NSE shares soar over 25% on boost from Securities Appellate Tribunal relief

The tribunal allows the exchange to use Rs 6,000 cr parked in an escrow

The move by the Securities Appellate Tribunal (SAT) to unfreeze the National Stock Exchange’s (NSE’s) Rs 6,000 crore has boosted the stock price of the country’s leading stock exchange.

People dealing in scrips of unlisted companies said the stock price of NSE has shot up from Rs 1,800 a month ago to Rs 2,300 this week, following the SAT order.

“Shares of the NSE have surged over 25 per cent. The stock is now changing hands between Rs 2,200 and Rs 2,300 apiece. The strong March quarter results and now the SAT relief have boosted the stock price,” said Dinesh Gupta, director of Unlisted Zone, a firm that facilitates buying and selling of unlisted company shares.

The SAT’s relief enables the exchange to unlock funds that are almost equal to one full year’s revenue.

In September 2016, amid a pending investigation of alleged wrongdoings at the NSE’s colocation facility, Sebi had directed it to transfer the revenue emanating from the colocation facility into a separate bank account. At the end of March 2021, the amount set aside by the NSE stood at Rs 6,085 crore.

After completing its investigation, the market regulator in April 2019 issued an order asking the NSE to disgorge Rs 687 crore with an interest of 12 per cent from April 2014 for the lapses at its colocation facility.

“The investigation is now over and, in order to balance the equities, we direct the appellant to further transfer a sum of Rs 420 crore to Sebi, which, in turn, will keep this amount in the same interest-bearing account and which will be subject to the result of the appeal. Further, the escrow account can be closed by the appellant and the balance amount can be utilised by the appellant for its business purposes,” the SAT said.

The NSE had immediately challenged Sebi’s April 2019 order before the SAT. As part of the appeal, the NSE had argued before the tribunal that it should be allowed access to the funds as the investigation was complete.

An intervenor had argued before the SAT that the exchange shouldn’t be allowed to withdraw the funds.

Accepting the NSE’s plea, the tribunal set a date of June 11 to hear further appeals in the matter.

The jump in the NSE’s share price over the past year mirrors gains made by other players of the stock market ecosystem, such as brokerages and depository firm CDSL.

Growth in stock prices has been underpinned by record additions in new client accounts over the past 12 months and a surge in trading volumes. In FY21, India added over 14 million new Demat accounts.

For the 12 months ended March 31, 2021, the NSE’s net profit soared 90 per cent YoY to Rs 3,573 crore on the back of a 59 per cent surge in total income to Rs 6,202 crore.

“In the unlisted space, the NSE is among the stocks that are most in-demand. The company has a near-monopoly and demonstrated healthy growth in profitability over the years,” said Gupta.

In 2016, the NSE had filed its draft red herring prospectus (DRHP) for a Rs 10,000-crore IPO. Ho­wever, due to a colocation probe, the exchange was not able to proceed with its listing plans.

Back then, the exchange was looking at a valuation of Rs 40,000 crore. At Rs 2,300 per share, the NSE will be valued at Rs 1.1 trillion.