India's NSE valued at $2.3 billion in stake sale

A consortium of investors led by the NYSE group acquire 20% of India's leading stock exchange, the NSE in a deal which values it at $2.3 billion.
The NYSE group, General Atlantic, Goldman Sachs and Softbank Asian Infrastructure Fund have collectively acquired a 20% stake in IndiaÆs leading stock market, the National Stock Exchange (NSE). Each of the investors will hold 5% of NSE, in consonance with the maximum permissible under Indian regulations announced by SEBI recently in November. NYSE said it is paying $115 million for 5% of NSE, suggesting an equity value of the NSE of $2.3 billion. The NSE is currently not listed.

ICICI Bank, Industrial Finance Corporation of India, IL&FS Trust Company, Punjab National Bank and General Insurance Corporation of India, all NSE founders, are the selling shareholders.

The NSE was established as a demutualised electronic exchange by leading Indian financial institutions in the early nineties. It started business in June 1994 as the first screen-based trading facility for Indian wholesale debt markets. Shortly thereafter, in November of the same year, it started trading in the equities segment. Since then the performance of the exchange has been stellar and it is generally agreed that the NSE is the main reason stock trading in India has become more efficient and transparent. The NSE has grown to become IndiaÆs largest exchange and is ranked 3rd globally by number of trades in the equities market. In 2001 NSE introduced trading in equity derivatives and it is currently the largest exchange in single stock futures and ranks fourth globally in index futures. Its flagship index, the NIFTY 50, is used extensively by investors. In 2006, the average daily traded value in equities was around $2 billion and the notional average daily traded value in equity derivatives was around $7 billion.

Ravi Narain, MD and CEO of NSE says: ôIn a rapidly integrating world of financial markets, this timely partnership brings together the strengths of institutions from North America, Europe and Asia. This alliance marks a significant milestone for NSE in developing a place for itself in the emerging global scenario.ö

While terming the investment complementary to the NYSEÆs global growth strategy, John A Thain, Chief Executive Officer, NYSE Group adds, "The National Stock Exchange shares our global vision. Through a mutually beneficial partnership, the NSE and NYSE Group, and the future NYSE Euronext, will extend our global reach, strengthen relationships with customers, and advance our competitive position in India and throughout the region.ö

Meanwhile, NSEÆs main competitor, the Bombay Stock Exchange - which was established in 1875 and is AsiaÆs oldest stock exchange - is finalising its own plans for an equity sale and IPO. The BSE is currently owned by its broker members but has been directed to bring in strategic and financial investors to dilute brokers ownership to 51%.

The NSE deal, which is subject to various regulatory approvals, is expected to close in the first quarter of 2007. The NYSE Group was advised by Merrill Lynch.

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