NSE IPO likely to unlock massive gains for SBI, LIC
Mumbai, June 18
The proposed initial public offering of the National Stock Exchange is expected to unlock massive gains for several state-owned financial institutions, including State Bank of India, while also highlighting the embedded value of holdings owned by Life Insurance Corporation of India, according to reports.
According to the NSE's draft red herring prospectus (DRHP), SBI plans to divest 2.475 crore shares through the offer for sale.
At an assumed IPO price of about Rs 2,000 per share, the stake sale would be worth nearly Rs 5,000 crore, the reports said.
The disclosures show that SBI acquired its shares at a weighted average cost of just Rs 0.80 per share.
In addition, several other public sector institutions that backed NSE in its early years are also poised to reap substantial gains.
Shares of Life Insurance Corporation of India (LIC) may attract attention as the insurer remains NSE's largest shareholder with a 10.72 per cent stake, despite not being among the selling shareholders in the proposed IPO.
Bank of Baroda, with a weighted average acquisition cost of Rs 0.54 per share, would sell shares worth about Rs 2,197 crore at the assumed IPO price.
Meanwhile, Stock Holding Corporation of India Ltd. is expected to monetise holdings worth around Rs 2,178 crore, despite acquiring its shares at a weighted average cost of Rs 0.46 apiece.
Among insurers, The New India Assurance Company and National Insurance Company acquired their shares at a weighted average cost of Rs 0.32 each.
At the assumed IPO price, the shares being offered by New India Assurance would be worth around Rs 2,100 crore, while National Insurance Company's stake would fetch nearly Rs 1,200 crore.
United India Insurance Company, whose acquisition cost stood at Rs 0.50 per share, is also set to sell shares worth about Rs 1,200 crore.
General Insurance Corporation of India, with a weighted average acquisition cost of Rs 5.26 per share, would monetise shares worth more than Rs 2,131 crore.
However, the final valuation will be determined closer to the issue launch.
NSE on Wednesday filed its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) and the BSE for its much-awaited IPO. The proposed listing will see NSE's shares traded on the BSE.
— IANS
Reader Comments
LIC holding 10.72% is huge! If NSE lists at even Rs 3,000, that's worth over Rs 30,000 crore for policyholders. But I wish some of these gains would trickle down to us common taxpayers who bailed out these banks in the past. Still, a good sign for the economy.
Honestly, this feels like wealth creation for the government at the expense of private investors who weren't allowed to buy NSE shares earlier. The DRHP is 1,000 pages long and there are risks like regulatory actions (remember the co-location case). I'll wait for the final price before deciding.
My father worked in a PSU bank in the 1990s when they invested in NSE. Everyone thought it was a waste of taxpayer money back then. Now look—everyone's a genius in hindsight. The real winners are those who held on for 30 years. Patience pays in India.
As an ex-investment banker, this is textbook 'strategic sale.' The government is using NSE's IPO to make PSUs look profitable before disinvestment. The real question: can NSE sustain its monopoly when BSE and new players like MSEI are growing? Also, the regulator's investigation into NSE's algo trading will be a key risk.
Wait—SBI bought shares at Rs 0.80 and now they're selling at Rs 2,000? That's a 2,500x return in 30 years! My mutual fund SIP hasn't given me even 5x in 10 years. Maybe I should just
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