Mutual funds eye NSE IPO as the last major capital pool seeks a stake

As per the latest business developments, Mutual funds, which manage around Rs 60-65 lakh crore and have largely stayed out of NSE so far, are now looking to participate in the exchange’s upcoming IPO.

Harish Krishnan, Chief Investment Officer at Aditya Birla Sun Life AMC, stated mutual funds represent the one large pool of capital that has not yet owned NSE shares. “We are the ones who have been left out of this huge party over the course of the last 25 years. We definitely want some of the action,” he stated at the CNBC-TV18 Market Forum.

The NSE IPO is entirely an offer for sale of around 5.1% equity, anticipated to mobilize around Rs 22,569 crore at the upper end of the price range. This values the exchange at nearly Rs 4.4 lakh crore. NSE already has nearly 2.28 lakh public shareholders who collectively own 67.5% of the firm.

Krishnan described exchanges as the “vanguard” of the financialisation of savings in India. Owning a stake in NSE, he stated, offers a long-term way to participate in the country’s economic expansion because the exchange collects a toll on market activity. He additionally flagged the central valuation question that will confront the market after stock-exchange debut: whether NSE will be priced more like a expansion stock or like a public utility.

“The key question is, is it really going to be priced more like a expansion stock or is it going to be priced like a public good utility stock?” Krishnan stated. Exchanges function in many ways as a public good, which brings defensibility of cash flows and dividends. At the same time, that utility character raises the question of how much earnings a monopoly-like institution will be allowed to retain over time. He noted that banks as a group earn around 1% of GROSS DOMESTIC PRODUCT as their earnings pool, and similar debates around what is “too much” for a public utility will continue for exchanges.

Harsha Raghavan of Convergent Finance first invested while at Goldman Sachs Private Equity in 2006 and later again through Fairfax India in 2016. He stated the goal was always to invest in a fundamental platform that was helping shape the Indian economy. “There’s a saying that the house always wins. In this case, NSE is the house,” he noted. Raghavan anticipates the stock to pop 20-25% in the first four to six weeks after stock-exchange debut, arguing that while it is widely held by individuals, it is still not widely held by mutual funds or large global institutions such as Fidelity and BlackRock.

Raghavan noted that retail market participants at present trade around Rs 5,000 on average; as India’s wealth rises, that could move to Rs 6,000-8,000, lifting values on the exchange.

Manish Kejriwal of Kedara Capital invested through Temasek around 2010, after the global financial crisis. He called financial services one of the best proxies for India’s secular expansion and stated the team was proud to have supported the institution. “I don’t think at that time we thought it would take 16 years to get liquidity,” he stated, adding that the secondary market had still provided an efficient exit route in the interim. Kejriwal took the other side of Raghavan’s stock-exchange debut-pop bet, saying he is more constructive on the 10-year outlook than the short term.

Veteran investor, Ramesh Damani described NSE as an institution that took Indian capital markets “out of the stone ages” through electronic trading and easier settlements. He recalled the romance of the old open-outcry system but stated the electronic platform is fairer, more accurate and far more democratic. On a busy day under the old system, the Bombay Stock Exchange might do Rs 400 crore of trading that took weeks to settle. Today the same volume can be handled in a minute.

NSE at present handles more than half of all equity derivative contracts traded globally and accounts for around 11.38% of cash equity trades worldwide. It has 13.2 crore unique registered market participants covering 99% of India’s postal codes. In FY26 the exchange noted topline of nearly Rs 16,600 crore and earnings after tax of around Rs 10,300 crore, with margins in the mid-to-high 70% range.

Several speakers pointed to continued volume expansion drivers: rising retail participation, elevated average ticket sizes as wealth increases, more listings, and the still-nascent bond and commodity markets. Manish Kejriwal further noted that volume expansion is secular and that the number of active market participants could climb from the current ~180 million toward 300 to 350 million over time.

The IPO is scheduled to open on September 17.