A flurry of activity in unlisted NSE shares has nearly tripled the investor base of India’s largest stock exchange since it expedited the process of transferring shares between counterparties on 24 March, according to a regulatory circular. The easing is a precursor to a listing of the stock exchange. NSE applied for a no-objection certificate for its IPO with Sebi last August and is still awaiting approval.
With the share transfer process having been slashed from three to four months to just one day, the investor base of NSE has grown nearly three-fold from around 22,400 in late March to around 60,000 as of 11 April, a spokesperson for the exchange said.
“The investor base as on 21 March (the last trading day before NSE’s International Securities Identification Number or ISIN was activated, allowing for faster share transfers) was around 22,400… and as on 11 April it is around 60,000,” the spokesperson added. NSE’s investor base on 3 January was around 20,500, he said.
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NSE’s ISIN, a global identifier for securities, had been in suspended mode prior to 24 March. This meant share transfers took up to four months, during which time NSE had to vet the bona fides of the prospective buyer in accordance with Sebi’s fit-and-proper criteria for a shareholder of a market infrastructure institution (MII). In the case of other listed and unlisted securities, the transfer happens on the day after the trade (T+1).
The fit-and-proper test says a person holding shares of an MII should possess financial integrity, be unencumbered by civil liabilities or conviction, and have a good reputation and character, among other things.
Note to self
Though Sebi’s circular last October was about easing of share transfers for unlisted MIIs, NSE said it applied to its own share transfer on 21 March, after Tuhin Kanta Pandey took charge as Sebi chairman from Madhabi Puri Buch on 1 March.
This has resulted in shares being transferred in a day, according to brokers who deal in listed and unlisted shares. Only fit and proper persons can buy the shares, and NSE has designated CDSL as its depository, which holds shares electronically in the name of buyer in his or her demat account. The depository participants act as intermediaries between the buyer and seller and the depository – either CDSL or NSDL.
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“The increase in the investor base is thanks to transfers being effected in a day, against months earlier,” said Narinder Wadhwa , managing director of SKI Capital Services. He said the change allows investors who wish to buy small lots of shares (100 or fewer). Institutions and high-net-worth individuals (HNIs) typically buy thousands or tens of thousands of shares at once.
“The ISIN activation has increased liquidity on the NSE counter,” said a broking official who was executing a secondary sale of 125,000 shares on Tuesday. He did not elaborate as he is not authorised to speak to the press.
NSE’s shares traded between ₹2,260 and ₹700 last month, according to exchange data. It has a market capitalisation of ₹4 trillion, while its listed peer BSE had a market cap of ₹79,859 crore during trading on Tuesday .
NSE’s top shareholders as of the December quarter were Life Insurance Corporation of India (10.72% stake), Aranda Investments (5%), Stock Holding Corporation of India (4.44%), and SBI Capital Markets (4.33%).
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