CHALLENGES AHEAD AS LIMAYE TAKES CHARGE AT NSE
Having been a part of the financial industry during the 2008 global meltdown and the recent asset quality problem, Vikram Limaye is no stranger to handling a crisis. However, 50-year-old Limaye, who has studied chartered accounting and possesses an MBA, has now embarked on one of the most challenging assignments of his career, in taking charge of the National Stock Exchange (NSE).
Limaye has taken the chair of managing director (MD) and chief executive officer (CEO), a little over seven months after predecessor Chitra Ramkrishna quit unexpectedly, and around five months after the exchange’s board of directors approved his appointment.
The country's largest stock exchange has been in a fire-fighting mode for about two years. It has been staving off intense shareholder pressure to go public, while lobbying to allow self-listing. At the heart of its problems have been the allegations against it and its employees for giving of unfair access to certain brokers at its co-location (colo) facility.
The exchange and 14 of its current and former key personnel have responded to show cause notices from the Securities and Exchange Board of India (Sebi) on the issue, seeking explanations over their roles and responsibilities. NSE has been keen to settle the case through the consent mechanism route, under which an alleged wrongdoer can settle charges by accepting a penalty but without formally admitting any guilt.
Sebi has initiated an audit to ascertain if any entities made monetary gains by gaining preferential access. It hasn't said if the colo issue can be settled through consent, which would help NSE save time. Limaye's priority would be to quickly resolve this controversy. Given his previous role as MD & CEO of financing entity IDFC, he's used to dealing with regulators and government bodies. He would hope these skills will now prove handy. Both Sebi and NSE have stated there won't VIKRAM LIMAYE, the new MD and CEO at the National Stock Exchange, tells Samie Modak he doesn't want to give a timeline for the co-location (colo) issue to be settled but would like it to end soon. Edited excerpts: NSE is keen to settle the colo issue through consent. At what stage are the consent talks? There have been discussions between NSE and Sebi (the markets regulator) on the consent process. Now that I have joined, I will pursue those talks and see how we can move along. In any consent process, a formal application needs to be made. That will have to be made first. Then, Sebi will review it and then agree whether to take it for consent. What if Sebi rejects the consent plea? If consent doesn’t go through, then Sebi will decide how to conclude this thing, by undertaking a formal legal process. Any time frame to settle the issue? I would like this to end as soon as possible but can’t come up with a be an Initial Public Offer of equity (IPO) till the colo controversy is settled.
“My immediate priorities would be sorting out regulatory issues; improving stakeholder relationships, which might have taken a beating in the past few years; boosting employee morale and stability; strengthening controls and process; and taking the NSE public, the timing of which will depend on when the regulatory issues get sorted,” Has the EY audit report on NSE's cash and currency segment come? It is expected in the next two to four weeks Has Sebi appointed any auditor to ascertain monetary gains due to the colo issue? That is a separate exercise Sebi is conducting. They are not doing it through NSE. I am not aware of anyone they have appointed. Was there any financial loss due to last week’s trading glitch? None was brought to my attention. A detailed report on Monday’s glitch is being finalised, in terms of the nature of the problem. That will get discussed with the standing committee for technology at NSE. Once we have their views on the nature of the issue and steps taken to address it, the report will be shared with Sebi and the (finance) ministry. says Limaye. Cash-rich NSE filed for a ~10,000-crore IPO with Sebi last December, to provide exits to several of its investing shareholders. The exchange's board is hopeful that it will be able to hit the market within a short time after the colo issue is settled. The IPO's timing is important, given the shareholder pressure.
For years, Tiger Global, Temasek, Norwest Venture Partners and others have been eager to cash on their investments. “Several important things such as the IPO and new product launches have got put on hold due to the controversy. Everything revolves around how quickly NSE is able to settle the pending regulatory issues,” said a senior executive at one of NSE's shareholders, adding that a lot of them were beginning to lose patience.
So, while Limaye will have to battle legacy issues, he will also have to ensure the exchange is able to maintain its leadership position.
In heading the country’s largest exchange, India’s financial nerve in a way, Limaye will also have to live with intense scrutiny from all quarters — brokers, regulators, government, shareholders, and the public at large. This was demonstrated when the exchange had to halt trading for three hours last Monday, after being hit by a technical glitch.
Meanwhile, in his first address to NSE employees, Limaye said he was very optimistic about the future and strongly believed the best was yet to come for this group. He sent an e-mail to all staffers, highlighting the importance of the institution in market development, challenges faced and the need for working together.
“We are all here because we believe in a higher purpose. We are an institution of national importance and a critical pillar of the country’s market infrastructure. We will play a key role in the development of markets, and in providing the products and infrastructure to fund the country’s growth through better intermediation of savings, and providing access to capital to our country’s companies ,” he said.