Investcorp-backed NCDEX gets SEBI nod to float IPO
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National Commodity & Derivatives Exchange Ltd (NCDEX), India’s largest agricultural commodity derivatives exchange, has received regulatory approval to float an initial public offering (IPO).

The Securities and Exchange Board of India (SEBI) issued its final observations on NCDEX’s IPO proposal on April 9, according to information published on the SEBI website.

This takes the number of companies to have received regulatory clearances so far this year to 15. SEBI had cleared 28 IPO proposals last year, 72 in 2018 and 46 in 2017.

The approval comes at an ominous time. Stock markets have declined 30% over the past few weeks as the coronavirus pandemic spread worldwide, infecting more than 1.86 million people and killing nearly 115,000. This has disrupted businesses and dealmaking, and prompted several companies in India to defer their IPOs.

NCDEX had filed for IPO on February 12 as it sought to become the third bourse in India to go public.

Mid-market private equity firms Investcorp and Oman India Joint Investment Fund (OIJIF), besides Build India Capital, have offered to sell shares in the IPO.

In addition, NCDEX is looking to raise Rs 100 crore by selling fresh shares. The IPO size is pegged at Rs 500-550 crore and may value NCDEX at roughly Rs 1,500-1,700 crore.

Investcorp bequeathed NCDEX as a portfolio company after it acquired IDFC Alternatives’ private equity business. IDFC Alternatives and OIJIF had invested in NCDEX in 2013.

Other shareholders who plan to sell shares in the IPO include public-sector lenders Punjab National Bank, NABARD and Canara Bank, besides fertiliser cooperative IFFCO and brokerage Jaypee Capital.

The National Stock Exchange (NSE) is the single-largest shareholder of NCDEX with a 15% stake, followed by state-run Life Insurance Corp of India and NABARD with 11% each.


NCDEX will follow the Multi Commodity Exchange (MCX) and stock-exchange operator BSE Ltd to float an IPO. The NSE had also been looking to go public.

NCDEX claims to dominate trading in farm commodities, though MCX is much bigger in metals and energy trading.

The company generated operating revenue of Rs 150 crore for the year ended March 2019 against Rs 112.5 crore the year before. Its operating profit more than doubled to over Rs 40 crore. For the six months ended September 2019, the company’s revenue from operations was Rs 70 crore. While the company’s revenue has grown over the years, its net profit has fluctuated.

It intends to use the bulk of the proceeds from the fresh issue (around Rs 70 crore) to contribute to the core settlement guarantee fund (SGF) and invest in wholly owned arm National Commodity Clearing Ltd (NCCL).

NCCL is required to establish and maintain the SGF to guarantee the settlement of trades executed on the exchange. The SGF is required to be utilised when a clearing member fails to honour its settlement obligations.

As per regulations, NCCL’s contribution to the core SGF needs to be at least half of the minimum required corpus while the exchange needs to bring in at least another 25%. The remaining corpus is to be brought in by the clearing members.

ICICI Securities and SBI Capital Markets are the merchant bankers for the proposed IPO.

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