NSEs unlisted shares have declined despite IPO buzz as eligibility rules restrict last-minute participation in the offer-for-sale. With a one-year holding requirement in place, new investors are locked out of the OFS route, shifting focus to valuations and post-listing performance in an increasingly selective primary market.

NSE IPO: Unlisted shares crash despite offer buzz. Are late buyers locked out of OFS route?

The long-anticipated IPO of the NSE is moving closer to execution, but activity in the unlisted market is telling a more cautious story. Even as IPO expectations build, NSE's unlisted shares have failed to sustain earlier highs, slipping from a peak of around Rs 2,075 in January to nearly Rs 1,885 in recent trades.

This disconnect between IPO hype and price action reflects a shift in investor behaviour, with participants turning more valuation-sensitive rather than chasing pre-listing momentum.

The proposed IPO, expected to raise over Rs 20,000 crore, will be structured entirely as an offer-for-sale (OFS). This means the exchange itself will not raise fresh capital, and all proceeds will go to existing shareholders looking to exit partially or fully.

NSE is likely to offload about 4–4.5% of its equity through this route. The draft red herring prospectus is expected to be filed in the coming months, with June widely cited as a probable timeline.

Unlike typical IPOs where companies raise growth capital, this structure positions the NSE listing primarily as a liquidity event for existing investors.

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Who can participate in the OFS?

A key regulatory condition has effectively shut the door for new entrants hoping to capitalise on the IPO through the unlisted route.

Under SEBI rules, only shareholders who have held fully paid-up NSE shares continuously for at least one year prior to the filing of the draft papers will be eligible to tender shares in the OFS.

Practically, this means investors must have held shares since at least mid-June 2025 to qualify. Additionally, eligible shareholders are required to submit an expression of interest by April 27, 2026, to participate in the sale process.

Investors who miss this deadline or fail to meet the holding criteria will not be allowed to sell shares in the IPO.

Can you buy now to participate?

For investors considering buying NSE shares in the unlisted market today with the intention of participating in the IPO, the route is closed. Since the one-year holding requirement will not be met, any shares purchased now will be ineligible for the OFS.

This has important implications. It removes the incentive for last-minute speculative buying in the unlisted market purely for IPO arbitrage, which partly explains the recent cooling in prices despite strong buzz around the listing.

Why are unlisted prices not rising?

The decline in unlisted NSE shares despite IPO momentum can be attributed to multiple factors. First, analysts said the eligibility restriction has filtered out short-term participants. Earlier, investors could enter late in the unlisted market hoping to benefit from IPO pricing, but that window is now effectively shut.

Second, valuation concerns are emerging. Unlisted prices had already factored in aggressive IPO expectations, and with clarity improving around structure and eligibility, the market is recalibrating.

Third, broader sentiment in the primary market remains selective. Investors are increasingly focused on pricing discipline and post-listing performance rather than pre-IPO hype.

Large shareholder base adds complexity

NSE's shareholder base has expanded sharply over the past year, driven by strong demand in the unlisted market. The number of investors has surged from around 39,000 in early 2025 to over 1.8 lakh by the end of the year. This unusually large and fragmented base adds complexity to the OFS process, requiring the exchange to identify eligible sellers and assess participation before finalising the offer structure.

The exchange has already appointed a large consortium of bankers and legal advisers to manage the process, indicating the scale and complexity of the transaction.

For eligible shareholders, the primary uncertainty lies in pricing. Since the IPO will follow a book-building process, the final exit price is not known upfront and will depend on institutional demand. There is also execution risk. If the offered shares are not fully subscribed, any unsold portion could be subject to a six-month lock-in after listing, limiting immediate liquidity.

For new investors buying in the unlisted market, the risks are different. Participation in the IPO is not possible, and returns will depend entirely on post-listing performance.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times.)

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