After a wait of 10 years, the NSE IPO is here. The company has now filed its DRHP. Apart from the key details like issue size and marquee investors selling shares, the risks stated by NSE are a key point of interest.
NSE has highlighted that any decrease in volume, regulatory scrutiny, IT structure failure, and other factors are likely to affect its business.
NSE lists 5 key risks in IPO DRHP
Based on the prospectus, here are the material risks listed by NSE that could potentially impact its business and operations.
#1 Decrease in trading volumes and values
A significant portion of the company’s revenue comes from transaction charges based on trades executed on the exchange. Any decrease in the volume and value of these transactions could significantly reduce revenue and constrain growth. This could be due to macroeconomic factors, shifts in investor sentiment, or regulatory interventions.
#2 Regulatory scrutiny and enforcement actions
The exchange operates in a highly regulated industry, which is overseen by SEBI, the RBI, and other statutory authorities. In the past, the company has been subject to enforcement actions, penalties, and adjudication proceedings related to regulatory violations. So, going forward, there are any adverse findings from SEBI inspections that could result in stringent operational restrictions, significant monetary penalties, or the revocation of necessary registrations.
Just to give you context, the company was alleged to have preferential access to tick-by-tick data and to have permitted unauthorised service providers to lay fibre on NSE premises. In 2019, SEBI ordered a forced penalty of almost Rs 624.89 crore and prohibited NSE from accessing the securities market for six months.
While some parts of these orders were set aside by the Securities Appellate Tribunal (SAT) in 2023, the matters are now pending as settlement applications involving a cumulative provision of Rs 1,391.21 crore as of FY26.
#3 Information technology infrastructure failures
As a fully electronic exchange, the company’s business depends entirely on the continuous and secure performance of its IT infrastructure. Any disruptions, software malfunctions, or system inadequacies (such as the primary storage network failure in 2021 that halted all trading for over five hours) could lead to extended trading halts, financial penalties from SEBI, and loss of market share.
#4 Concentration of revenue in derivatives
The company’s revenue is heavily concentrated in its options and futures businesses, which contributed a combined 69.14% of revenue from operations in FY26. This concentration exposes the exchange to risks specific to the derivatives market, such as SEBI-regulated measures to curb excessive speculation (for example, increasing contract sizes or reducing weekly expiries), which have already led to moderated trading volumes.
While the company sees concentration in derivatives, it also has a significant dependency on a small number of participants. The top 10 trading members accounted for 46.78% of revenue from operations in FY26.
#5 Market share erosion due to interoperability
The introduction of “interoperability” among clearing corporations has quietly begun to erase the company’s dominant position. Since clearing can now be done through any authorised corporation regardless of where the trade was executed, the company’s subsidiary, NSE Clearing Limited (NCL), has seen its market share in settlement turnover decline. NCL’s market share in the cash market dropped to 88.42% in FY26 from 94.24% in FY25.
Conclusion
All in all, the exchange works under a heavily scrutinised sector. This means any regulatory bypass will result in a heavy penalty and loss of business. The example of the co-location case proves the kind of risk NSE carries with it.
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