California-based orivate equity firm Norwest Venture Partners (NVP) announced yesterday that it has entered into a definitive agreement with IL&FS Securities Services Ltd. for acquiring the 2.11-per cent stake it holds in India's National Stock Exchange (NSE) for around Rs250 crore.

Mumbai-based NSE, the country's largest stock exchange, is valued at Rs12,000 crore ($2.54 billion), which reflects its sound standing in global markets in terms of quality of operations, management and secular growth. The stock exchange has a two-thirds market share in the cash segment and 100 per cent in derivatives.

The all-cash deal settled at Rs2,650 per share of a face value Rs10, is likely to be completed by next week.

NVP said the valuations of NSE were at similar levels to January 2007, and the multiples were favourable compared to other regional exchanges.

The NSE board has given its approval for the transaction which is one of the biggest private equity deals this year.

NVP managing partner Promod Haque said in a statement, ''The NSE is regarded as one of the best operated exchanges globally, with world-class technology systems, a proven management team, and a wide range of products and industry leading processes that are unrivalled in the industry.''

The firm is extremely bullish on the value proposition NSE offers shareholders at a time when India is on the cusp of global influence.

NVP India managing director Sohil Chand was quoted in the statement as saying, ''The Indian market continues to show great potential and the fundamentals of the Indian economy are strong. NVP is pleased to align itself with the largest stock exchange in India, whose intrenched market position, high liquidity, and national network footprint are incomparable, and future growth opportunities are extremely promising.''

Last November the ministry of finance issued a notification clarifying foreign institutional investors (FII) could hold up to 23 per cent of the equity in an Indian Exchange, even if such exchange was not listed a decision that evoked more FII interest in the NSE.

NVP is a global multi-stage investment firm managing a capital of more than $2.5 billion with offices in the US, Israel and India. The firm has investments in US and global companies covering a range of sectors viz. information technology, business and financial services, consumer and infrastructure. The firm has funded over 450 companies since its inception.

Early in 2007, following the announcement of the new foreign direct investment (FDI) policy for the stock exchanges, four reputed foreign institutions became shareholders of NSE including NYSE Group, Goldman Sachs, General Atlantic and Softbank each acquiring 5 per cent stake, the investment cap set by the FDI policy from five domestic financial institutions at an average share price in the range of Rs2,250-2,500.

Both domestic and foreign institutional investors are keen on NSE going public, which would raise its valuations. However, NSE seems to be cool on the issue apparently due to unfavourable market conditions.