Shree Renuka to offload 7.5% stake in NCDEX for $11M

Mumbai-based Shree Renuka Sugars Ltd has signed an agreement to divest a 7.5 per cent equity stake in agri-commodity exchange National Commodity and Derivatives Exchange Ltd (NCDEX) for Rs 66.54 crore (around $11 million), bringing down its holding in the firm to 5 per cent, according to a stock market disclosure.

It did not name the proposed buyer(s) but media reports had earlier said NSE is picking 5 per cent in NCDEX from Shree Renuka Sugars.

If NSE indeed is picking 5 per cent out of this 7.5 per cent, it will become the single-largest shareholder of NCDEX.

This follows new guidelines, which allow stock exchanges to own up to 15 per cent of a commodity exchange. Recently, FMC came up with a new set of norms for ownership of commodity exchanges and said that a commodity exchange, stock exchange, depository, bank, insurance company or a public financial institution can own up to 15 per cent of the paid up capital in a commodity exchange. Besides, no individual or any other kind of company can hold more than 5 per cent.

Currently NSE owns 10 per cent in NCDEX, the same as Oman India Joint Investment Fund (OIJIF), a private equity fund sponsored by Oman’s sovereign wealth fund State General Reserve Fund and India’s largest lender State Bank of India.

Shree Renuka had acquired 5 per cent equity stake in NCDEX, India's biggest farm futures exchange, in 2009 from Goldman Sachs Asset Management India Private Limited for $7.5 million. Later in 2010, the Indian sugar company raised its holding in the commodity exchange by acquiring stake from rating agency CRISIL.

The development comes as Singapore-headquartered agri-commodity giant Wilmar International is acquiring a significant stake in debt-laden Shree Renuka.

On Friday, scrip of Shree Renuka  were trading at Rs 21.75 per share at 3:10 PM (IST), up 0.46 per cent from its previous close. 

NCDEX valuation

The latest deal values NCDEX at Rs 887.2 crore ($148 million). As against this, a previous transaction where OIJIF purchased another 5.3 per cent stake in NCDEX from Jaypee Capital Services Ltd for Rs 49.56 crore ($7.87 million) valued the commodity exchange at Rs 935 crore.

This was the second leg of a transaction where previously OIJIF teamed up with other investors to buy a stake in NCDEX.

In November, IDFC Alternatives, an alternative investment arm of infrastructure financier IDFC, picked up around 5 per cent for Rs 45.6 crore in the Mumbai-based bourse while OIJIF bought 4.7 per cent for around Rs 42.8 crore. Build India Capital Advisors LLP, headed by Old Lane India CEO Hari Iyer, had also picked up another 5 per cent stake in NCDEX, raising its holding 6.1 per cent for an estimated Rs 45.6 crore. These deals valued NCDEX at Rs 912 crore, a premium to Rs 735 crore in 2010 when Shree Renuka picked up stake in the bourse from CRISIL. 

But it was still half of over Rs 1,800 crore valuation that Atlanta-based Intercontinental Exchange (ICE) paid for 8 per cent stake in 2007. 

Before the latest transaction involving Shree Renuka it was the single-largest shareholder with 12.5 per cent stake. OIJIF and NSE held 10 per cent each with LIC and NABARD owning 11 per cent each.

Before the string of recent deals, Jaypee Capital was the single-largest shareholder with over 22 per cent holding. NCDEX had issued shares to Jaypee Capital under a discounted preferential allotment to become an anchor investor and increase volume on the exchange.

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.

It enjoys 70 per cent market share in agri-commodity derivatives and has more than 700 accredited warehouses across India with capacity to handle more than 2.6 million tonnes.

(Edited by Joby Puthuparampil Johnson)

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