IDFC Alternatives, Oman India Fund pick up minority stake as part of $22M deal in NCDEX

IDFC Alternatives, an alternative investment arm of infrastructure financier IDFC, and Oman India Joint Investment Fund have picked up a minority stake in India’s largest agri-commodity derivatives exchange National Commodity & Derivatives Exchange Ltd (NCDEX). The two private equity investors have picked up the stake from Jaypee Capital Services Ltd in a secondary transaction.

IDFC Private Equity Fund III has picked up around 5 per cent for Rs 45.6 crore in the Mumbai-based bourse while Oman India Joint Investment Fund has bought 4.7 per cent for around Rs 42.8 crore. Build India Capital Advisors LLP, headed by Old Lane India CEO Hari Iyer, has also picked up another 5 per cent stake in NCDEX raising its holding 6.1 per cent for an estimated Rs 45.6 crore. Build India Capital held a 1.1 per cent before this deal.

The current round of deals value NCDEX at Rs 912 crore, a premium to Rs 735 crore in 2010 when Shree Renuka Sugars picked up stake in the bourse from rating agency Crisil. But it is still half of over Rs 1,800 crore valuation that Atlanta-based Intercontinental Exchange (ICE) paid for 8 per cent stake in 2007.

The entire 14.7 per cent stake has been sold by Jaypee Capital, which has made 3x on its three-year-old investment. After the deal, Jaypee's stake will come down to 7.68 per cent from 22.38 per cent, making Shree Renuka Sugars the largest shareholder in the exchange with 12.5 per cent stake.

NCDEX had issued shares to Jaypee Capital under a discounted preferential allotment to become an anchor investor and increase volume on the exchange. The shares to Jaypee Capital were reportedly issued at Rs 59 per unit, while the current set of transactions have been executed at Rs 180.

NCDEX reported a 9 per cent increase in total income to Rs 151 crore with profit after tax up 24 per cent to Rs 43.9 crore in FY13 compared with the previous fiscal.

NCDEX, backed by institutional shareholders like National Bank for Agriculture and Rural Development (NABARD) and LIC, enjoys 70 per cent market share in agri-commodity derivatives. India's leading bourse NSE also holds 10 per cent stake in NCDEX. The firm roped in former Dubai Gold and Commodities Exchange executive Samir Shah as CEO earlier this year.

It has more than 700 accredited warehouses across India with capacity to handle more than 2.6 million tonnes.

IDFC Alternatives partner Girish Nadkarni said NCDEX is a unique asset and offers huge opportunity for electronic disintermediation in the agri value chain, better price discovery & higher realisation for farmers.

A statement from IDFC said the sector outlook is positive with exchange traded agri-commodities in India being significantly below international benchmarks, a strong regulatory regime, tax benefits, re-introduction of certain commodities and better warehousing ecosystem.

For IDFC Alternatives, this will be the third investment in the rural and agriculture space. Last year it invested Rs 160 crore in Parag Milk Foods, which retails milk products under 'Gowardhan' and 'Go' brands after it pumped in Rs 150 crore in Jaipur-based Staragri Warehousing and Collateral Management Ltd, a company providing post-harvest management solutions.

This will be the fifth known deal of Oman India Joint Investment Fund (OIJIF), sponsored by Oman’s sovereign wealth fund State General Reserve Fund (SGRF) and India’s largest lender State Bank of India.

Its other investments are ING Vysya Bank, defence electronics maker Indus Teqsite, industrial explosives maker Solar Industries India and Beaver Engineering & Holdings, which is the holdings company of HBL Power Systems.

(Edited by Joby Puthuparampil Johnson)

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