as well. In terms of the valuation, there are some assumptions that this could become one of the largest IPOs in terms of its relative valuation to BSE.”

NSE IPO: The big gainers

With NSE finally coming with an expected issue size of Rs. 30,000 crore, the question is who the big gainers are. 

SBI is the biggest seller in this OFS, followed by Morgan Stanley, Canada Pension, Bank of Baroda, Stock Holding, as well as the 4 PSU general insurance companies. LIC is conspicuous by its absence from the OFS list.

According to market veteran, Ambareesh Baliga, “This will also improve the perceived valuation of their listed shareholders. IFCI, which holds nearly 4.4% through its subsidiary Stock Holding Corp, has seen its stock double in the last 3 months. IFCI indirectly holds around 12,000 crore worth of NSE shares compared to its current market cap of around 24,000 crore. LIC is the other one which would benefit, as the value of NSE shares held by them compared to the market cap of LIC is around 10% at 50,000 crore.”

What’s the right strategy for retail investors 

That said, what should be the right strategy for retail investors. 

Sabharwal believes that it “purely depends on the pricing because it’s a well-traded stock in the unlisted market. So the price has been reasonably discovered. If they price it well, retail investors obviously will get a discount over the regular price. Then it could be something which could be good for retail investors, where they can just invest and hold for the long term.“

Sunil Jain, Head of Equity Research – Retail at Nirmal Bang corroborated the view that “It comes across as a good IPO. We are seeing exchanges like BSE, MCX are already trading and both are doing very well. So if the issue price is reasonable, then definitely, it is likely to do well. If the valuations are on a similar line, or maybe marginally ahead of them, then the market will definitely take it on a positive note. It’s a larger player, as compared to both of them. So definitely we’ll be commanding some premium over them.”

Dipan Mehta, however, cautioned that long-term investors should not be perturbed by near-term earnings volatility. “However, there will be volatility in earnings. Investors should be prepared for that. Especially if it’s a richly traded stock, you know, you buy a stock at 50-60 times. One bad quarter can certainly damage the sentiment. So long-term investors should certainly keep that in mind.”

Conclusion

Though early days yet, the NSE IPO DRHP filing has undoubtedly added a different type of excitement to the primary market action. While most experts see the prospect of a string listing, the potential gains would be a function of the relative earnings and valuation growth. For now all eyes are on the IPO pricing.

You can track full coverage on the NSE IPO here. Stay tuned to financialexpress.com for the latest on the NSE IPO. 

The market consensus, analyst commentary, and valuation metrics detailed in this article are for informational and educational purposes only and do not constitute an offer, invitation, or solicitation to subscribe to or purchase any public offering or security. Initial Public Offerings (IPOs) involve a high degree of risk and potential market volatility; past performance or unlisted market trends are not indicative of future listing results. Readers are strongly advised to review the official Draft Red Herring Prospectus (DRHP) carefully, conduct their own independent evaluation, and consult a SEBI-registered financial advisor before making any investment decisions. This disclaimer has been generated using AI to support user well-being and responsible content consumption.