NSE shares are up almost 30% in the unlisted market, after bonus and dividend
The National Stock Exchange (NSE), the country’s largest stock exchange, has seen its market value rise by nearly Rs 85,000 crore to Rs 3.21 trillion after announcing a four-for-one bonus issue and a dividend of Rs 90 per share .
The shares have risen to Rs 6,000 apiece in the unlisted market from Rs 4,500 before last week’s results.
Industry experts say that interest among retail and high net worth investors (HNIs) in the stock has increased following the bonus issue. With the bonus issue, the stock will trade in a range of less than Rs 1,200-1,500, it will appear cheaper and
also boost liquidity, they said.
According to many, the announcement of the bonus issue by the NSE board could be a precursor to the initial public offering (IPO). Although the stock exchange has been aiming to go public for more than five years, its plea to the regulator has not yielded much results. As a reason for this, the share price was restricted until December 2023 and only gained momentum this year.
After the earnings, the exchange said it had no update from the regulator on the upcoming IPO.
“The phase-1 approval when someone buys or sells NSE shares takes place on the same day. However, since the ISIN is frozen, the share transfer process is done manually which takes 2 to 3 months. The exchange and the custodian are trying to speed up the process. However, there has not been much progress on that front,” said Dinesh Gupta, director of Unlisted Zone.
The exchange’s management had confirmed last year that they were working to reduce the processing time to one week.
However, it is still a time-consuming process as regulations dictate that exchanges can only be made by ‘fit & proper’ entities. According to industry players, there are two phases of approval to buy NSE shares.
The first is KYC and the second is approval for processing the transfer of shares. In cases where the buyer has purchased the shares in the past, the KYC stage is not required again.
The first phase can last almost two months, while the second phase requires fourteen days or a month.
“Given the manifold rise in rival BSE’s shares, NSE’s valuation is actually attractive now as the stock has not moved much in the past year due to regulatory issues and uncertainty surrounding the IPO,” said Gupta. .
While there are concerns that BSE will gain market share, overall option volumes continue to increase, which will keep NSE’s earnings growth robust, he said.
First print: May 10, 2024 | 10:48 PM IST