Soach Global set for 25-fold return selling part of decade-old NSE stake
Mauritius-based Soach Global is selling a fifth of its National Stock Exchange holding through an offer for sale in the exchange's IPO, which opened today.
Soach Global Strategic Holdings Limited, a Mauritius-based wholly owned subsidiary of Soach Global Opportunities Fund (together called "Soach Global"), has decided to sell part of the investment it made in the National Stock Exchange of India Limited (NSE) ten years ago. The fund is selling part of its stake through an offer for sale in NSE's IPO, which opened today.
The fund had bought 1,50,000 equity shares of NSE from Industrial Finance Corporation of India Limited (IFCI) in January 2016 at Rs 3,950 per share, for a total investment of Rs 59.25 crore at the time. Over the following ten years, various corporate actions increased the fund's holding to 82,50,000 shares without any additional investment. Accounting for these corporate actions, the fund's average purchase price now works out to Rs 71.8 per share.
The fund is now selling 16,50,000 equity shares out of its total holding of 82,50,000 shares, or 20 percent of its stake. At the IPO's price band of Rs 1,700 to Rs 1,785 per share, this sale will be worth about Rs 280 crore to Rs 295 crore, giving the fund nearly five times its original total investment, or about a 25-fold return. The fund will retain its remaining 66,00,000 shares in NSE, or 80 percent of its holding, which at this price band would be worth about Rs 1,120 crore to Rs 1,180 crore.
Anubhav Dayal, founder and director of Soach Global Opportunities Fund, said, "India is a rapidly growing economy. A large number of young people are looking for growth opportunities and are quickly understanding the risks and opportunities of entering the capital market. We are selling part of our promoter stake by participating in the offer for sale because we want a large number of ordinary retail investors to hold some stake in NSE. When these retail investors buy small stakes in NSE directly or through mutual funds, they too will benefit from NSE's growth, the same benefit we got by investing in NSE ten years ago. Of India's population of 1.4 billion, only about 13 crore are registered investors on NSE, and that is the biggest opportunity."
He further said, "In our country, there is a tradition of buying gold during festivals or family functions. Once a family buys gold, it is kept safely for a long time, often for generations, and sold only when absolutely necessary. Retail investors can compare NSE shares to buying gold. Being a multi-asset-class trading platform, NSE's revenue can grow while its operating costs remain largely fixed, since most of the expenditure has already been incurred. It is a high-technology platform that settles transactions in nanoseconds."
He also said, "It also offers trading facilities across asset classes such as equities, commodities, electricity derivatives, bond index futures and coal. As India's economy grows, the list of products traded will keep expanding. This will boost revenue on a largely fixed cost base. This will also be reflected in NSE's per-share price after listing. This is a one-time partial sale of our stake, and we have no plans to reinvest."
