The National Stock Exchange’s (NSE) long-awaited IPO moved closer to reality on Friday (September 4) after SEBI issued its final observations on the offer documents. According to the processing status of draft offer documents released by SEBI, the regulator has issued its final observations on the IPO papers. NSE is expected to file an updated draft red herring prospectus next week.
The proposed IPO will be entirely an offer for sale, involving 14.89 crore shares i.e. nearly 6% of NSE’s equity. The issue could be worth around Rs 30,000 crore, according to a PTI estimate. The approval follows a listing process that became entangled in regulatory investigations, governance concerns and prolonged litigation.
2015-16: Co-location allegations disrupt IPO plan
The roots of the delay go back to 2015, when a whistleblower alleged that certain brokers had obtained preferential access to NSE’s trading systems through its co-location facility.
NSE had introduced co-location in 2009, allowing brokers to place their servers inside the exchange’s premises for a fee. The arrangement reduced the time needed to receive market data and place orders. It is an important advantage in high-frequency trading.
According to SEBI’s subsequent findings, NSE’s tick-by-tick data architecture was susceptible to misuse because traders connecting early to certain servers could receive information ahead of others. The regulator also investigated allegations that select brokers received preferential access to backup servers.
Even as these investigations continued, NSE sought SEBI’s approval for a listing in October 2016 and filed its first DRHP in December that year. According to NSE’s original offer documents, the IPO was structured as an offer for sale by existing shareholders.
However, SEBI did not clear the proposal as the co-location investigation and concerns about the exchange’s technology systems and governance remained unresolved.
2019-22: Regulatory action and governance questions
In April 2019, SEBI directed NSE to disgorge Rs 624.89 crore, along with interest, in the co-location case. The regulator also barred the exchange from accessing the securities market for six months, effectively preventing an immediate revival of the IPO.
A separate SEBI investigation examined the provision of high-speed “dark fibre” or leased-line connectivity to certain brokers. The additional proceedings increased the legal uncertainty surrounding the exchange.
Governance concerns returned to the fore in February 2022. In an order involving former NSE managing director Chitra Ramkrishna and other officials, SEBI examined irregularities in the appointment of Anand Subramanian and Ramkrishna’s sharing of confidential exchange information with an unidentified person. The order intensified scrutiny of oversight and decision-making at the systemically important market institution.
2023-26: Appeals and settlements clear the way
NSE secured partial relief in January 2023 when the Securities Appellate Tribunal set aside SEBI’s disgorgement direction. SAT said there was no finding that NSE had made illicit gains or engaged in fraud or collusion. It nevertheless directed the exchange to pay Rs 100 crore for failing to exercise adequate due diligence while operating the co-location facility.
SEBI subsequently challenged the SAT ruling in the Supreme Court, keeping the dispute alive and continuing to cloud NSE’s listing plans.
NSE then began pursuing negotiated settlements of its outstanding regulatory cases. In October 2024, the exchange and several former officials paid Rs 643 crore to settle a separate case involving its Trading Access Point architecture, according to a SEBI settlement order. The settlement amount was revised to around Rs 1,491 crore and received SEBI’s in-principle acceptance in 2026.
SEBI issued NSE a no-objection certificate for listing on January 30, according to an announcement by the exchange. NSE then filed fresh draft offer documents on June 17.
The Supreme Court on September 3 accepted the settlement reached between NSE and SEBI. The court disposed of SEBI’s appeals concerning NSE in the co-location and dark-fibre cases, although proceedings against Ramkrishna and other former officials will continue separately.
The Supreme Court decision removed the final major legacy hurdle. SEBI’s approval on Friday now takes NSE closer to a listing nearly ten years after its first IPO filing and more than a decade after the controversy that derailed the process began.