Sebi weighs NSE IPO nod, stresses public interest over commercial pressure

MUMBAI: India’s largest stock exchange has long been waiting to go public. But as the National Stock Exchange (NSE) renews its bid for an initial public offering (IPO), the country’s capital markets regulator is making its priorities clear: investor protection comes first.

The Securities and Exchange Board of India (Sebi) is currently reviewing NSE’s application to proceed with its IPO, Sebi chairperson Tuhin Kanta Pandey said Thursday on the sidelines of the Confederation of Indian Industry’s (CII) Corporate Governance Summit in Mumbai.

“We will not allow commercial interests to override public interest,” Pandey said. “It is the regulator’s responsibility to ensure that.”

A Sebi letter to NSE echoed the sentiment: “The culture of giving primacy to public interest over commercial interest must run deep at the operational level as well.”

The regulator’s remarks underscore a cautious approach, as it weighs systemic risks and stakeholder interests before approving one of India’s most anticipated listings.

NSE had filed its draft red herring prospectus back in 2016, but has yet to receive the regulator’s go-ahead to list. The latest application, filed in August 2024, has once again drawn detailed scrutiny from Sebi.

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In its letter dated 28 February 2025, Sebi flagged four key issues: the robustness of NSE’s technology systems, the role and conduct of key managerial personnel, unresolved legal matters, and compliance with norms governing its clearing house subsidiary, NSE Clearing Ltd (NCL).

NSE formally responded on 28 March, detailing improvements in its technology framework, governance practices, and internal structure. It also outlined corrective steps to address compensation gaps and compliance lapses, and reaffirmed adherence to existing norms on ownership and independence of its clearing operations.

Addressing broader governance issues, the Sebi chief stressed the need to strike a balance between investor protection and ease of doing business.

“We are conscious that over-regulation can stifle growth and innovation. At the same time, too little regulation can reduce stakeholder interest and adversely impact growth,” Pandey said, emphasizing that Sebi intends to resolve the NSE issue at the earliest.

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He called for “optimal regulation” and highlighted the importance of self-governance among market participants. “Boards must rise above routine and ask difficult questions,” he said. “Auditors and independent directors must act as gatekeepers of integrity.”