Big Relief For NSE- SEBI Drops Charges Against NSE Co-location Case

The Securities And Exchange Board of India(SEBI) has dropped all charges against the NSE & its ex-officials in the Co-location Case. Citing a lack of evidence, the Indian market regulator dropped charges against seven former executives including Chitra Ramkrishna, Ravi Narain, and Anand Subramanian.

The History Of Alleged Co-location Scam

In 2015, NSE filed its draft papers with SEBI for its IPO. However, it was delayed due to NSE irregularities. SEBI has raised certain governance issues for NSE. One of them included the co-location scam of 2015 where several algo traders rented out areas near the NSE servers. Thus getting an upper edge in wrongfully obtaining prior information and then picking up large chunks of money in trading.

After being alerted, SEBI investigated the facts and found that NSE violated several SEBI Act provisions and the Stock Exchanges and Clearing Corporations (SECC) Regulations. In 2019, SEBI passed an order stating the disgorgement of money and directed NSE to pay Rs 625 crore along with interest plus a penalty of Rs 100 crore.

In 2019, after the whole co-location scam came out, SEBI banned NSE executives, namely Chitra Ramkrishna and Ravi Narain for putting in place such networks which allowed unfair access to some network servers of the exchange. The Enforcement Directorate (ED) also arrested Chitra Ramkrishna, in the phone tapping case.

SEBI’s Latest Statement

The market regulator said there were some non-compliances at the NSE Co-location facility. Still, there was no evidence to justify any “collusion” or “connivance” with brokers OPG Securities, who were deemed to have unfair access to NSE’s secondary server.

“It is held that due to the absence of sufficient material/evidence/ objective facts on record in this case, the test of ‘preponderance of probability’ fails to produce enough justification for the establishment of collusion/connivance between OPG and its directors with Noticees,” Kamlesh Varshney, whole-time member, Sebi said in an 83-page order.

Big Relief for NSE Planning IPO

For the last 8 years, SEBI has been hesitant to permit NSE to issue its IPO. This was primarily due to the alleged mismanagement and system loopholes NSE faced when called out for a Co-location scam.

Thus the market regulator rejected or delayed accepting the DRHP for NSE’s IPO. This decision brings back NSE’s credibility in the eyes of SEBI. Now NSE can confidently file its IPO and get its shares listed in the stock market.

Read more about NSE’s unlisted shares here

NSE Financial Performance

NSE’s total revenue in the quarter ending June ’24 increased by 47% from INR 3,357 crores to INR 4,950 crores. This significant rise showcases NSE’s ability to generate continuous growth in operations.

Total Expenses in FY 25 Q1 were Rs 943 crores, before contribution to Core SGF Fund. This is 16% more than YoY Rs 826 crore spent in the same year.

The Profit After Tax rose 39% Year on Year from Rs 2568 crore to Rs 1844 crore thus increasing the profitability.

Read in-depth analysis of NSE’s latest financial performance here

Is It The Right Time To Buy NSE Unlisted Shares?

The NSE in India is one of the most actively traded shares in the unlisted market. With its recent financial performance and declaring a 4:1 bonus issue, theNSE Share price jumped from Rs 6000-6500 per share.

It is dominating with more than 90% market share in all categories. Compared to BSE, its revenue growth has been three times more than BSE for the last four years. NSE IPO may come soon as SEBI has given a green flag for the alleged scam. Based on its recent returns and positive news indicators, this can be the right time to buy.

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