India’s capital markets regulator, the Securities and Exchange Board of India (SEBI), is actively working to resolve key regulatory and governance issues that have delayed the much-anticipated initial public offering (IPO) of the National Stock Exchange (NSE). The IPO, first proposed in 2016, has been on hold for years due to a series of compliance, legal, and structural concerns.
IPO Still in Limbo After Nearly a Decade
Despite strong investor interest, NSE’s journey to the public markets has been anything but smooth. The exchange filed its draft red herring prospectus nearly a decade ago, but progress has been stalled by a combination of regulatory hurdles and unresolved legal matters. In August 2024, NSE once again approached SEBI for a “no-objection” certificate — a key step toward listing — but the regulator has yet to greenlight the proposal.
Clearing Corporation Ownership a Major Sticking Point
At the center of SEBI’s scrutiny is NSE’s ownership in its clearing arm, NSE Clearing Ltd (NCL). SEBI is pushing for greater separation between exchanges and clearing corporations to prevent any potential conflicts of interest, especially with the interoperability of clearing systems across stock exchanges now in place.
According to sources close to the matter, SEBI has asked NSE to present a comprehensive roadmap addressing how it plans to comply with the recommended ownership structure. NSE has argued that its current setup aligns with existing norms and has proposed that risks related to this issue be disclosed in its IPO prospectus.
Governance, Technology & Legal Legacy Weigh Heavily
Apart from the ownership debate, SEBI has highlighted governance and infrastructure concerns. The regulator is demanding that NSE strengthen its internal systems, improve technological robustness to prevent outages, and demonstrate enhanced corporate governance practices.
There is also the lingering shadow of the 2019 co-location controversy. Though SEBI officially dismissed charges against NSE in September 2024, certain aspects of the case remain under judicial review, contributing to the delay.
Executive Compensation Draws Regulator’s Gaze
SEBI has also flagged concerns over the compensation of senior executives at NSE. The regulator is seeking transparency and regulatory alignment in how executive pay packages are determined — another critical element to ensure shareholder trust in a post-IPO scenario.
A Delicate Balancing Act
In public statements, SEBI Chairman Tuhin Kanta Pandey has expressed optimism that the remaining hurdles can be resolved with constructive dialogue. “We are working to sort out the pending issues,” he said, underlining the regulator’s intent to move the process forward while maintaining high standards for investor protection.
NSE, for its part, has reiterated its commitment to regulatory compliance and market integrity. The exchange has also stressed that it continues to engage with SEBI on all outstanding matters.
Looking Ahead
With India’s capital markets seeing increasing global attention and a surge in retail participation, NSE’s IPO could be a landmark moment for the sector. However, unless the regulatory issues are thoroughly addressed, the listing will remain on the sidelines.
As things stand, SEBI’s measured but proactive approach appears aimed at ensuring that when NSE does go public, it does so on a foundation of trust, transparency, and resilience.
Conclusion
The journey of NSE’s IPO reflects the complex intersection of market ambition, regulatory oversight, and the evolving landscape of India’s capital markets. While the exchange remains a cornerstone of the country’s financial infrastructure, SEBI’s insistence on robust compliance and governance standards is a clear signal that market maturity demands accountability at every level.
The delays, though frustrating for investors and stakeholders, underscore SEBI’s commitment to ensuring that such a high-profile public offering is built on a foundation of transparency, fairness, and resilience. As global attention increasingly shifts to Indian markets, the eventual listing of NSE—if and when it happens—will not just be a milestone for the exchange, but a reflection of the regulator’s evolving role in balancing growth with responsibility.
If NSE can navigate the remaining regulatory challenges and align itself fully with SEBI’s expectations, its IPO has the potential to be a transformative event for India’s capital markets, attracting both domestic and international interest. Until then, stakeholders will need to remain patient, with the hope that the eventual listing delivers lasting value built on trust and strong fundamentals.