E&Y bullish on CSE com exchange

Global consultancy major, Ernst & Young (E&Y), has projected a daily turnover of Rs 3,700 crore in five years for the proposed commodity exchange of Calcutta Stock Exchange (CSE).

It feels that the proposed commodity exchange could clock a daily turnover of around Rs 600-650 crore in the first year of operation.

Analysts feel that if materialise, the commodity exchange can bolster the prospect of the exchange where the daily equity turnover is now only Rs 15-16 crore.

Ernst & Young has also suggested that CSE should look for acquisitions of small but working regional commodity exchanges in order to have an all India footprint and greater volume.

E& Y submitted it's report on the proposed commodity exchange of CSE last week. CSE had given the mandate to draw up a roadmap of the commodity exchange to Ernst & Young in March.

Sources in the market informed the CSE managing committee has sought few clarification from the consultancy outfit on the report submitted last week. "Ernst & Young will soon get back to CSE with the changes and modifications," said sources.

CSE administrator T K Das earlier informed that the exchange will take a final call on commodity exchange in the second quarter of this financial year after getting the report from Ernst & Young. "I am optimistic about the commodity exchange," he said earlier.

According to sources, E & Y has put stress on five commodities for the commodity exchange. These are jute, potato, tea, maize and groundnut.

"They are specially optimistic about jute. Now it is only traded in the Ahmedabad based National Multi Commodity Exchange (NMCE). But the turnover is only Rs 15 crore per day. E& Y feels that jute as a commodity has the potential of a daily turnover of not less than Rs 80 crore even today," said sources.

E & Y has opined that as almost 100 per cent of the jute growing belt is in eastern India so the commodity exchange based in Kolkata will have an advantage if it can work out a strong relationship with the supply side.

On the acquisition, the report described that there are 20 regional commodity exchanges in the country. Most of them are defunct. But there are few which has some volume and broker network. CSE could target those.

According to E & Y, CSE could look for exchanges like Ahmedabad Commodity Exchange and Rajkot Seed Oil & Bullion Merchant Association. "The Rajkot exchange does Rs 9,000 crore business from castor seeds alone annually so CSE could tie up with them," added sources.