Ahmedabad-based National Multi Commodity Exchange (NMCE) will merge with Indian Commodity Exchange (ICEX)—which counts Anil Ambani-led Reliance Capital Ltd as its largest shareholder—to create the country’s third-largest commodity exchange.
The merger, which is subject to regulatory approval, is expected to be completed by December 2017, the companies said in a statement.
ICEX's shareholders will hold a 62.8% stake in the merged entity while the balance will be held by shareholders of NMCE, they said.
Shareholders of the merged entity would include MMTC, Indian Potash, Krishak Bharati Cooperative (Kribhco), IDFC Bank, Reliance Capital, Indiabulls Housing Finance, Punjab National Bank, Bajaj Holdings, Central Warehousing Corporation (CWC) and Gujarat Agro Industries.
The merger with NMCE will result in the consolidation of clients and members, an enhanced product basket and higher operational synergies, helping ICEX strengthen its position in the fast-growing commodity derivatives market in India, said Sanjit Prasad, managing director and chief executive at ICEX.
Inga Capital Pvt. Ltd represented NMCE as financial adviser. J Sagar Associates and Khaitan & Co represented ICEX and NMCE, respectively, as legal advisers.
ICEX, which recently received clearance from the market regulator the Securities and Exchange Board of India (SEBI) to re-launch operations after reviving its net worth, is a deemed recognised stock exchange. It provides a nation-wide online trading platform in commodity derivatives besides having warehousing facilities to facilitate deliveries.
The commodity bourse, which is promoted by Reliance Capital and Indiabulls Group, had suspended operations in 2014 following the imposition of commodity transaction tax (CTT) by the government in July 2013 and the payment crisis at Jignesh Shah-promoted National Spot Exchange Ltd (NSEL) that eroded 80% of ICEX’s net worth which stood at Rs 100 crore in 2009 when it started operations. The NSEL crisis hurt sentiment across the commodities futures market, resulting in declining volumes for commodity exchanges.
Then the fourth largest commodity exchange, ICEX also said it would set up a committee to explore strategic alternatives that comprised a possible sale or merger with another bourse.
Regulations stipulate a commodity bourse to have a minimum net worth of Rs 100 crore.
The merger would also salvage NMCE—which has been losing market share and seeing declining trade volume—from becoming defunct.
“The large base of warehousing facilities of Central Warehousing Corporation with a storage capacity of 9.89 million tonnes, will become available to the combined entity pan India, which will help generate more liquidity due to the wider participation of members of the combined entity,” said Anil Mishra, NMCE’s managing director and chief executive.
NMCE offers commodity derivatives contracts in bullion, energy, rubber and other agricultural commodities. The exchange will also offer the world’s first diamond futures contract for which it has received ‘in-principle’ approval from SEBI.
Stock exchange-listed Multi Commodity Exchange (MCX) and National Commodity and Derivatives Exchange Ltd (NCDEX) are the country’s top commodity bourses.