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IIFL AMC fund picks up additional stake in National Stock Exchange

IFL Asset Management Company Ltd has bought an additional stake in the National Stock Exchange (NSE) through its fund that has raised a large corpus to invest in companies preparing to go public.

The asset manager is buying the stake via the IIFL Special Opportunities Fund through a recently concluded $100 million (Rs 640 crore) investment in NSE, which is the country's largest stock exchange.

This will take its overall stake to NSE to a little more than 2%.

IIFL Asset Management's chief executive officer Prashasta Seth confirmed the transaction. He added that IIFL is in the process of picking up additional stake in NSE and may eventually own up to 5%.

The fund had picked up a small stake in NSE for $60 million in the latter half of 2017. VCCircle had reported in August that the transaction was awaiting approval.

An email query sent late evening to NSE did not immediately elicit a response.

IIFL Special Opportunities Fund had increased its corpus to Rs 4,021 crore by raising a third tranche of Rs 601 crore. It had previously mobilised Rs 1,980 crore in the first tranche in May and Rs 1,440 crore in the second tranche in July.

The fund mainly invests in companies that are IPO-bound. The IIFL Special Opportunities Fund can invest a maximum of $100 million in one transaction, Seth had said in a previous interaction.

NSE had filed for an IPO in December 2016 and aimed to float the share sale by the end of 2017.

However, that did not take place and a mid-2018 timeline looks more probable.

This is because the exchange has yet to receive regulatory approval as the Securities and Exchange Board of India investigates whether the bourse provided some brokers unfair access to its servers.

Many NSE shareholders that had planned to offload their stakes via an initial public offering are now looking to strike secondary share sale deals owing to the delay.

The one-year share escrow ended in December. NSE initially had a six-month escrow agreement with its shareholders and then extended it by another six months. It did not seek a second extension and NSE has yet to re-file for an IPO.

NSE was to list shares on the rival bourse BSE Ltd.

The proposed IPO comprised only of an offer for sale by NSE shareholders including global private equity funds and financial institutions such as Tiger Global Holdings, Temasek Holdings, Goldman Sachs Inc., Citigroup as well as state-owned local lenders such as State Bank of India, IDBI Bank and Bank of Baroda.

While the IPO has been delayed, the NSE's shares and valuation have climbed. Its shares have risen 2.7 times to about Rs 950-1,000 apiece, compared with the off-market deals 16 to 18 months ago. This values the exchange at around Rs 49,500 crore ($7.71 billion).

NSE was valued at around Rs 45,000 crore when it had filed its draft red herring prospectus with the regulator. This was a substantial jump from its valuation in the build-up to filing for an IPO.

In early 2017, NSE chairman Ashok Chawla had said that the company had pushed back the IPO deadline to December and later until March 2018.

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