Anil Ambani’s Reliance Money has entered into an agreement with the third largest commodity exchange in the country, National Multi-Commodity Exchange (NMCE), to pick up to 26 per cent stake in the bourse. Six months ago Bombay Stock Exchange (BSE) had picked up 26 per cent in NMCE for Rs 100 crore and Reliance Money is expected to pay the same amount, Business Standard. Both the deals give NMCE a valuation of around Rs 400 crore.
The agreement now awaits the approval of the commodity markets regulator Forward Markets Commission (FMC). Ahemadabad-based NMCE is the smallest of the three commodity exchanges that have a national presence, with a market share of less than 5 per cent of total turnover in 24 commodity exchanges across India. Top commodities traded on the NMCE include pepper, rubber and cardamom.
Reliance Money will acquire the stake through issue of fresh equity, which is expected to diminish stake held by other shareholders. BSE will also have to buy more shares to maintain its 26 per cent stake and issue of management control might also be a question after entry of Reliance, the report added. It goes on to add that BSE has still not paid for its stake despite appointing members on the board of exchange. Other shareholders in NMCE include Central Warehousing Corporation (CWC), Neptune Overseas, Punjab National Bank and National Agricultural Cooperative Marketing Federation of India (Nafed).
Anil Ambani has been eyeing business of commodities exchanges for some time now, along with other players such as Kotak Mahindra Bank and IndiaBulls. This deal will give Reliance ADAG a headstart rather than waiting one-and-half to two years for FMC approval and starting from scratch. Reliance Money will have two seats on the NMCE board.
Buying a stake in commodities exchange in the country’s rapidly growing economy and consequent commodities boom seems to be very lucrative. National Stock Exchange (NSE) owns 2.56 per cent of Multi-Commodity Exchange of India Ltd (MCX), which has around 70 per cent share of all commodities futures trade in India. It also holds 15 per cent stake in National Commodity and Derivatives Exchange (NCDEX), the country’s second largest commodity bourse.
Foreign exchanges and financial institutions are also buying into Indian commodity exchanges. In a recently concluded deal, NYSE Euronext picked up a 5 per cent stake in MCX for $55 million.
Citigroup and Merrill Lynch also own 5 per cent stake each in MCX. Intercontinental Exchange Holdings Inc has an 8 per cent stake and Goldman Sachs has 7 per cent stake in NCDEX, which they may have to pare down to 5 per cent, according to the norms stipulated by market regulator SEBI. The Indian government passed legislation in January this year, putting a cap on individual foreign investments at 5 percent.